Until just a few years ago, insurance was a product that had to be sold. With a limited range of off-the-shelf, one-size-fits-all products available, there was a widely held perception that these were contracts that were mired in legalities and paperwork and the benefits were rather conditional on a lot of fine print, disclosures, and other complex systems and processes. There was a gaping hole between coverage available and the protection desired and as a result, insurance penetration in India was low.
But in recent times, some interesting trends are emerging, thanks to technology-enabled innovation. The use of Big Data and analytics, GPS trackers, AI&ML, cloud, RPA, etc., has given companies in the sector the opportunity to offer new products that are better mapped to the protection needs of potential clients and can be delivered through less cumbersome marketing and distribution channels too.
Changes in regulatory frameworks by IRDAI to accommodate tech-based innovation has also supported the expansion, reach and coverage, of insurance.
Within this changing landscape, traditional insurers have begun to modernize and reinvent themselves. At the same time, innovative new tech-based insurers and software companies that specialise in providing insurance solutions have emerged to compete and/or partner with established players. All this has led to better choices for those who seek insurance.
On the product front, one of the biggest innovations has been to offer coverage for very specific events to those who are not seeking long-term comprehensive coverage. Customers can now buy protection from anything from cycle theft and gym injuries to malaria or dengue and mobile damage or even cyber fraud. Naturally, these policies cost far less than more conventional comprehensive non-life insurance policies and appeal to those who know exactly what they want and want value-for-money coverage.
Realizing that people have unique insurance needs that may not have been addressed in the past, companies have also begun offering products like pet insurance for pet lovers or only home contents insurance, for those who may live on rent and value the contents of their home, while their landlord takes care of house insurance. All this customization is supported by technology like Big Data, AI, and ML, which helps insurers price their products accurately.
In the past, there was also the concern that customers with very different behavioral patterns were being clubbed together and made to pay similar premiums for coverage. This was perhaps because there was no way to track and measure behavior in the past. Technology is providing ways to distinguish between those who need greater coverage from those who do not, thereby, providing insurers with the opportunity to make premiums fairer. Now non-life insurers are offering pay-as-you-go auto insurance, where the user will be charged on either daily commute or mileage. This way those who use their vehicles more will have to pay more than those who do not, rather than a one size fits all monthly or yearly premiums.
At another level, technology has enabled insurers to adopt unique marketing and distribution strategies. They have begun selling products like credit insurance and even life insurance as bite-sized products that can be bundled with any other products or services, ranging from cab rides and credit cards to online purchases of small-ticket products or services. The details of the insured are not captured separately by the insurance company as the primary product or service provider collects them. All it would require from the potential insured would be to click on a check box in an app and the cost of insurance would be added to the total bill. Such insurance can be bought for as little as Re. 1 per cab ride.
Some of the greatest deterrents to purchasing insurance have involved the jargon in complex policy documents, slow processing and the need to pay out money at periodic rests for future eventualities. The use of technology has been changing this perception through technology enablement at various levels (filing claims, verification, and disbursement) which will play a crucial role going forward too.
The greatest tail-wind to these new trends has been that India’s Insurance Regulatory and Development Authority has been forthcoming in giving licenses to new fintech insurance sector players. While some, such as Acko and Digit, have licenses to build and sell products, others, like Toffee, Symbo,l, and Mobikwik, partner with traditional insurance firms to co-create and sell innovative products. The advent of tech-supported online marketplaces such as Policybazaar, Turtlemint, and Coverfox is also empowering insurance seekers to get products that they are comfortable and satisfied with.
Going forward, the use of technology in insurance could expand the coverage and reach of the sector as a whole, as the resultant innovation in products and distribution formats fit well with millennial mindsets. According to Morgan Stanley Research, there are 400 million millennial (adults aged between 22 and 38 years as of 2019) in India. They account for one-third of the country’s population and 46% of the workforce. Numerous studies on this dynamic segment of the population have tried to understand them, as they are the lead target group for many B2C businesses, including most companies in the insurance sector. Some attributes that keep cropping up in these studies are that millennials are digitally savvy and very comfortable with the DIY route to acquiring products and services; they tend to spend liberally but seek value for money; they are impatient (prefer instant results) and do not feel the need to commit to long term solutions.
Keeping these attributes in mind, if the insurance sector in India continues down the path of tech enabled innovation in products, marketing and distribution, there is a large and willing market awaiting it and this will finally become a sector where products are bought, rather than sold.