Presently, India is a land full of business opportunities. Due to various technological innovations and government initiatives, a wave of startups is rising in every business sector. Every business is innovating to adjust to the behavioural shift of customers from an 'asset-heavy, ownership' model to an 'asset-light, pay-per-use' model. Every product and service is now being re-imagined to fit into these changing customer preferences. Unlike banking, logistics, e-commerce sectors that have already adjusted their offerings, the insurance sector has been a bit slow to evolve. But the advent of micro insurance could change all that.
Problem with existing products
There are over 57 life and non-life insurance companies in India that have seen a substantial growth in their product offerings. But there has always been a complaint that the products are very generic with a high premium. A generic product gives the broadest coverage but confuses customers with a lot of exceptions and disclaimers. By making it broad-based and expensive, insurance companies also lose out on price-sensitive customers with specific needs.
What is Micro Insurance?
While in India 'Micro Insurance' refers to providing insurance to low-income families, a broader, globally accepted definition is where insurance products provide a specific coverage for a specific need at a lower cost to customers. Unlike generic products, 'micro insurance' brings down the cost for consumers by putting in innovative constraints on 'coverage', 'time' or usage.
Some Examples of Micro Insurance
Time-based constraints: Retail insurance products are time-based and not usage-based. A time-based insurance product assumes that a customer is exposed to an equal level of risk over the entire year. For e.g. if a car stays in a garage for 100 days in a year, why should a customer buy own-damage insurance for the entire 365 days of the year? A microinsurance product that tracks the 'usage' of an asset will be much more useful to customers.
Event-based coverage: Customers are more open to buying insurance before they engage in a specific event. For eg, a customer might be interested in looking at a personal accident cover before she goes on a long weekend drive. Once the event is completed, her perception of risk drops significantly and so does the perceived need. Designing 'micro insurance' products that specifically cover an event risk reduces the price and increases acceptability among customers.
Need-based coverage: Insuring your entire home might not make sense while insuring your new home theatre system might. Similarly buying a broad-based health insurance might not be valuable for youngsters but buying a broken-bones insurance might be. Identifying the specific need to the specific profile of customers reduces the cost of insurance.
Key insurance players have already started offering easy solutions to customer's problems who cannot buy high premium insurance. Microinsurance model could be the next thing in Indian insurance sector where insurers offer low priced products to increase the 'culture' of buying insurance among youngsters. As they say, insurance is a product where everyone knows the price but only a few understand the value. It is an innovation at product level which is steadily attaining the attention of customers by the efforts of various online fin-tech players. Interestingly, India with all its diversity in income patterns, education levels, occupations etc is a huge experimental playground for microinsurance products.
Microinsurance plans are based on extremely low premium rates. Because of its affordability and specificity, the majority of Indians can get the advantages of insurance.
Moving ahead, Micro-insurance is not only going to benefit the low-income strata. Companies involved in offering micro plans can equally capitalise on the new insurance model. Currently, India accounts for nearly 65% of Asia's Microinsurance market. This directly points microinsurance sector towards its key profitability which is based upon 'Low margin - High volume' revenue model. Large volumes of micro-policies mean more business for the company. Selling larger volumes of Microinsurance plans results in increased revenue and scalability.
To summarize, there is immense potential to bring innovative insurance products that leverage technology.
From an era of transactions on paper and agents walking door-to-door to the method of selling insurance today — the entire process being done at the click of a button on your computer or phone — the industry has undergone a radical transformation. Thanks to technology.
However, the market penetration numbers are still low, which allows insurance companies to take charge and ride on the digital wave to reach out to the farthest corners of the country.
A company that has been able to harness the potential of the industry is IndiaFirst Life Insurance. The company is the outcome of a joint-venture between Bank of Baroda, Andhra Bank and UK’s Life Insurance and Pension Fund Legal & General. About eight years into the business, they have already climbed up the ladder to secure the 12th position in the ranking of insurance companies in India.
Entrepreneur India caught up RM Vishakha, MD and CEO of IndiaFirst Life Insurance to learn about how they have taken the digitally-enabled path for their 94 lakh customers.
The Need for Insurance is Higher Now
The Indian insurance industry has, for long, been trying to crack the code of reaching out to millions of Indian customers while struggling with low penetration numbers. However, today the story has a different ending with more and more customers looking at buying insurance policies.
Vishakha believes that the reason is the change in socio demographic profiles of Indian citizens. Earlier, there were guaranteed jobs where often in the case of government jobs, the death of a government official meant a compensatory job for a family member. “Back then, the risk factor was taken care of for many families,” said Vishakha and added, “With more and more nuclear families popping up these and the privatization of the economy, the risk is higher and that’s where the requirement for insurance comes in.”
Riding the Digital Wave
Given the advent of technology, Insurtech has been able to win over more customers, thanks to greater reach through the tap of a button. Foregoing the long delusion that insurance means a lot of papers and documents along with umpteen number of back and forth with the agent, today insurance policies are given to a customer at the comfort of their home with an all digital approach.
At IndiaFirst too, all their processes have gone digital. “All our tools and sales processes are available online. Through our digital initiatives, we aim to do right consumer profiling and usage of products while also creating financial awareness,” she said.
Flexibility for Better Customer Service
With the launch of a first-of-its-kind product — Insurance Khata – IndiaFirst has tied up with Common Service Centres (CSCs are centres for delivering government of India e-Services to remote locations where internet availability is negligible or mostly absent). Keeping in mind the seasonal incomes of people, their product works literally like a Khata allowing individuals the flexibility to pay premium in parts, as and when possible. “This product is designed for long-term savings along with the life insurance benefit, making it a win-win proposition for the customers. The simple and easy way to understand model makes this product mis-selling resilient,” said Vishakha.
The Future of Insurance
There’s no denying the speedy growth of insurance in India and technology is being incorporated to act as a catalyst. With a customer- centric approach, Vishakha said future forecasts aside, they are aggressively planning their growth strategies. Targeting the informal sector with their recent product, they aim to reach out to the 20 crore base of Aadhaar. They are also looking at partnering with start-ups for pilot projects.
Another recent development in the insurance industry has been with companies turning IPOs. Ask Vishakha whether they too plan an IPO and she said, “These companies have been around for almost 17 years now. IPO requires a certain stage of evolution of the company. The requirement of an IPO is an individual call that has to be taken by the shareholders.”
Today, you can buy almost everything online — a smart phone, a ticket to your favourite holiday destination or even a car. But will you buy insurance? The idea will get very few takers, as the products are complicated and FAQs do not answer all your queries.
Digitization has already revolutionized multiple sectors across industries. Fintechs may take the pride for leading the revolution in the financial sector, but the insurance industry is ‘almost’ like an unexplored territory.
Mohit Rochlani, Director (Operations & and IT) of IndiaFirst Life Insurance shared his views with Entrepreneur India on how insurtechs can change the way the world looks at insurance.
The Change
The statement that “insurance industry is almost like an unexplored sector” holds true. The development here is at a very nascent stage though there are numerous policy aggregators in the market, he said.
Presently, the trend is people research online before meeting their agents or distributors where they can ask questions and buy a policy directly. However, with Chat Pods coming in, there will be a gradual change in the practice. People will not just look for policies online, but the entire processes of buying those will migrate to the digital medium, he predicted.
“It is not that people are not buying policies online, but the percentage is very low (single-digit figure), compared to the overall sale. It is small right now in comparison with a travel industry,” he said.
Explaining the situation, Rochlani clarified, “on most occasions, you buy it from your bank or distributor, because you repose your faith in them. In general insurance, this shift will be faster because the products are simple like motor insurance. In life insurance, where the product is more long-term, people still need more details and have questions to ask.”
Analytics
Rochlani claimed that general insurance would be the first insurance segment to see the change, but at the same time reasoned that this is only because it is a short-term product and more or less standard in nature.
Noting that from a regulatory perspective, as of now, insurance companies cannot differentiate between rates, he said it is likely to change with personalized information of the buyer.
“Internet of Things (IoT) is used more in the general insurance segment,” he said and added, “If you have Fitbit or any related device, we can track the customer’s health and offer better rates.”
Turning to the healthcare he said medical infrastructure is quite weak and “we don’t know have much data about a person’s medical history.” “Once this infrastructure improves, we’ll see more insurtechs getting into the health insurance segment as well,” he added.
In the life insurance segment, a disruption can happen if analytics can be used. Insurtech companies can collect data of the customer through multiple channels and underwrite them i.e. evaluate their risks and exposures to offer rates better, he opined.
Technology
Instead of investing in the legacy system, Rochlani said insurtechs might probably work on CRM systems or a live admin system where the investments are less and flexibilities are more.
“Presently, we have no such companies. However in future, a lot of companies will have a digital presence and we’ll hopefully see general insurance companies in that medium. Here, insurtechs will play an important role, in terms of technology or services for customer engagement.”
Giving an example of chat pods, which are not restricted to the industry, he said, “Earlier when we buy these products, it was restricted to fixed features and any change in the platform would be an expensive affair. However, today, it is not the case; these products are more flexible and adaptive. One just needs a platform and keep building on it, depending on how the experiences are.”
Need of the Hour
To start with companies should invest in becoming more digital. Thinking non-digital will not help as it will become very difficult for traditional companies to really adapt, he added.
“Customer experiences and expectations are changing fast. Insurance companies, which are thinking to continue the traditional manner, may become irrelevant,” he said.
Imagine the customer asking to see the products online or asking you e-KYC options and you don’t have one. The platforms should be as easy as to operate an e-commerce websites like Flipkart or Amazon.
“For a company like IndiaFirst, which is eight years old, it easy for me to change faster compared to an 18-year-old company, which has a lot of processes,” Rochlani claimed.
However, on the side, a large number of people are employed to handle transactions, who should be re-skilled to save them from being redundant.
“I think transactional jobs, be it sales or call center, are going to change in the next three-four years,” he said.
Pro Tip
Upcoming insurtechs should not just look at the digitizing the insurance segment, but also pay attention to the whole journey a customer is undertaking. “Start from the customer perspective rather than from the whole insurance and digital perspective,” Rochlani suggested.
If one starts looking from the customer perspective, one will know what the customer’s expectations are, he said and added this would not just help insurance companies but other industries.
Flexible timings, opportunity to innovate and scope to unleash their creative sides — companies these days are going out of their way to offer these privileges to build a friendly environment for their employees.
In a bid to adapt the entrepreneurial work-style, they are not just changing their hiring policies but also bringing about changes in their operating procedures.
Entrepreneur India spoke to Martijn De Jong, Chief Digital Officer, Aegon Life Insurance about how they have changed the work culture.
Looking Beyond Insurance for Hiring
With the growing demands of technology, it has become necessary for companies to evolve with it. Jong, who has earlier worked with various telecom giants, said, “Younger people from non-insurance background constitute 80-85 per cent of my team. In fact, most of them are from e-commerce companies like eBay, ShopClues, Mu Sigma etc. So, while it takes some time for them to get the hang of the insurance terms and policies, they are enriched with data and customer experience.”
Internal Hackathon, Global Appreciation
In order to keep employees motivated to innovate, corporates often organize hackathons or present them with real challenges in a fun format. “We conduct internal hackathons. In fact, recently 20 teams, representing different countries, met in Holland for a 48-hour hackathon. These teams work on ideas that will benefit the company in the digital space. In the recent one, the Indian team was in the best 3 for coming up with an idea that will allow one to auto-fill the required forms while applying for insurance using AI, data analytics, social profiling, and Aadhar. This will optimize the purchase journey of the customer,” said Jong.
But that’s not where the competition ends. Once back in India, the team has been sanctioned a budget of maximum 30,000 euros to develop a prototype for their idea. “We have an in-house R&D facility, so the testing of the product will also be done in India. This makes way for data-driven innovation,” he said.
Back to School
While the younger generation brings in new concepts, it also becomes important for the senior management to reinvent ideas. Jong opted for a year-long corporate innovation programme at Stanford so that he can implement the learnings at Aegon. “Other senior officials, too, are opting for the 12 months’ course at Stanford or the 6 months’ one at INSEAD,” he added.
All of this is being done because corporations increasingly believe that a shift in mindset is necessary. Jong has seen the change even at start-up events in India. “From people who showed up just in suits for events, we now see jeans and suits mingling in the same crowd. With everything becoming technology and culture oriented, it’s creating a different way of thinking,” he added
Problem with existing products
There are over 57 life and non-life insurance companies in India that have seen a substantial growth in their product offerings. But there has always been a complaint that the products are very generic with a high premium. A generic product gives the broadest coverage but confuses customers with a lot of exceptions and disclaimers. By making it broad-based and expensive, insurance companies also lose out on price-sensitive customers with specific needs.
What is Micro Insurance?
While in India 'Micro Insurance' refers to providing insurance to low-income families, a broader, globally accepted definition is where insurance products provide a specific coverage for a specific need at a lower cost to customers. Unlike generic products, 'micro insurance' brings down the cost for consumers by putting in innovative constraints on 'coverage', 'time' or usage.
Some Examples of Micro Insurance
Time-based constraints: Retail insurance products are time-based and not usage-based. A time-based insurance product assumes that a customer is exposed to an equal level of risk over the entire year. For e.g. if a car stays in a garage for 100 days in a year, why should a customer buy own-damage insurance for the entire 365 days of the year? A microinsurance product that tracks the 'usage' of an asset will be much more useful to customers.
Event-based coverage: Customers are more open to buying insurance before they engage in a specific event. For eg, a customer might be interested in looking at a personal accident cover before she goes on a long weekend drive. Once the event is completed, her perception of risk drops significantly and so does the perceived need. Designing 'micro insurance' products that specifically cover an event risk reduces the price and increases acceptability among customers.
Need-based coverage: Insuring your entire home might not make sense while insuring your new home theatre system might. Similarly buying a broad-based health insurance might not be valuable for youngsters but buying a broken-bones insurance might be. Identifying the specific need to the specific profile of customers reduces the cost of insurance.
Key insurance players have already started offering easy solutions to customer's problems who cannot buy high premium insurance. Microinsurance model could be the next thing in Indian insurance sector where insurers offer low priced products to increase the 'culture' of buying insurance among youngsters. As they say, insurance is a product where everyone knows the price but only a few understand the value. It is an innovation at product level which is steadily attaining the attention of customers by the efforts of various online fin-tech players. Interestingly, India with all its diversity in income patterns, education levels, occupations etc is a huge experimental playground for microinsurance products.
Microinsurance plans are based on extremely low premium rates. Because of its affordability and specificity, the majority of Indians can get the advantages of insurance.
Moving ahead, Micro-insurance is not only going to benefit the low-income strata. Companies involved in offering micro plans can equally capitalise on the new insurance model. Currently, India accounts for nearly 65% of Asia's Microinsurance market. This directly points microinsurance sector towards its key profitability which is based upon 'Low margin - High volume' revenue model. Large volumes of micro-policies mean more business for the company. Selling larger volumes of Microinsurance plans results in increased revenue and scalability.
To summarize, there is immense potential to bring innovative insurance products that leverage technology.
From an era of transactions on paper and agents walking door-to-door to the method of selling insurance today — the entire process being done at the click of a button on your computer or phone — the industry has undergone a radical transformation. Thanks to technology.
However, the market penetration numbers are still low, which allows insurance companies to take charge and ride on the digital wave to reach out to the farthest corners of the country.
A company that has been able to harness the potential of the industry is IndiaFirst Life Insurance. The company is the outcome of a joint-venture between Bank of Baroda, Andhra Bank and UK’s Life Insurance and Pension Fund Legal & General. About eight years into the business, they have already climbed up the ladder to secure the 12th position in the ranking of insurance companies in India.
Entrepreneur India caught up RM Vishakha, MD and CEO of IndiaFirst Life Insurance to learn about how they have taken the digitally-enabled path for their 94 lakh customers.
The Need for Insurance is Higher Now
The Indian insurance industry has, for long, been trying to crack the code of reaching out to millions of Indian customers while struggling with low penetration numbers. However, today the story has a different ending with more and more customers looking at buying insurance policies.
Vishakha believes that the reason is the change in socio demographic profiles of Indian citizens. Earlier, there were guaranteed jobs where often in the case of government jobs, the death of a government official meant a compensatory job for a family member. “Back then, the risk factor was taken care of for many families,” said Vishakha and added, “With more and more nuclear families popping up these and the privatization of the economy, the risk is higher and that’s where the requirement for insurance comes in.”
Riding the Digital Wave
Given the advent of technology, Insurtech has been able to win over more customers, thanks to greater reach through the tap of a button. Foregoing the long delusion that insurance means a lot of papers and documents along with umpteen number of back and forth with the agent, today insurance policies are given to a customer at the comfort of their home with an all digital approach.
At IndiaFirst too, all their processes have gone digital. “All our tools and sales processes are available online. Through our digital initiatives, we aim to do right consumer profiling and usage of products while also creating financial awareness,” she said.
Flexibility for Better Customer Service
With the launch of a first-of-its-kind product — Insurance Khata – IndiaFirst has tied up with Common Service Centres (CSCs are centres for delivering government of India e-Services to remote locations where internet availability is negligible or mostly absent). Keeping in mind the seasonal incomes of people, their product works literally like a Khata allowing individuals the flexibility to pay premium in parts, as and when possible. “This product is designed for long-term savings along with the life insurance benefit, making it a win-win proposition for the customers. The simple and easy way to understand model makes this product mis-selling resilient,” said Vishakha.
The Future of Insurance
There’s no denying the speedy growth of insurance in India and technology is being incorporated to act as a catalyst. With a customer- centric approach, Vishakha said future forecasts aside, they are aggressively planning their growth strategies. Targeting the informal sector with their recent product, they aim to reach out to the 20 crore base of Aadhaar. They are also looking at partnering with start-ups for pilot projects.
Another recent development in the insurance industry has been with companies turning IPOs. Ask Vishakha whether they too plan an IPO and she said, “These companies have been around for almost 17 years now. IPO requires a certain stage of evolution of the company. The requirement of an IPO is an individual call that has to be taken by the shareholders.”
Today, you can buy almost everything online — a smart phone, a ticket to your favourite holiday destination or even a car. But will you buy insurance? The idea will get very few takers, as the products are complicated and FAQs do not answer all your queries.
Digitization has already revolutionized multiple sectors across industries. Fintechs may take the pride for leading the revolution in the financial sector, but the insurance industry is ‘almost’ like an unexplored territory.
Mohit Rochlani, Director (Operations & and IT) of IndiaFirst Life Insurance shared his views with Entrepreneur India on how insurtechs can change the way the world looks at insurance.
The Change
The statement that “insurance industry is almost like an unexplored sector” holds true. The development here is at a very nascent stage though there are numerous policy aggregators in the market, he said.
Presently, the trend is people research online before meeting their agents or distributors where they can ask questions and buy a policy directly. However, with Chat Pods coming in, there will be a gradual change in the practice. People will not just look for policies online, but the entire processes of buying those will migrate to the digital medium, he predicted.
“It is not that people are not buying policies online, but the percentage is very low (single-digit figure), compared to the overall sale. It is small right now in comparison with a travel industry,” he said.
Explaining the situation, Rochlani clarified, “on most occasions, you buy it from your bank or distributor, because you repose your faith in them. In general insurance, this shift will be faster because the products are simple like motor insurance. In life insurance, where the product is more long-term, people still need more details and have questions to ask.”
Analytics
Rochlani claimed that general insurance would be the first insurance segment to see the change, but at the same time reasoned that this is only because it is a short-term product and more or less standard in nature.
Noting that from a regulatory perspective, as of now, insurance companies cannot differentiate between rates, he said it is likely to change with personalized information of the buyer.
“Internet of Things (IoT) is used more in the general insurance segment,” he said and added, “If you have Fitbit or any related device, we can track the customer’s health and offer better rates.”
Turning to the healthcare he said medical infrastructure is quite weak and “we don’t know have much data about a person’s medical history.” “Once this infrastructure improves, we’ll see more insurtechs getting into the health insurance segment as well,” he added.
In the life insurance segment, a disruption can happen if analytics can be used. Insurtech companies can collect data of the customer through multiple channels and underwrite them i.e. evaluate their risks and exposures to offer rates better, he opined.
Technology
Instead of investing in the legacy system, Rochlani said insurtechs might probably work on CRM systems or a live admin system where the investments are less and flexibilities are more.
“Presently, we have no such companies. However in future, a lot of companies will have a digital presence and we’ll hopefully see general insurance companies in that medium. Here, insurtechs will play an important role, in terms of technology or services for customer engagement.”
Giving an example of chat pods, which are not restricted to the industry, he said, “Earlier when we buy these products, it was restricted to fixed features and any change in the platform would be an expensive affair. However, today, it is not the case; these products are more flexible and adaptive. One just needs a platform and keep building on it, depending on how the experiences are.”
Need of the Hour
To start with companies should invest in becoming more digital. Thinking non-digital will not help as it will become very difficult for traditional companies to really adapt, he added.
“Customer experiences and expectations are changing fast. Insurance companies, which are thinking to continue the traditional manner, may become irrelevant,” he said.
Imagine the customer asking to see the products online or asking you e-KYC options and you don’t have one. The platforms should be as easy as to operate an e-commerce websites like Flipkart or Amazon.
“For a company like IndiaFirst, which is eight years old, it easy for me to change faster compared to an 18-year-old company, which has a lot of processes,” Rochlani claimed.
However, on the side, a large number of people are employed to handle transactions, who should be re-skilled to save them from being redundant.
“I think transactional jobs, be it sales or call center, are going to change in the next three-four years,” he said.
Pro Tip
Upcoming insurtechs should not just look at the digitizing the insurance segment, but also pay attention to the whole journey a customer is undertaking. “Start from the customer perspective rather than from the whole insurance and digital perspective,” Rochlani suggested.
If one starts looking from the customer perspective, one will know what the customer’s expectations are, he said and added this would not just help insurance companies but other industries.
Flexible timings, opportunity to innovate and scope to unleash their creative sides — companies these days are going out of their way to offer these privileges to build a friendly environment for their employees.
In a bid to adapt the entrepreneurial work-style, they are not just changing their hiring policies but also bringing about changes in their operating procedures.
Entrepreneur India spoke to Martijn De Jong, Chief Digital Officer, Aegon Life Insurance about how they have changed the work culture.
Looking Beyond Insurance for Hiring
With the growing demands of technology, it has become necessary for companies to evolve with it. Jong, who has earlier worked with various telecom giants, said, “Younger people from non-insurance background constitute 80-85 per cent of my team. In fact, most of them are from e-commerce companies like eBay, ShopClues, Mu Sigma etc. So, while it takes some time for them to get the hang of the insurance terms and policies, they are enriched with data and customer experience.”
Internal Hackathon, Global Appreciation
In order to keep employees motivated to innovate, corporates often organize hackathons or present them with real challenges in a fun format. “We conduct internal hackathons. In fact, recently 20 teams, representing different countries, met in Holland for a 48-hour hackathon. These teams work on ideas that will benefit the company in the digital space. In the recent one, the Indian team was in the best 3 for coming up with an idea that will allow one to auto-fill the required forms while applying for insurance using AI, data analytics, social profiling, and Aadhar. This will optimize the purchase journey of the customer,” said Jong.
But that’s not where the competition ends. Once back in India, the team has been sanctioned a budget of maximum 30,000 euros to develop a prototype for their idea. “We have an in-house R&D facility, so the testing of the product will also be done in India. This makes way for data-driven innovation,” he said.
Back to School
While the younger generation brings in new concepts, it also becomes important for the senior management to reinvent ideas. Jong opted for a year-long corporate innovation programme at Stanford so that he can implement the learnings at Aegon. “Other senior officials, too, are opting for the 12 months’ course at Stanford or the 6 months’ one at INSEAD,” he added.
All of this is being done because corporations increasingly believe that a shift in mindset is necessary. Jong has seen the change even at start-up events in India. “From people who showed up just in suits for events, we now see jeans and suits mingling in the same crowd. With everything becoming technology and culture oriented, it’s creating a different way of thinking,” he added
0 Comments