It is not an unknown to anyone that the third, or Digital, Revolution, and the Fourth- The Technological Revolution has transformed the world order and the way daily activities are conducted. From a linear to an exponential growth rate of the revolutions, all the sectors- minor and major have seen unprecedented changes. The financial sector, though slow and cautious, is not an exception to these transformations.
FinTech, or Financial Technology is the integration of technology into the offering of financial service to improve and automate their delivery and usage. Regular activities like online transfer of money to purchase of equity through an online platform come under the umbrella of Fintech. The Global Fintech Market has been valued at $127.66 bn by 2018 and was estimated (before COVID) to grow at 24.7% per annum. India is the 3rd largest fintech centre with FinTech investments of nearly $3.7 bn.
Financial systems globally have incorporated certain level of digitalization and have experienced growth. One of the major markets that were perceived to have huge potential for Fintech investments is Insurance. Reducing vulnerability to financial loss, mobilization of funds and capital formation, and funding of infrastructural (or long term) projects had made the Insurance sector attractive for both demand-side and supply side parties for centuries, essentially making it a necessary financial instrument. Given this, the insurance penetration in the world is still quite low, and this industry is perceived as ripe for disruption and innovation by the FinTech Start-Ups.
Insurtech, coined in 2010, is a combination of insurance and Fintech i.e. exploiting the wave of the digital revolution to improve insurance provision, innovation, and cost reduction. Insurtech employs artificial intelligence for customization of insurance products, simplification of pricing and underwriting for the products, cost reduction through disintermediation and automation, easy and quick settlement of claims and provide a platform for innovation. For example, claim settlement in motor insurance could be automized and made digital intensive, by uploading photographs of the accident and relevant documents to verify the claim, and online processing and approval of the claim. Blockchain technology would be of critical here for collaboration and common sharing of data and transactions with other insurance players, to avoid fraud by customer( for example, repetitive claims). Use of technology would also enable extending of services to those previously left out of the system.
Why InsurTech?
Say for example, in health insurance, an insurer would obtain only point-in-time data (through medical tests) about the policyholder which is not completely sufficient to make accurate risk assessment and underwriting. Once the customer is on-boarded, there is no effective way an insurer could know or keep track of the risk entailed in activities of the agent. That is the problem of moral hazard[1] which is a most relevant in case of motor insurance (at the individual level) or marine insurance (at the institutional level). InsurTech extract information from repositories like Big Data, BlockChain[2][3] or information records of Technology-driven devices (IoT devices like wearables and trackers) to maintain a regular stream of data that enables them to price the risk better and provide appropriate incentives to customers’ to reduce their risk exposure.
For example, Pedometers to count steps walked in a day, fitness devices that capture heartbeat, oxygen intake, blood pressure etc, or even information recorded by smartphones (sometimes linked to the wearables) is used as input data that helps insurers to gain better insights(to a limited extent) into the behavioural pattern of the policyholder. This is additional information available to the tech-driven InsurTechs that gives them an edge over the conventional insurance companies in assessing the risk more accurately. The analysis could be utilized to motivate customers to maintain good health by providing incentives like health-score based reduction in premium or other tangible benefits like discounts on health products, free subscriptions etc.
There are several types of innovations[4] that fall within the scope of InsurTech—Digital platforms, Internet of Things (IoT), Big Data Comparators, Robo Adviser, Machine Learning, Artificial Intelligence, Blockchain, P2P (peer to peer), Usage-based and so on. India, being one of the largest smartphone users could take advantage of the Existing mobile and digital penetration to extend the outreach of insurance products (life, health, pension schemes) into untapped segments in the country- like youth and low-income customers.
Risk assessment, underwriting and Fraud detection is done by the analysis of the accumulated data using Artificial intelligence and Machine Learning techniques. Artificial intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. Machine Learning (ML), [5]a subset of Artificial Intelligence, is the science and engineering of making machines ‘learn’ by finding patterns in data in an automated manner, using sophisticated methods and algorithms.
So how does Insurtech aspire to be the face of the insurance market?
With the digital revolution and rapid increase in the use of mobile phones, insurtech sees an opportunity to reach out to its customers in a fast and convenient way. Data resources like Big data and SaaS, about the customers collected from multiple sources could be employed to draw better inference from raw data and target the pool of potential customers. Unlike traditional insurance, Artificial Intelligence (AI) and Machine Learning(ML) could be used to develop chat bots and multiply interaction between agent and customer for assessing and customize the products in line with their needs. New Technologies (like Robotic process automation) could be used to reduce human intervention and automate the mundane activities like underwriting the contracts, claim settlement and also reducing operational costs. Moreover, AI and ML enable fraud detection from the pattern of activities of the customer. Unlike established insurers, insurtech have the flexibility to steer clear of legacy products and provide tailor-made products for the customers according to their needs and demand.
Incumbents, or the established insurers, are viewing this as an opportunity and catalyst of innovation rather than a threat to their market penetration and customer acquisition. Collaboration of incumbents with the nascent start ups is a win-win situation, with the integration of best of both the worlds- the established infrastructure and market share of incumbents and innovative products, niche targeting and better pricing by employing AI and ML algorithms of the Insurtech.
Insurtech in the World
US homes nearly half of the InsurTech start-ups, followed by UK and India, and is an avenue for 63% of the insurtech investments.
Source: InsurTech 2020 , Research Insights by Imaginea
Some of the innovative on-demand insurance products launched by Insurtech around the world include-
- MANGO: a Mexican- retirement and life insurance intermediary, for obtaining life insurance in minutes without excessive paperwork and confusing coverages.
- Go Girl: women-only drivers insurance. It involves lower premiums for good drivers, free courtesy car repairs and an inbuilt accident and theft insurance. Complete transaction is conducted online.
- VisitorCoverage: a travel medical insurance for only non-US citizens. It also provides insurance for public emergency health screening including Covid-19 and other tests.
- Fizzy: an mobile insurance for delays in flights for 2hours or more
- Dapp: Etherisc, a Munich Based insurance platform , offers a crop insurance, providing an instant payout of insurance in case of flood or drought.
- AgUnity and Etherisc, a austalian start up to provide insurance covers directly to farmers to reduce the last mile challenges in providing insurance to customers who need it.
InsurTech in India
Currently, there are 24 life insurance and 39 non- life insurance companies in India (incumbents). In spite of that, India with a population of 121 billion has less that 4% (3.7% to GDP) of insurance penetration and a lapsation rate (unpaid premium for >6 months) as high as 20% compared to 15-20% in other Asian countries. As of 2017, at least 75% or 988 million Indians do not have life cover and 56% of population do not have any significant health coverage (out of 44%, 26% are covered by Rashtriya Swasthya Bima Yojana and only 8% by insurers).
Incidentally, Indian insurance industry for a long time has relied on one-size-fits-all insurance products in the market, but now the dynamics of the insurance market are changing. Innovative products like usage-based insurance, micro insurance and on-demand insurance are flooding the Indian market. The large section of uninsured population is a candy store of opportunities for competent start ups that are in search of potential markets.
- Usage based insurance: insurance products with low premium, paid periodically based on usage like pay-per-mile auto insurance; individual habits-based life insurance.
- Need – based insurance: based on specific needs of the customer like theft insurance when away from home, theft insurance for valuables in the rented house. IRCTC travel insurance – in collaboration with ICICI Lombard, Royal Sundaram and Shriram general. Paytm launches a e-wallet insurance, refunding money stolen or accessed unauthorized.
- Sachet-size insurance: provision of products like insurance against dengue (dengue insurance) to accident and life insurance, at a low premium rates is the agenda of this insurance. Toffee Insurance – gurgoan based insurance start up, offers insurance against cycle theft and mosquito related diseases for a premium starting from Rs 20.
[innovative ideas like Tinder-Date-Gone-Bad insurance to cover for restaurant bills and gift expenses are all our millennials and Gen X need to mobilize some cash for insurance].
These are the some of the innovative products tailor-made for its customers according to their needs and economy. The primary incentive behind these innovations is to create an environment where customers are introduced to the benefits of insurance, who would ultimately vouch for the long-term insurances.
Paytm which has users mostly in Tier II and Tier III cities has partnered with insurers to provide insurance services like premium payment and policy renewal and has launched PayTm Insurance in early 2020, tying up with leading insurance firms in india. Amazon and Flipkart have collaborated with ACKO and AEGON LIFE respectively to provide Point-of-Sale insurance(for example, insurance on electronics). Ola provides commutation insurance for the rides at Rs 1. IRDA and the incumbents have viewed this disruption as an opportunity to improve penetration and provision of service. Collaboration with incumbents would also reduce barriers to trade for the emerging start ups and would provide financial support for more innovations. IRDA granted licenses to AKCO, DIGIT INSURANCE, COCO by DHFL and reliance health insurance to work as “neo-insurers”; a sandbox was established for the initial testing of new innovations before launching them into the market; guidelines and regulations were laid down for the functioning of insurtech, under the supervision of IRDA.
Though at nascent stage, Insurtech has already attracted $3 billion investments worldwide. India has attracted nearly $183 million investments, as of 2019.
Source: Predictions, BusinessToday.in
IRDAI on Insurtech
IRDA is the Insurance Regulatory and Development Authority of India. The demand for linking wearables to product designing by the insurers prompted the setting up of a working group to look into the new innovations and wearables. The main purpose/aim of working committee was to make recommendations for supervisory and regulatory frameworks for InsurTech.
“What should be the Regulator’s role in encouraging innovation”[6]
IRDA working committee has recognized that customers’ needs have evolved over time which cannot be fulfilled by traditional insurance alone. IRDA subsequently acknowledged that use of technology will, not only aid in new innovations and better service provision, but also helps insurers assess risk better, develop new business models, processes and products, through the use of data collected through various devices (for example: IoT[7] devices in the automobile to assess policyholders’ driving behaviour, which are recorded as data points). Insurers are embracing innovations with focus on data analytics, and sophisticated data models that help the identify, understand and quantify risk.
Nevertheless, IRDA also acknowledged that this data capture poses several threats and challenges to the insurer and the customer. IRDA recognized the need for a regulator to understand the fast moving innovations in the sector, and develop proper knowledge and skills that foster Insurtech, simultaneously protecting the customers’ interests. In its report, it has made some recommendations regarding supervisory and regulatory framework with respect to InsurTech – Risk assessment, risk Improvement, product design and product pricing.
For a better insight into the status quo of InsurTech worldwide, IRDA working committee looked into the variety of measures insurance regulatory bodies in other countries have observed.
- Financial Conduct Authority (UK): FCA has taken initiative to look out for upcoming start ups and understand their potential problems, alongside with providing direct support (advisory support and clearing regulatory ambiguities); it has established a sandbox for pilot testing of new products on live customers on a small scale.
- BaFin, Germany: it has adopted a technologically neutral position, i.e no special treatment is accorded to InsurTech owing to their innovative nature. Regulations to the insurers are strictly based on the functions performed by them.
- Mexico: Regulators felt it is too early for developing separate regulations for Insurtech and they would be supervised under the existing regulations.
Notable observations
“From purchasing a policy to raising a claim, the process is time consuming, resource driven, and paper intensive. Technology can address these concerns and make the customer experience very smooth and hassle free.”
“Digital technology could extend the reach coverage into largely untapped areas such as lower income segments, by reducing costs and allowing businesses to engage with customers in more compelling and relevant ways”
“The use of technology has an impact on product design and the efficiency of inclusive insurance delivery.”
“The consent of the customer to share data is a must for participation in such products.”
“Insurers may be allowed to capture data as per their product requirements, but within the scope of insurance and underwriting need.”
“The provider shall capture and give the insurance companies only the specified information, and the privacy of data arrangement will be directly between the insured and the provider.”
“Insurers shall develop robust internal monitoring mechanisms to ensure that data leakages do not take place as this data could be misused for monetary benefits (e.g., sending promotional offers to customer based on his location etc.).”
“The products can evolve and be tested in a sandbox environment before fully going live and a transition strategy should be proposed for when the proposed product exits the sandbox environment.”
Working Committee insisted on maintaining transparency and follow protocol for data collection, data usage and data sharing with third parties. It suggested that there is a need for portability/ sharing of data between the insurers. They could employ block chain technology unto this purpose.
IRDA permits the insurers to offer discounts or offers to the customer based on the data collected. Premium and other benefits like discounts or subsidized or free health services could be determined by the performance, progress, and consistency in individual’s (say health) score arrived at by analysing data obtained from single or multiple sources.
Data Mining and Security
Data collection could be done through proprietary or third party services. However,
- Consent and customer access: The insurer should provide the details of the data collected to the customer and he should have access to this data (on a portal etc). There should be complete transparency about the data collected (should be as per/after his consent) and the benefits bestowed.
- Usage: The usage of data should be as per the notice given to the customers. Regulations have to provide appropriate safeguards against data misuse
- Disclosure: Insurer should not share the data with any third party, except for analytical services, provided they(analytical firms) satisfy the framework laid down.
- BlockChain: BlockChain is an effective way to ensure transparency and security (encrypted records-blocks which are resistant to modification of data) which makes them ideal for recording of events and transactions. This is an ideal platform to ensure security and sharing to data among insurers.
Concerns
- It is important to maintain a right balance between protection of policyholders’ interest and promoting innovation.
- There is a chance that some segment of populated may be rendered commercially uninsurable. Risk granulation might worsen the affordability and exclusion of certain sections in the society.
- Innovations might disrupt the traditional risk pooling mechanism of the incumbents
- Technology might disrupt the conventional business models of the insurers. There is a possibility of minimized engagement (integration) between insurers and customers.
- Data insecurity is a prominent challenge.
- Overreliance on technology could be a threat.
- Supervisors ought to develop adequate technical resources, knowledge and skills to make sure there are no lapses.
Recommendations
- Insurers should perform a cost-benefit analysis, because the cost is ultimately borne by policyholders
- (As mentioned) Product pricing and premium reviews, incentives to customers can be based on data collected through devices.
- Such products must be tested in the sandbox before launch in the market.
- Provision for adding wearbles data pricing for existing products. Details of usage of wearble devices should be a part of product filing.
Interview
InsurTech is still newbie. I found it more appropriate to interview few analysts who have hands on experience in the insurance market and have worked, supervised or studied about InsurTech and InsurTech start ups.
I have interviewed 4 analysts
Dr Sahil: A medical graduate(Cancer Biology) who ventured into Insurance sector. He is a experienced professional with an in-depth knowledge of healthcare and Insurance industry. Had the opportunity to be a part of 4 startups Currently working as a Director in a new and upcoming zen space of Insurtech- Meta InsurTech.
Aparajit Bhattacharya: Senior-level Insurance professional experienced as Business Head of public and private companies. He is also a seasoned executive with an in-depth understanding of emerging technologies and their commercial applications, also having international business expertise, having conducted business in South Asia, Nigeria. Motivated self-starter who earned multiple sales achievement awards during the early career, as well as sustained recognition for Co-Founded Start-Up- Insure First.
Rahul Mathur: He has completed his Master’s degree from the University of Warwick. He worked as a Insurance Product Manager at Laka Insurance focused on product development, strategy and research. Presently, he is based in London working as a consulting analyst for a Start-up lead at the London chapter of Accenture’s FinTech Innovation Lab. He is also an Ambassador for Asia Insurtech Podcast, Asia’s first podcast dedicated to InsurTech and innovation in insurance featuring entrepreneurs, thought leaders and investors.
Neerav: Senior-level insurance professional.
- Where does insurTech stand today in India?
Dr.Sahil: InsurTech is basically employing AI and ML methods, and other technological tools, that reduce human intervention and processing time and increases efficiency in the insurance sector processes. InsurTech can help in early and easy, simplified purchase, processing and settlement of claims. According to me, we haven’t really reached that stage yet. Currently, we are in a behavioural changing phase, through digitalization of insurance Claims processing is still paper intensive (physical documents). The farthest we have gone so far is the approval of sandbox for testing products. But we are still behind in R&D and new products are yet to come out.
Aparajit: InsurTech is a mix of insurance and technology. Though AI seems like a catchy concept, it hasn’t entered insurance globally. Presently, InsurTech is majorly dominated by Cloud-Based API. In the coming decade, more insurtech start ups and intermediaries will subscribe to using blockchain to automate activities more than AI.
Neerav: InsuTech is mainly AI driven ecosystem that aids in reducing human intervention, cost and time, and improves accuracy. It cannot be regarded as a separate field. It has touched all areas in insurance so far, from risk analysis to price determination. But we are certainly slower than some countries like Singapore which have been using more advanced technologies.
Rahul: More incumbents are willing to engage with Start ups to do business for example- partnerships with Riskcovry for distribution via APIs. Situations have changed for the insurance industry. Digit has scaled to $313M GWP for FY20 via commercial lines business. Private players are laying an active role in insurance. InsurTech has penetrated almost all areas in insurance including risk analysis, and price determination.
- What has been the Biggest success of InsurTech so far? What more could be done?
Dr.Sahil: Sandbox is a appaudable success. New products are entering markets right now. But country needs to be more adaptable. As a premium- driven economy, we are attracted to cheaper premium products, which defeats the purpose of insurance. Awareness is still a big challenges in India.
Aparajit: One of the major successes is digital customer onboarding ( and acquisition) . Social media and search engines are creating awareness. Specially after covid, awareness about insurance (mostly health) has increased. InsurTech also created a excellent API culture for customer acquisition.
Secondly, Sandbox is a commendable breakthrough, indicating that regulator is working on creating a conducive environment for growth of insurtechs. IRDA is also promoting e-commerce sales in Insurance. In Additional, various business-to-business start ups that work on administration, customer onboarding have also developed. These are some appreciable successes so far.
Neerav: Insurers in India have become more adaptive to change and are more open to suggestions, new technologies and actively building internal infrastructure. They are looking for ultimate outcome.
Rahul: Biggest success of InsurTech so far is lowering operational cost resulting in lower premiums (e.g.how). Secondly, B2B2C (business to business to customer) distribution via new affinity channels like e-commerce and payments apps entering into insurance (Patym premium payment). Incumbents have realized the need for change and “innovation”. As more InsurTechs enter the space, incumbents are becoming increasingly comfortable working alongside Technology companies (they are starting to appoint “Heads of Innovation” and create standalone teams for new affinity)
- What do you think are the niche areas that InsurTech could cater to?
Dr.Sahil: There are numerous opputunities for InsurTech. There are numerous pools of customers that need to be insured. So the questionhere shifs to what should be done by the insurtechs to tap into these pools. To achieve these oppurtunities, Increased interaction between insurers, early processing and common data repository are 3 component areas that needs work on initially. For example, in case of health insurance, digital recording of medical report results, prescriptions and OPD slips saves huge amount of processing time (even for third party administrator) for the customer. Moreover, creating a central repository of relevant data, accessible to all insurers, would avoid be beneficial.
Aparajit: India is one of the fastest growing insurance markets in the world. Yet,it has less than 4% penetration. InsurTech is an necessary means of reaching out to less insured tier II and tier III cities, which entails high capital costs if done in the traditional way. Secondly, unorganized sector workers are more likely uninsured for most part. Insurtech could bridge this gap through digital customer onboarding, virtual distribution of policies, e- kyc etc Digital Customer acquisition, identity verification (through e- Aadhaar), quick accessing of product details as per customer needs etc could be done without the need for physical infrastructure. Thus, API driven InsurTech would be the key to solve the low penetration problem in India.
Neerav : there are two types of distributors- retail and corporate. Corporate have broadly foussed on launching Apps say, a wellness app for pharmacy buying and telecalls. Gradually, it will be expanding to other customers (retails). The main focus would be on customers in tier II cities and rural areas, rather than in metrocities.
Rahul: InsurTech has prospective future in Drone insurance. The upcoming use for electrical vehicles opens up doors for new product- electrical vehicles insurance. InsurTech also has huge scope in Micro insurance and insurance in sharing economy.
- Personal Data Security is one of the biggest challenges India is facing. How are the new Start ups assuring the customer data safety?
Dr.Sahil: InsurTech is all about data. And Tech doesn’t happen overnight. It has various layers that need to be designed before a robust technology takes form.
- Functionality or purpose of the innovation
- Independence in the working
- The Load taking capacity
- Security measures
Younger population currently prefers hassle free processing through digital platform, hence data security is not the first thing on mind. This is surely a big challenge, but this is a task for a later stage. Moreover, In India, Most insurtechs are intermediaries and the essential processes like underwriting, policy issue, claim settlement are done at the insurers’ end. So in ideal situations, insurers should be responsible for Data security. Alternatively, Government, a more informed member, should take responsibility to ensure data security and measures in case of a data leak where parties involved are punished.
Aparajit: InsurTechs abide by the data safety protocols, system audits reports and security protocols mandated by IRDA. Mostly all the Servers are located in india, which reduces risk to considerable extent. However, data threat is very much of a real problem and IRDA will come up with new measures in due course of time to tackle this effectively.
Neerav : Big companies are mainly following European data security standards and
Guidelines and hence are legally insulated. But in practical sense, there are still gaps. Risk prevails. Challenges are there but we will figure out more ways. Infact, this isone of the many reasons, incumbents are hesitant to invest in newbies.
Rahul: Typically, start-ups are built on AWS[8] or MS Azure or GCP(cloud based platforms) which comes with in-built security features that incumbents who use on-premise services would not have access to. Moreover, Incumbents tend to be more vulnerable since they are the targets of cyber criminals owing to the size of their operations. Typically, leading InsurTech companies with increasing investments (Series A/B) have a full-service cyber security team (but this varies by company).
- How can we increase the awareness about Insurance in India?
Dr.Sahil: Agents, more often than not, focus on appraisal and incentives. Similarly, customers are concerned with cheaper premium with more benefits. Improving customer welfare is hardly talked about. This is a consequence of lack of awareness. Insurer should focus on post sales engagement. Inception of a chat bot or common call centre, agnostic touch point not represented by any one company could be a innovative start.
Aparajit: Social media and search engines playing a major role in creating awareness- like insurance specific pages on facebook, Linkedin. API culture of InsuTech also actively creates awareness. For the benefit of customers, simplification and bullet pointing the terms and conditions in policy underwriting is a suggestion.
Neerav: Most effective way is ‘word of mouth’. Customers will do away with agents, only if they see a better alternative in new technology. Though Advertising is effective promotion, it has a limited impact. Lack of awareness has negatively impacted customers’ welfare for a long time.
- In my opinion, one of the implications of digital insurance is lesser personal contact and more digital interaction between the agents and the customers. Do you think this could transform into challenge in any context?
Dr.Sahil: As mentioned before, Agent is certainly more concerned about his benefits. Post sale of product, subsequent contact with agent will be for claim processing and settlement or maturity. thus, evidently, it is more profitable to be more interactive with the insurer. Most queries by the clients are not complex or tech related (like clauses of a claim) and could be answered by Chatbots. Chatbots infact make his process more efficient- make it phygital- physical person plus digital model. Many Insurers like policy bazaar, HDFC have already employed this technology. Is time agents also adapt to this change.
Aparajit: Unlike popular belief, digitalization can infact improve the productivity of Agent if taken advantage of. Typically, an Agent could contact 2-3 clients per day, given the distance and time factor. Digital arrangement is cost effective in the sense that it reduces transaction costs and travelling time, increases agent productivity and outreach. Tier II and III cities are becoming with active on online platforms and are looking for online modes of communication. Voice and video could become the new mode of communication, the new normal.
Neerav: Not really. This was a problem of past. On the contrary, InsurTech could make huge difference in Tier II and III cities which are highly dependent on agents. InsurTech would promote awareness, and provide more transparent information and advice unlike an agent. Agents could still be a source of contact forsecond opinion, but InsurTech could replace agents at primary level.
Rahul: It is difficult to say certainly. For more established agents/brokers who own large books, they might just return to business as usual The younger generation of agents & brokers might accept the support that digital platform provides (lower commissions but higher volume) since they are less embedded in the “old ways”. It is also important to consider that customers at different points in their life would want different levels of service ranging from digital to Face-to-Face.
- IRDA has been welcoming to the changes in the sector. Do you think there is more to be done?
Dr.Sahil: IRDA has done a great job so far in welcoming InsurTech into the country and establishing the sandbox. But It has to move beyond the role of a regulator and expand its capabilities in technology and insurtech.
Aparajit: Yes, there is a lot of scope for IRDA as a regulator. But the pace has been set, which is a progressive step. Finance ministry and IRDA could promote digitalization and modrenization in LIC.
Neerav: No. IRDA has been very supportive and cautious. As long as the product quality meets the standards, IRDA would approve and promote the product and the firm. Although, may be Public sector firms in the economy could be given a nudge by the government and IRDA.
Rahul: Sandbox is a good starting point and Standardization of clauses, exclusions and claim settlements in Health is a welcome move. However, there is a Lack of clarity on policy wordings and interpretation which makes it harder for brokers/customers to compare products on features beyond price. In addition, there is a need for Centrally pooled underwriting capacity for innovation. This is a global problem where any start-up or platform which requires “product innovation” in insurance has to chase multiple carriers. Similar to how the IRDA used to operate the Third-Party motor pool, it should consider operating an innovation pool for capacity (application system like Sandbox)
- Covid 19 is the biggest pandemic any country has faced so far. Yet, it is believed that Covid could in fact accelerate digitalization. Do you believe that? Do you think this holds true for India? What will be its short term and long term impacts?
Dr.Sahil: Covid has succeded in driving a behavioural change in the customers. People have become more adaptive to digitalization of processes. This could be a long lasting effect. Yet, this seems to a very limited group, expansion of which depends on the InsurTechs now. However, In my opinion, InsurTech per se is covid independent.
Aparajit:
Traditionally, There are 4 distribition channels for insurance- bancassurance, agency, direct sales and brokers and corporate agents. Prior to Covid, agency and bancassurance owned major market share and digital platforms have less than 5% contribution. But currently, with bancassurance and agency which are not technologically prepared, are shut and digital platforms have taken their place. Policy bazaar’s business has increased by 30% due to their digital front which is certainly going to sustain even when bancasssurance and agents revive. Thus, in this way, InsurTech will be efficient, removing manual and menial (repetitive) works. Some jobs would become obsolete, and those employees could be used for other human intensive activities. Though motor and travel insurance companies have expected short term losses, these can be recovered as the industry revives. Insurtech was initially met with scepticism. Adopting digitalization was considered “optional”. Covid has certain ways exposed the inefficiencies in the industry. It is now a question of how fast industry can adopt technology for the long term benefit.
Neerav: Covid infact has a multifold effect on the industry. It could change the business is done by the insurers. Gradually, a virtual work culture may develop, where client meetings are held digitally. This is entail large cost benefits. Smaller cities and towns are moving towards digital payments and service, which has become a necessity now. It also achieving a gradual behavioural change and adaptation to technology. Insurance industry will see a change
Rahul: Some B2B InsurTechs (like policybazaar.com, Metamophsys) have seen several inquiries come in and sales cycles shorten. Executives understood the limitations of not having digital capabilities to administer policies, renewals and claims remotely, and incumbents are inclining rapidly towards digital operations. This effect is bound to remain for a long period. Moreover, Awareness of the importance of health insurance is likely to remain. Health Insurance was one of the few segments to maintain positive YoY growth in April and May 2020)
Presently, nearly 60- 65% of population in India is young. They would form a major share of insurance demand in the forthcoming years and InsurTech and incumbents should be prepared for this. Demand for Renters policies and gadget protection policies will increase rapidly. Health Insurance also holds more oppurtunities for innovation and disruption. A more customer centric approach will pave the way for InsurTech.
Evidently, Insurtech needs to happen as it is an effective way to create awareness among customers, for them to look beyond return on investment or fear. Insurance is a precaution against an eventuality and should be considered a long term investment.
Appendix
List of InsurTechs in India
| India: InsureTech Acitivity (Sorted by Type and then Alphabetical Order) | ||||
| Name | Type | Description | Founded in | Location |
| Konsult | Enabler | Mobile app offering health consultations with potential insurance leads | 2015 | Delhi |
| SatSure | Enabler | Crop damage assessment service | 2015 | Bangalore |
| Trak N Tell | Enabler | A leading telematics solution provider | 2009 | Delhi |
| BharatSaves | Enabler | Online insurace shopping by Google | N/A | Bangalore |
| Xceedance | Enabler | Insurance analytics and consulting to P&C carriers | 2013 | Bangalore |
| Senseforth | Enabler | Conversational AI – has developed SPOK, an email bot HDFC Life Insurance | 2012 | Bangalore |
| Ask Arvi | Enabler | Health Insurance Assistant / Conversational AI | 2017 | Mumbai |
| Girnar Software | Intermediary | IT company offering mobile and web solutions. Operators of CarDekho.com car buying portal | 2007 | Jaipur |
| Demyto | Intermediary | A portal for car services with the ability to request an insurance quote | 2015 | Pune |
| EasyPolicy | Intermediary | Life and P&C insurance comparison site | 2011 | Noida |
| Wishfin | Intermediary | Insurance and finance marketplace, formerly known as Deal4Loans | 2015 | Delhi |
| Pickme India | Intermediary | Gadget insurance | 2011 | Mumbai |
| YuMiGo | Intermediary | Travel insurance aggregator | 2015 | Delhi |
| Turtlemint | Intermediary | Insurance aggregator with online quotes and form assist | 2015 | Mumbai |
| RenewBuy | Intermediary | Car insurance aggreagtor | 2015 | Noida |
| Coverfox | Intermediary | Insurance aggregator with online quotes and form assist | 2013 | Mumbai |
| ETInsure | Intermediary | Insurance aggregator with online quotes and form assist | 2016 | Delhi |
| 121Policy | Intermediary | Insurance aggregator with online quotes and form assist | 2016 | Kolkata |
| GIBL | Intermediary | Insurance aggregator with online quotes | 2013 | Kolkata |
| GramCover | Intermediary | An insurance marketplace for the rural sector. | 2016 | Delhi |
| PolicyMantra | Intermediary | Insurance aggregator with online quotes and form assist | 2010 | Mumbai |
| PolicyBazaar | Intermediary | Insurance aggregator with online quotes and form assist | 2008 | Gurgaon |
| CarDekho | Intermediary | Car search portal that also provides online car insurance quotes (Subsidiary of Girnar) | 2016 | Gurgaon |
| PolicyBoss | Intermediary | Online insurance aggregator | 2003 | Mumbai |
| Acko General Insurance | Primary | India’s first online insurance company | 2017 | Mumbai |
[1] Moral Hazard is the case where the insured assumes more risk, since the burden of the loss is borne by someone else( insurer)
[2] Blockchain or distributed registry technology is a digital ledger that stores active transaction data without intermediate control by using a consensus system to validate transactions. Blockchain operates on a principle of transparency for fixed record keeping.
[3] InsurTech -Working Group Findings & Recommendations (IRDA)
[4] InsurTech -Working Group Findings & Recommendations (IRDA)
[5] InsurTech -Working Group Findings & Recommendations (IRDA)
[6] InsurTech -Working Group Findings & Recommendations (IRDA)
[7] Internet of Things
[8] Amazon Web Services
This is a working paper. Comments are welcome and can be forwarded to aqf19surya@mse.ac.in
