GENERAL INSURANCE
IRDAI Regn. No. 157

The Ascent of New-age Insurers

In today’s digital world, wallets are no longer confined to consumer’s pockets, they are online. There is an ever-increasing online marketplace, and insurance providers are looking to cater to that market. The ascent of new-age insurers has forced traditional players to increase their service quotient and overall efficiency, resulting in savings for consumers.

But all this development has a curve and different markets are placed at a different trajectory of this curve. For example, Indian e-commerce market has crossed a considerable level in case of cab aggregation and online shopping at large but it is at a nascent stage when it comes to online insurance. Tech-driven players like Amazon, Flipkart, Uber, Ola etc. have made online transactions a part of our lifestyle. Since insurance is not a desired product yet and its purchase frequency is low, it needs a market push and data has the power to initiate that push.

Leveraging Data

According to a recent survey by PwC, 90% of insurers fear they will lose business to a tech startup. One of the main advantages of established insurers has always been large amount of detailed risk data collected over years, that can be used for underwriting and pricing. However, as the type and amount of alternative data relevant to insurance continues to explode, it is possible and likely that this advantage will not be sustainable.

The old-fashioned style of risk assessment is to rely on impersonalized datasets. But today, endpoint devices, social media and basic personal details can provide large amount of customized data. This new approach helps both insurers and the insured. Customers get cheaper or better coverage and highly personalized services, while a business gets more accurate risk assessment, stable margins, and satisfied clients. 

Managing Claims

What happens if customers try to check their claim status today? The process usually requires several calls, emails, some additional paperwork or even visiting the insurance provider’s office. This is unnecessary. An InsurTech organization’s immediate problem statement is to solve this issue by offering quick, hassle-free, and transparent claim settlement. Traditional insurers who were taking this step for granted will now need to match-up.

Globally, there are several examples where new insurers have taken a lead over traditional players by bringing in this efficiency. SnapSheet for example, offers end-to-end automated claims management, while the Claim Di mobile app’s ‘shake and go’ feature allows claimants to interact with their carriers on the accident site just by shaking their phone.

Automating Processes

InsurTech companies are free from legacy products, processes, and IT systems. They are able to design digital processes, products, and systems from the ground up, relying on the latest technology. Due to this, a lot of duplicating business operations can be made more efficient and reduce cost, which can be passed on to the customers.

Take the example of a Chicago-based insurer that rewards customers for living healthy lives and monitors their activity through the use of smart wearables. In their partnership with Apple, the customers are able to purchase an Apple Watch at a discount and pay for the remaining balance by tracking their physical activity.

Exploring Technology

Concepts such as Artificial Intelligence (AI), Internet of Things (IoT), Chatbots, Blockchain, Cloud computing, Connected devices, Social Media usage, Drone assessment, Telematics, Sensors, Machine learning etc. have been introduced to the insurance sector thanks to Insurtech. A move towards cloud-based platforms or use of AI results in not only lower upfront costs, but also reduced ongoing operations spending. Only such innovation when compared to mainframe-based technology can decrease cost drastically.

Disintermediation, self-servicing, and automation of core-functions will lead to huge savings. There are companies who offer IoT-based dental Insurance where a smart toothbrush tracks how well customers take care of their teeth. All this is possible because insurers have started seeing value in these innovations.

Already, there are cases where the car driving behavior of the insured person is tracked and analyzed to determine car insurance premium. The person benefits in the form of discount or higher coverages based on analysis.  But Insurtech’s scope of work doesn’t end at making the existing process more efficient but also extends to creating new market opportunities.

Furthermore, the performance of digital channels and infrastructure (like cloud computing) provides the potential to shift further towards more consumer-centric insurance offerings including greater product customization, shorter-term or real-time cover, proactive risk management, and near-instant procurement options.

Overcoming Hurdles

Legacy software and infrastructure act as barriers for digitization. Traditional Insurers can’t rely solely on their internal innovation teams or consultants for reforms. Managing a transformational process on their own would be extremely challenging. They are not set up either to develop or nurture new bleeding-edge technology; they are experts at understanding and managing risk, not driving innovation.

Also, top tech talent is not inclined towards the insurance sector and it is difficult to attract such talent away from the promising startup economy. Traditional insurers need to recognize their limitations and act towards reducing them with a long-term strategy.

Ascending Beyond

There is a new kind of model in the form of P2P Insurance or Crowdsourcing which is based on the sharing economy concept. Peer-to-peer insurers, such as Friendsurance, Lemonade, Guevara, and Inspeer, use policyholder pooling to lower rates, but also create a social contract with the policy holder that many traditional insurers would envy.

It is certain that InsurTech entrants are looking beyond traditional data. Insights from social media and online activities as well as data from IoT devices such as smart wearables and smart home devices are being collected, bundled, and analyzed in new ways. This provides a more holistic picture of the customer, setting the insurance company up for success as it tries to offer focused, specialized, and tailored experiences for its customers. InsurTech is pushing traditional insurance providers to innovate and not allowing them to rest. This will ultimately lead to lower costs and better services for the consumers. 

(By Animesh Das, Product Strategy Head)