The insurance industry is not known for great customer experience. Lack of a consumer-focused mindset and slowness to adopt technology creates pain points for customers. For a young demographic that is used to ease and simplicity, this has made insurance a difficult concept to embrace. India has this huge underserved market, thus creating the perfect opportunity for the rise of insur-tech start-ups.
According to EY’s Global Insurance Trends Analysis 2018, $2.3 billion has been invested in insur-tech start-ups, representing over 45 percent of insurance investments spanning 2012-17. Yet, Indian insur-tech start-ups are yet to tackle some significant challenges as they try to break into the local market.
Key Vulnerabilities need Curated Coverage
Today, one-third of India’s population is made up of urban millennials aged between 21 to 35 years. This huge market faces very specific risks on a daily basis that are not being covered by the insurance industry, which continues to focus on one-size-fits-all health, life and motor insurances.
Most young adults will, for example, not think twice about buying an expensive silicon cover to protect their cell phones, which is insurance in a tangible form. Buying small insurances for specific risks is the same thing. They can cover their unique and immediate risks, which can amount to basic cycle or commute coverage, salary protection in case of hospitalisation, and coverage of their belongings such as laptop bags in case of theft or burglary in their daily lives.
Identifying this growing target population and providing to their needs gives rise to a whole new direction for the insurance industry. More user experience research needs to be done in order to understand the specific concerns and needs of this new target client category, a challenge that can easily be taken on with the right partnerships and technology.
Common Obstacles in Purchasing Insurance
Even with insurance aggregators, customers seldom complete their purchase entirely online. A telephone call or a visit from an agent is often needed to clarify, fill forms, and understand the inclusions and exclusions of each plan as well as to wrap one’s head around obscure terminology. Start-ups need to improve the design of purchase processes by deconstructing over-complicated products into easy to grasp, bite-sized coverage plans that use simple language with examples set in the user’s day-to-day life.
This will not only greatly increase customer understanding by taking out unnecessary decision fatigue, but it will also speed up the purchase process. Insur-tech startups thus have the exciting task of pulling insurance from a financial mindset (something you have to sit down with an expert or an agent to plan meticulously) to a product mindset (something you can pick up as and when it is needed like a case for your phone).
Stressful Claim Processes
The popular general impression is that an insurance company does not want to approve claims, with of course is reinforced by the hoops one has to jump through to just file a claim. To be fair, Insurance companies are worried about fraud and have a complex maze of processes to prevent it. From getting all the needed paperwork together, physically mailing them and filling out forms in triplicate. (We exaggerate a bit, but you get the idea.)
Insur-tech start-ups need to show that they can approach claims entirely differently while following the prescribed guidelines. They want to approve claims with minimal information, trust their customers on face value. The assumption of an insurance company is that customer is dishonest, while the precedent set up by Amazons of the world has proven that trusting the customer is good business as well.
Digitizing the whole experience goes a long way, removing the inefficiencies of paperwork and decision-making. Simplifying document requirements along with a smart algorithm-led fraud check can take the frustration out at both ends – saving the company’s manpower cost and eliminating customer frustration from the lengthy process of submitting claims. With these digital tools, a typical claim would only require one to simply upload the photos of relevant documents and money could be sent to the client’s bank account practically instantly. This process obviously works a lot better for simpler products.
A Growing Market
Insurance for a typical Indian has always been about tight family bonds, counting on your relatives to come through for you – not something you have to buy. However, as a consequence of the evolving society we see the trend of families breaking down from big, extended groups into smaller or nuclear units; this phenomenon is affecting half a billion people. As huge joint families dissolve and migration weakens community bonds, there is little hope of relying on family and communities to come through to help in times of crises. Hence, the ground is set for insur-tech start-ups to introduce the idea of risk mitigation (beyond family bonds), a safety net in the shape of a small, simple insurance policy that can mitigate those risks and concerns.
Opportunity through Challenge
Insur-tech startups have the responsibility to deliver to first-time buyers of insurance a powerful and pleasurable experience. Digitising, simplifying and automating the entire buying and claims processes for seamless, end-to-end user experience so that insurance can be bought as easily as any product in the digital marketplace. These powerful innovations, topped off with improved customer service with trust instead of suspicion, has the potential to revolutionise the insurance industry.
(Views expressed in this article are a personal opinion of Rohan Kumar, Co-Founder and CEO Toffee Insurance.)
