Being one of the fastest developing economies, India has witnessed the growth of several sectors in the past two decades. However, Insurance is still one of the least evolved sectors in terms of innovation, efficiency, and transparency. Now with key developments in insurance regulations, the Indian insurance sector is projected to move towards its growth trajectory.
Moreover, the promises to standardize and simplify the policies by the insurance regulatory body are also bringing an upward thrust to the market.
Over the past one year, Indian insurance sector is undergoing a series of major transformations resulting from the implementation of GST, digital advancements and regulatory changes. After a long span, the insurance sector is breaking its monotony and becoming customer centric, efficient and lucrative.
As per the estimates of IRDA’s annual report 2017, there has been a tremendous growth in the insurance sector in direct selling. Within a decade’s times, it has jumped from 0.4 percent in 2006-2007 to 4.15 percent in 2016 – 2017.
Going back to the history, the evolution of the sector can be witnessed from its transformation – from a slow paced market to a highly simplified sector and to a customer centric segment. From technology adoption to innovation, insurance providers are taking on every possible challenge to improve customer experience.
The availability of new technology in the hands of insurance providers is resulting in an improved user-friendly experience. This is one of the vital boosters of the sector’s growth this year.
The exponential rise in the adoption of digital practices and technological advancements is playing a crucial role in the growth of the industry. It is changing the customer behaviour by making them more aware of their needs. They can easily become self aware of the insurance policies, risks and processes involved. In addition to this, digitisation is also playing a significant role in influencing the customers’ decision while buying insurance plans.
Apart from increasing customer awareness, the change in customer behaviour due to digitisation is challenging the conventional business models of insurance companies. Though the tech- support has already started making inroads, however, the progress of the sector is slow. Various banks and insurance companies are also embracing to create an InsurTech ecosystem.
Several market reports also reveal that the insurance companies are making huge investments to innovate their products and back them with technology led models. The innovation in consumer tech sectors like launch of high- tech devices at home, offices and hospitals is also forcing the insurance providers to re-invent their offerings at an extraordinary pace.
The effort to adopt technology advancements is strengthening their relationships with customers. This has empowered customers to buy insurance policies online and understand their procedure simpler.
To simplify the plans and procedures, insurance provides have already started offering Micro-insurance plans that are designed specifically for the low income groups and young population of the country who do not like to spend a huge portion of their income on purchasing a high premium insurance plan.
For instance, buying a long- term health insurance policy might not hold any value to youngsters but buying an insurance policy specifically for broken bones might be. Identifying the specific need of the customers and offering a specific plan reduces the cost.
Micro-insurance could be a next big thing in India. It is an innovation at the product level that plays an important role in the growth of any industry. Since these plans are based on extremely low premium rates, youngsters or customers with low-income strata can reap out the benefits of it.
With wide demographic, income patterns, education and occupation level, Micro-insurance holds a great potential in India. In regions, where Micro-insurance is still a new concept is facing a number of challenges in terms of reach and acceptance among the customers. However, by the efforts of various online fin- tech players and technology, Micro-insurance is attracting huge customer base. The phenomenal applications and tech – support is persuading the low income groups to spend a small portion of their income wisely.
The concept of Micro-insurance in India is getting support from new technologies to improve its distribution and reduce the operational costs involved. A perfect mix of technologies like Blockchain, Artificial Intelligence and Internet of Things is changing the outlook for Microinsurance. Data mining tools are also helping the insurers to reduce their underwriting costs while data analytics, on the other hand, is helping the insurer to detect frauds.
Blockchain has perceived a lot many benefits in micro-insurance. Being a plan focusing mainly on the population living in remote areas, Micro-insurance faces a big challenge in maintaining transparency. Hence, Blockchain is one such technology tool that can enable trust between the policy holder and the insurer by increasing transparency. The policyholders can easily get a great portion of their premiums rather than paying to the individual agents who work to meet the targets of insurance companies.
Blockchain is also well- known in simplifying the claim processes resulting from its nature of transparency and efficiency. It also holds the ability to send, receive and store information that disrupts the way businesses process digital transactions.
Artificial Intelligence and machine learning is becoming an integral part of fin-tech and insurance companies. They are leveraging new set of data to structure it properly and improve customer experience while increasing efficiency for insurance companies. Artificial intelligence plays a major role in reducing individual risks around returns and claims by simplifying the structure of customers’ purchase and history data.
Since Micro insurance plans are based on low premium models, insurers face challenge to invest in human resources or verified intermediaries to help customer understand about the policies. Therefore, Chatbots or Mobile chat features- closely related to Artificial Intelligence are being used by fin-tech companies to help customers find the best policy matching to their specific need.
Some Fin-tech companies have already started offering Virtual Insurance Assistant that reaches out to the customers and automate their pre and post sales experience.
Internet of Things (IoT)
IoT is one of the most common and clearest technology tools that is going to impact the insurance industry. Telematics can be considered as the forerunner of IoT. It provides insurers to provide value added services to their customers. IoT enabled devices store huge amount of customer data that insurance companies use to meet the higher efficiency standards.
Insurers are utilizing IoT devices to collect data about the customer to reduce risks, customize communication with the customer and improve their overall experience.
There are many areas in insurance sector that are being influenced by IoT such as Health and lifestyle. For instance, fitness wearables such as fitness bands and other devices are used to extract data about the customer’s health history. Likewise, there are IoT enabled applications and other household devices that are being considered by the insurers to collect relevant data.
IoT is also driving the growth of automobile sector. Auto insurance policy holders are advised to install IoT enabled tracking devices and applications in their vehicles. This helps the insurance companies to collect data about the vehicles during the claim process. These are known as Vehicle Telematics devices that enhance safety and communication features for the customer.
Additionally, implementation of InsurTech is helping the insurer to transform them digitally. Even the customers are adopting InsurTech to choose their insurance plan wisely as per their need. There are great opportunities being offered by InsurTech in the growth of insurance sector.