The pandemic had a silver lining for the insurance ecosystem at large. Especially, the new age insurtechs benefitted tremendously due to their superior customer focus, digital readiness, and automated workflows. In India, the pandemic accelerated the behavioural push towards online and digital. These insurtechs with their digital-first mindset were best prepared to benefit from this push.
This digital-first mindset has spawned several trends since the first wave of the pandemic. And these trends are already changing the way insurance is bought and sold in this country. For example, since the pandemic the Indian insurtech industry has already increased its market penetration by 11.70%.
Top 5 Trends that the Pandemic Triggered in India’s InsurTech Industry
1. Embedded Insurance
Embedded Insurance is the bundling of insurance with the transaction of a product or service, at a point of sale. It could be a hard bundle where it is complementary like a warranty, or a soft bundle where the customer has to small increment but can opt-out.
This was already done while booking flights online. But now, due to a dramatic increase in online transactions across categories like payments, pharmacy, medical consults, gadgets and cars, there was a large push on creating sachet or micro-insurance products that could be embedded across multiple categories.
Insurance coverages that could be added alongside cab rides, cycles, cleaning services, mosquito illnesses, COVID, pet, etc. have suddenly become commonplace. And most of these did not even exist 2 years ago in India. Even more traditional products such as life insurance can be had on payment apps with as low as 100 rupees a year.
Embedded insurance not only contextualised the product constructs, it also made insurance affordable and easy, through a simple issuance process. In turn, it increased the penetration of insurance in the country, where it had remained stagnant for more than 2 decades.
2. AI, IoT and Machine Learning in Underwriting
The insurance industry in general is shifting from traditional modes of underwriting risks that is very one size fits all, to a more personalised risk assessment. This transformation is taking place at the intersection of Artificial Intelligence (AI), Internet of Things (IoT) devices and Machine Learning (ML). Admittedly, these have been buzzwords in the insurance industry for over a decade now, but insurtechs have proven specific use cases in the real world, when they have been just theories in the backyards of R&D departments in the insurance companies.
Smart apps and boxes for cars to observe your driving habits and home safety practices have been around in the west for a while. These dynamically bring down or up your premium without any human intervention. These are now real in India, where connected cars are quickly becoming a norm.
These have also led to the rise of parametric insurance, where not only the premium is automatically computed basis on AI and ML, but also the claims get paid out automatically. Flight delay insurance, crop insurance, and flood insurance are some of the examples where Indian insurtechs are demonstrating solid successes.
Further maturing of these technologies should lead to an underwriting process that is completely automated and personalised, wherever even a modicum of past data is available. Health, Life, Marine and SME Package insurance – which are the cornerstones of Indian insurance – should see huge improvements in efficiency and efficacy where just thepremium calculation takes days in most cases.
3. Bespoke Product Bundles and Hyper Personalisation
One of the direct impacts of COVID-19 has been the increase in online sales of simple term life and health insurance. The risk of death and hospitalisation is a lot more palpable obviously, but also to increase online traction the plans have been stripped to basics for easier understanding and to make them more affordable. But these are still the same they were 20 years ago.
Insurtechs have now begun to combine multiple such products by assessing personalised risks based on demographics, geographies and habits. Why can’t a term life, health plan, car insurance and home insurance be sold at the same time. These separate plans will be bought by an average consumer anyway past a certain life stage.
Plus, it has become essential to offer insurances against specific risks rather than padding an insurance product with lots of extras to increase premium. As a huge increase in term-life uptake would suggest. Third party only plans for older cars and screen protection for mobile plans are extremely affordable and can be sold online easily. As there is no middle person involved looking for a hefty brokerage, it also becomes meaningful to the bottom-line of the insurance companies.
These technologies when adopted at an industry level are now also helping to create shared risks repositories. For instance, claims history of an individual is tracked across insurance companies so as to not to penalise everyone for a fraud of a few.
4. Penetration in Tier 2 and Tier 3 markets
One of the more notable observations post-pandemic has been the penetration of insurance, particularly health insurance, in Tier 2 and Tier 3 markets going up by three-fold. Increased digital adoption in smaller cities due to payment wallets and cheap data rates, have enabled insurance companies offeraffordable health policies alongside popular apps and streaming video services.
With easier KYC and customer profiling, there is some innovation on payment modes as well – where monthly or even daily payments have been tried with some success.
Additionally, millennials who have largely stayed away from insurance until now, have been fuelling the growth of the sector by securing against increasing healthcare costs through top up plans for their parents.
5. Automation in Claims and Customer Service
Traditionally, the Indian insurance companies have a bad reputation when it comes to claims processing or customer-facing services at large. Most likely because these have always been riddled with slow administrative processes, including claims management due to continued dependencyon manual age-old operations.
Insurtechs usually come with a digital DNA that is pervasive across all operations from day 1, including claims and servicing. Digitised claims with 24-hour turnaround is now an expectation from every consumer. Even customer service is completely automated through self-service portals and bots for mundane tasks such as policy correction, downloads, claims submission, renewals, etc.
In other words, this is now a basic hygiene that is making traditional insurance companies now investing huge amounts of money to catch up to insurtechs.
Rohan Kumar, Co-Founder & Chief Executive Officer, Toffee Insurance.