Financial Services
Digitization on the horizon for insurance?
24 Mar 2023
Digitization on the horizon for insurance?
Ever
since the pandemic, several industries have been embracing digitization,
leveraging technology to streamline processes, improve efficiency, and enhance
customer experiences. The post-pandemic era saw sectors like retail, banking,
healthcare, etc. investing heavily in digital solutions, transforming the way
they do business. While the insurance industry is slowly catching up to the
digitization trends, the progress has been slower as they continue to rely on
traditional, often paper-based processes. This is largely due to the complex
nature of insurance products and the regulations that govern them.
The
insurance industry does not exist in a black box but is rather part of a
broader ecosystem, consisting of various industries, including healthcare, financial
services, automotive, and many more. For instance, health insurers depend on
hospitals, clinics, and other healthcare providers to offer their services to
customers. They work together with these providers to ensure that their
customers receive the best possible medical care. Similarly, motor insurers
work with dealers, distributors, authorized garages, and other stakeholders to
provide insurance products that meet the needs of their customers. Thus,
insurers rely on other industries to function effectively, and they must work
collaboratively with their partners to offer the best possible solutions to
their customers. Therefore, in a world where their partner industries are
becoming increasingly digital, it would not be possible for insurers to delay the
digital transformation any further. The rise of digital technologies in the
automotive, health, and financial services sectors has created a demand for
more personalized and user-friendly insurance products and services, pushing
insurance companies toward digitization.
Banking
industry - Leading the charge for digital transformation
The
banking industry was quick to leverage the digital customer base & digitize
its processes and saw rapid growth in digital payments & lending, among
others. This can be observed by the fact that a progressively larger number of
payments as well as loans are being disbursed through digital channels over the
last few years.
The
financial services sector in India has been transformed by the rise of mobile
banking and fintech startups. With the government's push towards a cashless
economy, more and more people in India are turning to digital platforms for
their financial needs. This has also created a demand for digitization in the
distribution of insurance products.For
example, with the rising popularity of digital payment methods, traditional
payment methods like cheques, DDs, etc. are already outdated and customers are
more comfortable paying premiums digitally using UPI, net banking, cards,
m-wallets, etc. An increasing number of users now expect their insurers to
offer simple, transparent, and flexible online payment solutions.
Another
area where insurers have scope to adopt new technologies is KYC, and of the
ways to do that is through penny testing. The purpose of penny testing is to
verify bank accounts, generally, as part of e-KYC. This is a practice that can
be implemented for bank account verification during customer onboarding, which
can also be used during reimbursement claim payments. This will help reduce
fraud claims and will offer a replacement to uploading canceled cheques (which
often leads to claim queries) during reimbursement claims. This is another
example of how even small digital integrations can go a long way in improving
the overall customer experience.
Additionally,
bancassurance is one segment that marks the joining of the banking and
insurance industries. According to IAMAI, the market share of bancassurance has
increased from 27% to 35% in the period 2011-2019. While insurers have started
to digitize some customer journeys, the bancassurance channel still lags in
technological advancements. There are challenges in terms of real-time status
updates on applications, claims, and servicing; delays in information flows;
limited reach-out options in case of queries, etc. With the rising share of
Banca channels, banks now demand more sophisticated and integrated digital
capabilities from their insurance partners. This would require leveraging
existing services with new digitalized insurance sales channels to reach out to
the relevant customer base with speed and cost efficiency.
Healthcare
- Catalyzing Digitization with novel Initiatives and technologies
For
digitization of the health sector, the GoI has launched the National Digital
Health Mission (NDHM), a program designed to improve access to healthcare and
related services through digital technologies. The program aims to create a
digital infrastructure that will allow patients to access their medical
records, book appointments, and receive e-prescriptions, among other services.
The NDHM has also created a framework for health insurers to integrate with the
digital health infrastructure, which will provide them access to a wide range
of data, including a customer’s medical history and other health-related
information. This data will help health insurers to create more customized insurance
plans, offer more accurate pricing, and streamline the claims process. The NDHM
is also expected to reduce the administrative burden on healthcare providers
and insurers. By digitizing healthcare-related services, the NDHM will reduce
the need for manual paperwork, which will save time and resources for
healthcare providers and insurers. This will also help to reduce the turnaround
time for onboarding, and processing claims, which will improve the overall
customer experience.
Moreover,
the rise of health tech devices, such as wearable fitness trackers and
smartwatches, is beneficial to insurers as it provides them with valuable data
on their customers' health and behavior. This is an opportunity for insurers to
use this data to create more personalized insurance plans and incentivize their
customers to maintain a healthy lifestyle. For example, the Niva Bupa GoActive
Insurance Plan offers personalized health coaching for customers who can then
avail of up to 20% premium discount on achieving their health score. This not
only improves the health outcomes of the customers but also reduces the
insurance companies' claims pay-out by mitigating the risk of their customers
developing chronic health conditions.
The
insurance landscape is also being disrupted by the emergence of insurtechs in
the space. Insurtechs like Kenko Health, Clinikk, etc. offer affordable and
accessible healthcare solutions using technology and data analytics. They
provide personalized healthcare services tailored to the needs of individual
patients, making them popular among tech-savvy consumers. These insurtechs
offer lower premiums, more comprehensive coverage, and convenient healthcare
options such as online consultations, health monitoring, and medication
delivery. With their innovative offerings, they are posing challenges to
traditional insurers, who continue to rely on traditional ways of distribution.
Automotive
Industry – Revolutionizing offerings with new-age products
The
automotive sector is another one that has undergone a major digital
transformation in recent years. With the rise of electric and connected cars,
the automotive industry is generating more data than ever before. This data can
be leveraged by insurers to create more personalized insurance policies for car
owners in India. To meet this need, insurers in India are investing in digital
technologies such as telematics and machine learning algorithms. In fact, early
adopters of digitization in the country are already reaping the operational
benefits, by achieving much better claim approval times than their less
digitized counterparts.
Telematics
is a technology that enables insurers to collect data on how and when a car is
being driven. The data collected can include information on driving speed,
acceleration, and braking, among others. By analyzing this data, insurers can
gain insights into the driving behavior of car owners and tailor insurance
policies based on their risk profiles. For instance, a car owner who drives
cautiously may be offered lower premiums compared to someone who drives
recklessly. An early adopter of telematics technology is Edelweiss General
Insurance, which launched SWITCH, an on-demand comprehensive motor insurance
product. Under this policy, the app detects motion and automatically activates
insurance when the vehicle is driven, making it convenient for customers.
Moreover, it rewards policyholders if they are driving well, as it measures
both the quantity and quality of driving and calculates premiums accordingly.
Other
such novel offerings in automotive insurance include Renter’s Insurance,
Non-insurer’s insurance, and in-trip insurance for cab rides. Thus, customers
can buy motor insurance for exceedingly shorter periods of time and specific
use cases, giving them complete all-around coverage. In fact, Zoomcar partnered
with Acko to offer insurance to the self-drive platform. This goes to show the
massive potential that traditional insurers can unlock by moving toward
digitization.
In
conclusion, the digitization of relevant ecosystems like financial services,
health, automotive, etc. is rapidly transforming the landscape of the insurance
industry. As these industries continue to embrace technological advancements,
insurance companies are pushed to adopt digitization strategies to remain
competitive and in accordant with these industries. There are four key imperatives that insurers
should keep in mind on this road to digitization.
- Re-imagine
customer journeys
- Build
products for a digitally native customer
- Enhance
the service experience of customers and channel partners
- Leverage
the power of data to drive meaningful customer and business outcomes
These
key action items will help insurers to enhance customer experience, improve
operational efficiencies, and expand their market reach in a competitive
environment.
Author:
Shishir Mankad, Managing Partner & Head – Financial Services, Praxis Global Alliance