Breakthrough innovation by leveraging digital disruption can only mitigate the crisis that insurance companies are facing. The urgency of having general or life insurance wasn’t felt much until pandemic struck the world. With a deadly virus and the risk of climatic change, it has become important to understand the worth of having insurance. But then it is not a one-way process, prospects understanding the worth of insurance and companies understanding the importance of providing seamless experience go hand in hand and that’s when digital disruption comes into the picture.
Dr Rakesh Agarwaal, editor of the journal, The insurance Times, who also authored more than 30 books on insurance mentioned that “COVID gave much necessary push in the insurance sector”. But is it the ultimate driver for digital transformations and growth in the insurance sector? Well, Digitization was already present in the market but the acceleration of the process happened now. The insurance sector is more prone to digital disruption than any other financial service companies. Adoption of digital payment mode by various banks, initiatives taken by the central government of India and insurance regulatory agencies such as IRDA has formulated and taken a few steps to combat with the prevailing situation.
There are various areas in which innovation can take place in the insurance sector such as Insurance solicitation, product underwriting, claim settlement and services. Innovation will help in providing tailor-made insurance, reduce cumbersome paperwork, automated documentation and fast-paced KYC process. Such digital disruption will reduce the timeline by making the process faster. Regulatory is also leveraging AI, IoT, big data, telematics and etc to bring out innovation in these areas.
As policyholders are choosing digital web aggregators to compare, purchase and settle claims, the sector finds it as an opportunity to adopt the new way to stay ahead. Sustainability lies in the mindset of customers. Today the world is going through a pandemic and tomorrow it will be over. But does that ensure that there won’t be a graver issue in the future? We will never know and therefore adaptation to innovation which was not present earlier is the only way to stay prepared. Insurance companies must focus on building technologies with the software technology companies backing them up with digital solutions and scale their operation for the remote workplace.
Creating digital front end technologies and formulation of effective strategies to balance human touch and digital solutions has catered to every touchpoint of customer path which increased the value proposition holistically. It is important for the strategies to be flexible and have a personalisation approach.
To test innovations, IRDA has allowed sandbox to bring an innovative product in the insurance sector. Sandbox is a workspace to experiment, test and innovate financial products, this also helped in containing the loss before applying it on a large scale.
We have heard the concept of the remote workplace in the IT industry but can it be a sustainable model in the insurance sector?
Penetration of insurance is low in remote parts of the country and even in tier II and III cities. Dr. Agarwaal has made “Lack Of Education” the root cause of it. After 73 years of Independence, the penetration rate is hovering around 3.7 percent. Digitization is the only way to increase the sales of the insurance product, enhancing the efficiency of operation. Further, technology adoption will reduce the cost by disqualifying the option of having a physical entity in every city and villages.
Digitization is viable in an ecosystem with proper infrastructure. To be successful, we need to create massive awareness for digitisation. One such initiative by the Government of India which helped in educating farmers and lower-income groups about insurance is Jan Dhan Yojana, where the villagers need to open bank accounts and buy small ticket size insurance of Rs. 30 or Rs.40. In that way, people who were unaware of such a product came to know about it and thereby increasing the penetration rate.
Due to COVID, many new dimensions have opened up for the insurance sector such as insurance for business interruption, loss of jobs and other high demand OTC products.
As physical inspection for claim settlement is not possible hence it slowed down the process. Therefore live streaming for inspections, adoption of machine learning, continuous automation have increased the speed of processing claims. Automation with analytics has also helped the decision-makers to analyse the claims correctly and also reduced the cumbersome paper works.
Robust claim processing and integrating various products with product insurance has expanded its market. Suppose you are buying a phone from any e-commerce website, you will see an option for ad-on insurance at a minimal price. Customers won’t mind to buy it as it provides insurance to theft at a very low cost.
Sachet insurance has become the new trend and has full potential to evolve over time due to its simple and easy to buy feature, it requires less documentation making it more popular among youngsters. It is convenient and also gives them the opportunity to ignore complex procedures. Sachet also caters to the temporary requirements and has the potential to avoid incurring a major loss on the premium paid if not renewed on time.
Though innovation is always accepted with open arms, it does invite some of the challenges. Breaches and data security posed as a major challenge and thereby it is important to have a strong infrastructure with special focus on these.
Is India mature enough to take all these innovations?
Today’s millennials want everything swift and seamless. Automation has helped them in receiving their answer to the query within microseconds. Web aggregators provided policy holders with a comparison chart and the rates that each company is charging on insurance. This helped in having greater transparency.
Changing mindset and staying agile towards digital adoption will make India prepare for it.