How Technology is Transforming the Insurance Industry in India
The insurance industry in India has seen major growth in the last decade. The industry today comprises 63 insurance companies (24 Life insurers and 39 non-life insurers) and is governed by the Insurance Regulatory and Development Authority of India (IRDAI). The industry has transformed from a seller’s market to a buyer’s market over the last two decades. Further, the market in India is expected to grow to $250 billion by 2025. Demographic factors such as growing middle class, young insurable population, and growing awareness of the need for protection and retirement planning will support the growth of Indian Life insurance. The future of the Insurance industry in India seems quite promising, and the above-mentioned figure prominently reflects the positive disruption caused by the digitalization of the industry.
Rapid digital adoption in India (est. 829 million internet users by 2021) has created much-needed opportunities and infrastructure for insurance players to reach Indian customers. However, traditional insurers are still struggling with simplifying policy terms, settlement procedures, mutual trust deficits of buyers and sellers, and differentiating products that can help customers buy without much confusion. This is where InsurTech players have identified their opportunity. With the onset of InsurTech, the entire insurance buying experience in India has become completely dynamic and covers end-to-end customer journeys with highly customized and relevant services. India has over 110 InsurTech players spread across different sub-segments, such as aggregators, claims management, digital-first insurers, software white label and infrastructure APIs, and IoT. InsurTechs are solving the affordability challenge by innovating small-ticket and low-duration insurance products.
Not just that but today, insurance interactions have become more ‘phygital’ (mix of physical and digital), although increasingly bending more towards the digital side. Insurance companies are exploring options beyond the traditional banking institutions for their insurance requirements and banks are partnering with fintech companies to provide services faster and at a lower cost. This new way of servicing is benefiting insurers as well as banks as they are retaining clientele while consumers are getting better customer services from the fintech companies. Apart from that, the technology advancements have also found their application across different aspects of the insurance business including sales, claims, underwriting, as well as customer service. Leveraging the potential of Artificial Intelligence (AI) and Machine Learning (ML), insurance providers of the current era are offering simplified insurance plans to end consumers, thereby developing higher trust levels with them.
Data-backed underwriting services have enabled insurance companies and insurance web aggregators to offer personalized premium quotes to their consumers. Another way, in which technology has positively impacted the insurance sector is the automation of claim services which has made the claim processing faster and easier for consumers.
Potential Usage of Technology in the Insurance Industry
In today’s world, AI and ML have made analytics processes more accurate than before. The AI/ML-backed InsurTech startups can assess the damage and estimate repair costs to analyze and define settlement claims in an automated, efficient and faster manner. For instance, AI algorithms which can automate the entire claim validation process and assess the exterior of a vehicle and share recommendations on the next course of action can help save hundreds of man-hours and millions of dollars which go as claim servicing costs. Such processes are expected to emerge as game-changers of the Indian InsurTech industry. Not just that but the AI-powered chatbots, virtual assistants and digital enablers such as WhatsApp would be future sales faces, focusing on immersive experiences. Many life insurers are experimenting with augmented and virtual reality (AR/VR) to take customers through their future, highlighting the powerful propositions offered by life insurance products.
Insurance penetration in India today is below 4 percent, and this number is low as compared to other parts of the world. This is despite a large population, rising incomes and rapid urbanization of the country which makes it quite conducive for insurance. This makes it an attractive segment for upcoming startups to launch InsurTech services targeted towards setting up a wide distribution channel across the country through a phygital model. This digital set up can be operated with remote offices across the country, empowering agents to sell insurance through digital means but at the same time maintaining human interface.
Internet of things (IoT) is expected to play a major role in disrupting the insurance space of India. The industry can leverage the wealth of information stored by wearable devices to provide customized insurance products. Usage of the IoT and advanced machine learning algorithms will open up new avenues to distribute products. In the future, several life insurers would partner with companies providing wearable devices.
The amalgamation of technology with the insurance industry of India is poised to bring great transformation. It has the potential to play a catalytic role in bridging the insurance gap in India across consumers and businesses and make an impact on the entire ecosystem. The aforementioned advantages and expectations are just the beginning. There are much awaiting. It’s just that we need to prepare our systems to benefit from them.