With a population of 1.4 billion, mostly rural, Indians need a social security net – and life insurance can provide this. And yet, penetration of life insurance in the country is low, at around 3%. Moreover, this figure represents a primarily urban population. To improve the spread of life insurance cover within and beyond cityscapes, the sector needs to find ways to increase access and reach.
Automated underwriting is the answer. In a world where customers demand speedy and seamless services, it supports life insurance companies in assessing risk and delivering policies faster and more efficiently.
Data-driven, rule-based underwriting
Automation of underwriting is a rule-based approach of assessing the risks associated with insuring an individual through algorithms, predictive models and data analysis.
The algorithms are based on data and insurers work with multiple internal and external data sources to gather information on various underwriting parameters. For instance, internal data sources include the company’s own data on past claims experience, data captured on applications, etc. External data sources include the Insurance Information Bureau of India (IIB), National Securities Depository Limited (NSDL), UIDAI, financial aggregators, CIBIL, CRISIL, and so on.
Greater integration within external data bureaus and data sources, and widespread digitisation have improved the access and the quality of data in the last few years, enabling life insurance companies to automate underwriting.
Speedier issuance, higher efficiencies, and better risk assessment
This has resulted in manifold benefits for the sector. By reducing the need for manual intervention by an underwriter, automated underwriting has enabled insurers to speed up policy issuance. A faster, smoother experience for the customer makes insurance purchase more convenient and less of a hassle, thereby improving customer satisfaction and building brand loyalty.
For the insurer, higher operational efficiency from automated underwriting has led to lower manpower costs, which, in turn, has led to a reduction in per policy costs and an increase in margins.
As a rule-based approach, automated underwriting also lends itself very well to standardisation of decision-making in the policy approval stage. This supports personalisation of policies since rules can be increasingly sharpened to suit diverse customer backgrounds and needs. The powerful digital crunching in the background serves as a great support for the salesperson sitting across from the customer. It’s also a boon to underwriters, who can shift their focus from routine tasks to complex decision-making processes.
Besides, rule engine algorithms can analyse vast amounts of data to identify a greater number of risk factors and more accurately than manual, traditional methods. By helping identify high-risk cases and by flagging bad risks, automated underwriting has enabled some insurers to reduce negative claims and save on possible losses. All these benefits make automated underwriting non-negotiable today.
New horizons
However, even as the life insurance sector flexes its digital muscles with automated underwriting – and while automated insurance has helped improve insurance volumes – this is only the beginning. The next growth delta is only possible if the sector takes this one step further and explores instant issuance of policies, as has been done at a few life insurers, including IndiaFirst Life Insurance.
Instant issuance of policies means issuing the policy within minutes, over the counter to its customers. Currently being explored with non-term policies, it has the potential to improve customer conversion – and satisfaction – rates dramatically. Over 75% of non-term policies are eligible for straight-through processing today, but insurers are taking it slow.
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Instant issuance solutions are built on automated underwriting coupled with backend integration with various data bureaus, insurtech partners, and data sources for customer profile, process, risk, and KYC checks. In addition, a predictive risk scoring model can be used to assess and identify the ‘eligibles’ quickly. The model bifurcates ‘straight-through’ cases from those that require manual intervention, and is based on multiple parameters such as age, gender, location, occupation, age proofs, product applied, income, etc. Improvement is built into the model as the claims experience helps in continuously configuring and changing these parameters to have better outcomes.
Inclusion through insurance
The new frontiers of automated underwriting and instant policy issuance offer a pathway to the nation’s vision for financial inclusion, which the Insurance Regulatory and Development Authority of India (IRDAI) has articulated in its ‘Insurance for all by 2047’ initiative. They can support insurers in reaching this stretch goal by facilitating digital and remote sales, while also building operational efficiencies to deliver on the goal. By taking insurance to more underserved areas, this will help bring in a greater section of society within the social security ambit.
Besides, smoother on-boarding, faster turnaround times, lower premiums and the shift towards greater personalisation will lead to improved customer satisfaction, promoting customer loyalty and trust – both crucial for increasing life insurance coverage.
The future of life insurance in India is being reshaped and the goal is an inspiring one – making insurance accessible for all. Automated underwriting and instant issuance can bring it within the industry’s reach.
Views expressed by Atri Chakraborty, COO, IndiaFirst Life Insurance
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