Breaking down the Insurtech in India
What is Insurtech?
According to Investopedia, “Insurtech refers to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model.” The belief driving Insurtech companies is that the insurance industry is ripe for innovation and disruption. Insurtech in India is exploring avenues that large insurance firms have less incentive to exploit, such as offering ultra-customized policies, social insurance, and using new streams of data from internet-enabled devices to dynamically price premiums according to observed behavior.
Breaking down the Insurtech in India:
Insurance is one of the oldest financial businesses, and it tends to favor those with deep pockets and a long experience in the market. Traditionally, broad actuarial tables are used to assign policy seekers to a risk category. The group is then adjusted so enough people are lumped together to ensure that, overall, the policies are profitable for the company. This approach does, of course, result in some people paying more than they should based on the basic level of data used to group people. Insurtech in India is looking to tackle this data and analysis issue head on. Using inputs from all manners of devices, including GPS tracking of cars to the activity trackers on our wrists, these companies are building more finely delineated groupings of risk, allowing products to be priced more competitively.
How technology can improve Insurance Operations:
- Robotic process automation (RPA) of processes: Several of the repetitive and manually intensive administrative tasks like document verification, system entry and forms management can be automated through RPA. According to one CIO of a leading general insurer, ‘Process automation is one the key focus areas for us in the immediate future. Most of the industry is paying closer attention toward it, given the technologies available today’.
- Next-gen customer interfaces: Several customer interaction functions can be conducted through AI-based chatbots and voice/speech recognition algorithms. Insurers like TIAA implemented robo-advisors to help their clients with wealth management. Most leading Indian insurers such as Bajaj Allianz, ICICI Lombard, TATA AIA, Birla SunLife and IndiaFirst are deploying chatbots for servicing and other customer functions. All of the insurers interviewed, both life and general, cited that they would look to expand and enhance the way they leverage chatbots across functions.
- Intelligent decision support for underwriters and claim adjustors: Cognitive technologies like machine learning and natural language processing (NLP) can help underwriters and claims adjustors quickly construct insights from unstructured sources such as social media, documents, videos, etc. and help in advanced decision-making support. Zurich Insurance has begun applying artificial intelligence in the personal injury claims adjudication. Progressive Insurance uses machine learning to predict claims from telematics and geospatial data.
- Immersive and contextual assistance for field employees: The insurers can leverage the technologies of AR/VR for an enhanced assistive and immersive visualisation of information during functions like training, risk assessment, loss prevention, loss survey and customer engagement. Travelers Insurance is working with Applied VR in developing a VR mobile application aimed at industrial safety. SBI Life India created awareness of the need for life insurance through an AR app. PNB MetLife India has launched a VR-based customer service platform conVRse. Customer interfacing through AR/VR can also be leveraged by general insurers, especially commercial players, for complex monitoring purposes like risk assessment, loss prevention and catastrophe claim assessment. Insurers like State Farm have started leveraging drones for property roof inspections to determine nature and extent of damage. The applicability among Indian insurers is initially focused on crop insurance. Roughly 80% of the general insurers we spoke to expect to focus heavily on drone-based assessment over the next three to five years. The Indian central government is also looking to deploy indigenous drones to settle insurance claims under the newly launched crop insurance initiative — Pradhan Mantri FasalBima Yojana (PMFBY) — and other such products.
- Blockchain-based centralised processing: Distributed ledger technology has huge potential to enhance the industry’s business model. With its inherent characteristics of decentralised validation, immutability and encryption, blockchain can help address some of the key cost challenges that many incumbent insurers face in a digital age by enabling significant automation and cost management opportunities. Bajaj Allianz recently launched a blockchain-based travel insurance app Travel Ezee, which pays out claims automatically when there are flight delays. Some of the key blockchain use cases explored by insurers across the globe include death claims management, reinsurance contract management, parametric products (event-based insurance products) and identify authentication.
India is on the move and touted to overtake Germany as the world’s fourth-largest economy by 2022, based on International Monetary Fund (IMF) growth projections. Much of this explosive economic growth can be attributed to changing population demographics, conducive and visionary programmes undertaken by the government (e.g., ‘Digital India’) and the rapid penetration of disruptive digital technologies such as online, social and mobile.
The government has increased its budget to promote artificial intelligence (AI), machine learning, 3-D printing, and other technologies alongside its Digital India programme which will eventually help Insurtech in India. The ministry of electronics and IT has already formed four committees to prepare a roadmap for AI, for the country. Regulations are also being eased into and crafted to encourage the use of new-age digital services and products built on the principles of the sharing economy, drones and e-commerce.Efforts have also been taken to improve the security tied to the usage of digital technologies like the establishment of ‘Cyber Swachhta Kendra’ (Botnet Cleaning and Malware Analysis Centre) and collaboration with industry partners.
Thanks to this push by the Indian government, millennial growth and the flourishing start-up ecosystem, the Indian economy has made significant headway in digital during the last year. Next-generation digital technologies like AI, the Internet of Things (IoT), big data analytics, sharing economy service, augmented and virtual reality (AR and VR), cloud-based transactions and blockchain have already transcended buzzword status across the country.
The proliferation of digital technologies and thinking, combined with improving socio-economics across India, are reshaping the country’s insurance ecosystem and will continue to bring in dramatic changes over the next few years for Insurtech in India. Insurers need to embrace new business and IT strategies that can withstand impending market changes wrought by consumer need, market shifts and new regulatory mandates. Investment in digital technology will prove to be a huge differentiator in the coming years.
‘Innovate soon or perish” is a new mantra shared by the Indian insurers. All of them are keeping a close eye on emerging digital technologies to make sure that their organisations are among the survivors.