In the old-world order, products simply provided solutions to generic needs. Maybe that worked then. However, this approach is now about to become as antiquated as a dial-up phone. Consumers today have more nuanced needs which simple cookie cutter solutions are unable to fulfil. The paradigm has decidedly shifted to product customisation and user experience. Delivering customised services most efficiently has become the focal point for many organisations. Technology is abetting this change and helping firms customise their value proposition.
New World Order
There is an acceleration in the pace of change in the financial services industry, and fintech firms are leading this change from the front. From banking and lending to payments and wealth management, we see fintech firms leverage technology to make financial service more customised and accessible to the average consumer. Insurance is an old business, encumbered by stringent regulations and complex products that find little consumer appeal. However, the insurance industry is now changing and slowly adapting to the new paradigm. Enhanced customer experience, developing new uses, mastering advanced technologies and an upgrade of the entire insurance value chain is changing the face of the insurance business.
Insurtech lies at the confluence of insurance and technology. It’s the technology that is being deployed to create, distribute and administer solutions in the insurance business in an effective and efficient manner. Smartphone apps, wearables, claims processing tools, online policy handling, customised premium pricing and automated processing are all insurtech. Insurtech is well positioned to reflect the nuanced reality of a consumer’s everyday life and create products that are more intuitive and fit the customer requirement better.
The Possibilities
Broad actuarial tables that assign a risk category to policy seekers are a mainstay of the insurance industry. People are grouped in certain risk baskets basis the broad level of data gleaned. Consequently, this results in some people ending up paying more than they should, based on their risk profile. Insurtech is looking to effectively tackle this issue of data assimilation and analysis.
Using inputs from all manners of devices, including GPS tracking of cars to the activity trackers on our wrists, these companies are building more finely delineated groupings of risk, so that the products can reflect the true risk of the individual customer and are priced more competitively.
For example, motor insurance can be tailored through GPS tracking telematic device that can provide micro information about the owners driving habits. The more responsible and risk-averse drivers can benefit from lower premiums or discounts. Insurtech empowers customers to take control of their insurance and make value accretive choices rather than settle for expensive products that don’t really fit their needs.
Insurtechs are also using artificial intelligence (AI) technology to provide a tailored and more customised user experience to consumers. Basis of the customers’ preferences and lifestyle, the technology can quickly summarise and present the most relevant and useful products to the customer. Internet of Things (IoT) can provide insurers with detailed data about customers to help them develop and offer the right products at the right time.
The Way it Has Helped
Insurtechs involvement has immensely helped the insurers view the business from a customer-centric perspective. The adoption of AI, IoT, robotic process automation (RPA) and machine learning has provided a new dimension to the insurance business as it allows for the automation of a lot of mundane and redundant tasks. Insurers, with the help of insurtechs, can develop products to better meet the ever-expanding and changing needs of customers. Emerging technologies will not only enhance customer experience but also introduce operational efficiencies to back-office operations. While technology brings with it myriad benefits, insurance companies must also be cognizant of the accompanying risks. Companies must have adequate safety and risk mitigation tools in place to ensure data security and sanctity.
The insurance business is notoriously characterised as being risk-averse, in contrast to the agile and disruptive methods of startups. However, insurance companies must view insurtechs as the harbingers of positive change and devise ways to mainstream technology into legacy cultures that are unaccustomed to the speed and agility of insurtech.
The digital transformation within the insurance space has given birth to a new category of companies called insurtech startups. According to Tracxn, there over 142 insurtech startups in the country at present including unicorn Policy Bazaar along with several promising companies like Digit Insurance, Acko, Coverfox, Turtlemint, etc.
In the age of the internet of things, artificial intelligence, machine learning and other new age technologies, these start-ups are not just focusing aggregating products but also developing new products, streaming distribution and providing last-mile support to customers.
Considering the penetration level of the sector in the country is so poor, we at Entrepreneur India, decided to catch up with industry veterans on how these insurtech startups could leverage on this opportunity.
Unlearn Everything about Insurance
Insurance is one of the most complicated product and there is no ruling against this. From buying insurance to claim settlement, a customer is always in the dilemma on what is right process to go about it.
Hence, Mehmood Mansoori, Member of Executive Management and Group Head, HDFC ERGO suggests insurtechpreneur to forget everything they know about insurance and focus on the customer.
“Insurance is a complex product. When you try to develop a solution keeping insurance in mind, you always make complex products. Instead of focusing on insurance, focus on the customer mindset,” he says while adding that, “When a consumer looks at insurance, all they want is ease of service or buying. The experience should be similar to buying from an e-commerce platform or transacting through a mobile wallet or watching content on OTT platforms.”
According to Mansoori, the moment an entrepreneur masters this, he or she is likely to end up in a different customer journey as against its peers.
Digital is the Key
Most of the problem in the insurance sector can be solved with a digital outlook. Like every industry, today insurance is also waling in the same direction. Amartya Sen the famous Nobel laureate and economist is of an opinion that the insurance sector is not adapting to the changes the way it should.
So in order to make a lasting impact in the insurance industry, Manik Nangia Director & Chief Operations Officer, Max Life Insurance says it is important to follow the mantra of ‘Being Customer First and Thinking Digital’.
“Digital disruption has changed the way financial institutions and businesses across the board are interacting with customers. Generating awareness of the value of life insurance products sooner rather than later is vital but understanding the fact that when human interaction is desired, digital channels are preferred, and how these preferences are influenced by demographic factors is also necessary. Businesses that will be able to strike this differentiation accurately will succeed in the future,” he noted.
Simply put, no matter what insurtech startups cannot afford to ignore customers and experiences.
Even businesses with great products and hungry markets can fail. If you don’t take care of the “boring” stuff, your company won’t last long enough to deliver on all the promises you made to your customers.
That’s not to say your product or service isn't an essential component of your success -- bad product-market fit is a top killer of failed startups. However, factors like lack of capital, inadequate management and marketing mishaps are more often to blame for turning both promising startups and established companies into tales of what could have been.
To avoid joining the league of companies that didn’t quite make it, business owners need to pay attention to the back-office tasks that keep operations running smoothly. It doesn’t matter how dedicated your employees are or how revolutionary your product is: If paychecks don’t come on time, the electricity is off or an unexpected legal battle crops up, your odds of survival can plummet.
Related: 7 Ways to Help Ensure Your Business Succeeds
Take care of these "boring" tasks ahead of time so you can focus on the fun parts of growing your business:
1. Payroll Processing and Administration
No matter how lean your company runs, employees must have their paychecks on time every time. The moment people have to ask about the status of their direct deposits is the moment your best performers start looking for new opportunities.
Payroll processing and administration company OnPay recommends that companies follow a six-step process to get ahead of any payroll issues as soon as they start hiring employees. Businesses need to register with the IRS and, in some cases, state-specific agencies. They should also hammer out the logistics for paying employees ahead of time to ensure employees never have any reason to doubt their employer’s solvency.
The same is true of benefits beyond paychecks. Workers depend on their employers for health insurance, PTO and other perks. If an employee gets denied at the doctor’s office or docked pay for using earned PTO, she might wonder whether the business really has its affairs in order.
Related: 17 Incredible Employee Perks of Successful Companies (Infographic)
The bottom line? Don’t play around with payroll and benefits administration. Get it done first -- and get it done right -- to keep your team together.
2. Information Security
Good technology management shouldn't be reserved for technology companies. Any business with a computer in the building needs an IT plan that can scale with the company's needs.
Businesses that use customer data should be especially proactive in this area. Nothing can tank a promising startup more quickly than an early data breach that kills customer trust.
“Having the right technology in place is a critical line of defense when faced with hackers, malware, and other cyber threats,” says Erik Brown, chief technology officer at GigaTrust. “Smaller companies may do some of this manually, while larger organizations will want to automate as much as possible."
Get the best of both worlds by investing in good security from day one. Set up systems and databases that comply with new rules, such as GDPR. Don’t know what that means? Find someone who does. The upfront costs may be steep, but the long-term protections are more than worth the investment.
Related: Why Startups Should Consider A Cyber Resilience Strategy
3. Business Insurance and Legal Protection
Your LLC can’t protect you from everything. Even if your company structure insulates you from certain lawsuits and judgments, you could still be held personally liable if someone gets injured on your property, if you accidentally break the law or if you’re careless about intermingling business and personal finances.
For a fairly low price, business liability insurance protects business owners from threats outside the norm. The Balance reports that most annual premiums fall somewhere between $750 and $2,000.
Different types of insurance cover different types of events. Product liability insurance, for example, protects companies if a product injures a customer. Professional liability insurance covers service-based businesses against errors that lead to losses. In many situations, businesses may be required by federal or local laws to carry insurance.
Owners should consult with a law firm to make sure they remain in compliance. However, law firms can do much more than help businesses mark checkboxes. Rather than wait until a small problem turns into an expensive legal battle, growing companies should work with lawyers early and often to protect themselves from future problems. Attorneys who help small businesses get set up are generally much cheaper than litigators who represent companies in messy court battles.
Business owners can't afford to ignore the details as they push their products and services. Only employees can do that. Things like payroll administration and business insurance might not be fun, but they're essential components for growing companies. If you want to run a successful business, you have to lay the "unsexy" groundwork first.
Customers these days tend to live in an Omni-channel world! However, still, there are many businesses that force the significantly evolved customers onto engagement paths that are relatively outdated. A recent report by global research and advisory firm, Gartner highlighted that by the end of the year 2020, 85per cent of the customer interactions will be managed without a human. This is because businesses are now employing machine learning to provide an intelligent and informed customer experience. This broadly results in re-imagined customer experiences that are integrated and completely personal. The experience is significantly natural to the customers.
As the latest advancements in the technology industry strive to transform how businesses are being developed, business owners are now actively looking for efficient and progressive ways to operate and eliminate issues related to customer satisfaction. Measuring the many attributes of marketing to access revenue growth is becoming more real-time and accurate, all thanks to Machine Learning.
What is Machine Learning?
Machine learning is an effective application of artificial intelligence also known as AI that makes any system efficient of learning and improving automatically from the experience itself without the assistance of the program. The application usually focuses on the development of different computer programs that can directly access data and use it to learn for themselves. The entire process of learning begins with the analyses of data which can include direct experiences or even any given instructions to properly study a pattern in data. This plays a vital part to make better and improved decisions in the future.
The key objective of machine learning is to let the computers automatically learn without the intervention of any human being and adjust the actions as per needs and requirements. Machine learning software was once thought to be a very technical and complicated application however it is now widely available and used by most businesses. Machine learning primarily heightens any organization’s sheer ability to build all data-backed applications to enhance the overall customer experience.
Importance of Machine Learning
As an entrepreneur, it has become very important to know what all is driving more marketing leads and how to best optimize the marketing campaigns. Industry leaders believe that improving the precision and profitability of pricing is one of the integral areas where machine learning is revolutionizing the concept of a customer centric approach. As per a recent survey, in the last 2 years, small businesses have spent over $55 billion on just cloud-based services, wherein an average professional uses anywhere between 10-16 apps daily. If trends are to be believed, by the end of the year 2020, more than 80per cent of the small businesses operating today will be using cloud-based services, increasing the current numbers by 37per cent .
Moreover, 84per cent of the marketing organizations operating today have already started implementing machine learning. Out of this, over 75per cent of the enterprises using machine learning are already experiencing enhanced customer satisfaction.
Uses of Machine Learning in the Insurance Industry
Insurance companies selling health, life, motor and home insurance can use machine learning (ML) in numerous ways for driving enhancements in operational efficiency, customer service and fraud detection. One of the most effective uses of machine learning is Policy Lapse Management wherein by using the technology, the insurer can easily identify the policies that are about to lapse and when to approach the insured regarding renewal of the policy. Machine learning also plays a significant role in Fraud Detection in insurance as it helps in identifying potentially fraudulent claims. In many cases, machine learning even helps the consumers in getting the right insurance as per their current life situations such as marriage and birth of a child.
Conclusion
In order to analyse and significantly reduce customer mix, machine learning has proved to be very fruitful in streamlining the various risk prediction. Businesses instead of completely relying on expensive methods to minimize customer churn must turn to machine learning.
Buying insurance is one of the most difficult tasks. Imagine this, after a lot of efforts, you shortlist a product along with the insurer but just when you are about to the buy the policy, the terms and conditions pages will arrive to confuse the hell out of you. And this vicious circle goes on and on.
And if at all, god forbid, if something goes wrong then the claim process is another set of a nightmare for customers.
Wouldn’t life be easy if insurance could be simple? Sounds more like an oxymoron, isn’t it? However, Kamesh Goyal plans to turn this paradox into a reality.
After spending over two decades in the industry, what bothered him the most was how much insurance was mistrusted by people as jargons complicated the product. This is where he saw an opportunity and started Digit Insurance with an idea to simplify the complexity around insurance products.
“If there is one thing that would truly make a difference to people in the insurance context, it is busting the complexity of the industry and bringing in simplified insurance,” Goyal said in a conversation with Entrepreneur India.
The Approach
Apart from simplifying insurance and customising process as per customer requirements, Digit is also known for its claim settlement process.
The start-up professes a 92 per cent claim settlement ratio for private cars own damage, 91 per cent for two-wheelers own damage, 99.5per cent for domestic travel, 97 per cent for mobile and 93 per cent for international travel.
On asking him how a 16-month old insurtech company could manage to achieve this claim settlement ratio, he says, “One of the reasons why the processes in insurance are full of checks is because they are made for fraudulent cases. We flipped this and said how the processes would look like for genuine customers.”
Pain Points
With the increase in smartphone penetration and internet boom, India is transiting to a digital nation. However, working with authorities and access to official records continues to haunt both traditional and new age insurers.
Take an example of motor insurance. If companies could access RTO data, driving license data, etc. wouldn’t life be easy for these institutions which in turn could help them focus on customer experience.
“Working on more technology solutions that would challenge how buying and claiming is experienced right now. With more consumer data insights, we will be customizing our plans further with sharper offerings relevant to that segment,” Goyal shared.
Expansion
Presently, Digit is marketing motor, travel, home and phone insurance. However, hinting at fundraising by end of this year, the entrepreneur says he will soon launch health insurance under Digit’s umbrella.
“The principles on which we build our other products and processes will apply to health as well. Apart from that, we will see more institutional partnerships and more strategic partners added to our network. We are also continuously expanding the number of locations where we are doing business,” concluded.
Insurance is a very complicated product. Every time you try to buy a policy either through your financial advisor or the internet, the entities will leave you more confused than ever. But times are changing and complexity around the product is getting solved.
With the rise of technology and increase in smartphone users, the insurance sector is looking at a bright future. According to IBEF, gross premiums written in the country touched INR 5.53 trillion (USD 94.48 billion). However, the penetration levels in the country need to improve which presently stood at 3.69 per cent in 2017.
In a conversation with Entrepreneur India, Mehmood Mansoori, Member of Executive Management and Group Head, HDFC ERGO General Insurance says there is two way to look at this number - on one side, it is a cause of concern because there so many people are underinsured which only means they are vulnerable to problems. While on the other hand, it is a great opportunity from the insurance industry point of view.
The Challenge and the Solution
If one looks at the insurance sector in India, there is a lack of awareness within the masses. Take an example of the health insurance space where people are often happy when their employers cover them and they do not feel the need to buy an additional policy. While on the side, people living in states like Kashmir, Uttarakhand, North East region, Kerala and states which are prone natural disasters, do not feel the need to ensure their houses.
“The market needs to be developed and this is a matter of people's awareness. For many years, insurance has been looked at as a tax saving instrument. Having said, the perception is changing but the pace is slow and hence, I think a lot needs to be done to increase awareness among people,” he said.
Secondly, with a country like India, for insurance companies to reach out to the hinterland, depending on the physical network cannot be a sole solution. Hence, Mansoori feels distribution needs to be improved and digital has a major role to play here.
Digital has indeed played a significant role among other financial services industry, especially on the payment front. They have increased the adoption among masses as these platforms are available on their fingertips via their smartphones.
“By simply adding manpower and infrastructure will not help us meet our goals, we have to adopt digital. In order to survive, we have to adopt technology. This has become a mantra for us.” he pointed out.
The Insurtech Way
In the last two-three, HDFC Ergo took an approach of transforming the more insurance organization. The move yielded significant results for the company. Today, the company claims to issue policies within five minutes.
Furthermore, 95 per cent HDFC ERGO’s policies are issued in a straight-prude processing mode which is either bought by the customer directly or via B2B integration or by a channel partner online.
Mansoori shares, “This has been a massive transformation which we have been able to achieve. On the customer service front, we have adopted the net banking style. Our overall call volume is not increasing with the linear growth of our business. While our self-service is continuously growing up but I still believe that we are yet to reach to the tipping point,” he added.
Elaborating on how the company is looking at artificial intelligence, he says the technology is shaping up well - both on the conversational and intelligence side because this domain is full of transformation.
“We are dealing with humungous data and that’s the perfect recipe for any AI solution to work. Though it is too early to say as there is a lot of room for improvement,” he concluded.
The insurance industry in India has existed for nearly a decade now but only recently it underwent the phase of liberalization and deregulation. Despite over 100s of insurance companies operating across health, life and general sectors, not many citizens realized the importance of non-life insurances until recently. Investing in safety packages for auto, health & travel was treated as expenditure rather than a way out to navigate through various risk scenarios.
Over time, the increased disposable income and improved general awareness have played a crucial role in amplified general & health insurance subscriptions. Having been nationalized in 1972, the industry has come a long way. Consumers have started to realize the value of non-life insurance products. With the upsurge of the start-up ecosystem in India, a significant boost of technology integration into insurance services has been noted, leading to increased adoption of such products.
Entrepreneur India talked to some leading names in the health & general insurance space to assess the market scenario.
Technology – The Game Changer
The penetration of the internet across the Indian borders has brought along endless opportunities for business aspirants. The insurance sector is reshaping with the entrance of new players in the market, by merging product thinking, data and technology with the existing bone structure of the industry. There are about 450 million digitally active consumers today, using more than 8 GB of data per month.
65 per cent of the Indian population is below the age of 35, representing the largest cohort in human history stated Rohan Kumar, the CEO and Co-founder of Toffee Insurance, adding, “With new technologies rapidly emerging, consumers now want insurers to deliver superior, personalized and seamless services across all channels.”
The new-age consumers are supremely active online and are looking to adopt a safer lifestyle. To fit within this scope, insurers need to be relevant to the end user and technology can help accelerate the process. However, for real-time results, conventional mediums need to be sidelined. Kumar suggested three areas to challenge traditional enterprise structures:
· Blockchain technology can be used to drive smart insurance contracts in Policy Issuance & Claim Servicing. This will also allow for real-time claim processing.
· AI & ML and advanced data mining techniques can help in assessing real-time risk scenarios to provide variable/dynamic pricing. This will help fuel the on-demand personalized insurance structure.
· Insurers can integrate with various IOT devices to drive data loops and personalised insurance plans.
In the global insurance space, emerging technologies are changing the business landscape. While in India, technology adoptions for both company and individuals are still in the budding phase which will continue to affect insurance penetration, provided Atul Deshpande, the Head of Operations, Strategy & PMO at SBI General Insurance.
He further added, “The use of web-based technologies as an Insurance service delivery medium has added new elements to service dissemination. The escalation in self-service technologies has provided customers with multiple choice for using services offered by insurers. The online service attributes of ‘convenience’ and ‘ease of use’ are being given priority by customers for designing web-based solutions.”
A Hotbed for Startups
Private players have gained momentum in the insurance space with their flexible approach towards providing such services as they are more open to tailoring their products to the specific needs of the customer. Currently, there are around 30 Private General Insurers operating in India offering a variety of products. According to Neeraj Prakash, Managing Director, Shriram General Insurance, Insurance Awareness Program has played a crucial role in the growth of general Insurance market in the country.
More so, people have started understanding that paying premiums of general insurance is like depositing the amount in a savings account. Giving a context, Prakash said, “Valuable possessions in our life, such as home, business and vehicle are also very important as our life. Some of the recent disasters Like Mumbai Floods, J& K Floods, Uttrakhand tragedy and Chennai Floods also prompted this revolution. Most of the Property, which was damaged under these catastrophes, were uninsured.”
Buying insurance online has become a fad in recent years. While the share of premium received through online sales is still small in India but the medium holds great potential. The unconventional method provides convenience, quick execution of services and most of all, clarity about the product. A number of start-ups in the insurance space have jumped the field to address the pain points of customers through their unique identification.
One such organization is Digit Insurance. The startup has witnessed the insurance industry evolving over the years. “The industry is coming up with insurance solutions that cater to the changing lifestyles and life products of people,” Vijay Kumar, CEO & Principal Officer Go Digit General Insurance Ltd, adding, “Customized products are the way forward to increase penetration of insurance products.”
Further providing testimony to the increased consumption of online insurance services, Kumar claimed, “Digital claims give customers speed and ease, so it’s a win-win situation.” The insurance industry is undergoing a major shift. Major European insurers have set up innovation divisions or labs and have set up huge investment funds to invest in Insurtechs, verified Pallav Singh, Co-founder & CEO, Kruzr.
He further suggested that we see this trend even in some Indian insurers, which makes us quite bullish about the InsurTech domain in India. Recently, online startup Acko General Insurance Co. Ltd raised $65 million in a Series C round of funding led by Flipkart co-founder Binny Bansal, recommending an increased interest of investors in the insurance space. Taking a glance at other deals, we see a string of online insurance platforms raising funds.
In January, Turtlemint raised $25 million in a fresh funding round led by the Indian arm of global venture capital firm Sequoia Capital whereas the parent company of insurance startup Digit Insurance Go Digit Infoworks Services Pvt. Ltd raised $45 million from existing investor Fairfax Holdings in July last year.
Corporate-Government Connect
Post the economic liberalisation, tonnes of opportunities were available for private players to explore and the government was there to handhold. With reference to health insurance policies, the Insurance Regulatory and Development Authority (IRDA) of India has lineated certain regulations to further support the insurers. “Portability options opened by IRDA in health insurance category is now providing a valuable boost to this category,” provided Anand Shrikhande, the CEO of Quickinsure.
Insurance is a complex and high involvement product. People have started considering Health and Motor insurance policies as a compulsory part of their financial portfolio. According to Dhirendra Mahyavanshi, the Co-Founder of Turtlemint protecting vehicles against damages has become a priority for customers and the digital intervention has made the claims way easier to apply and track.
“For health insurance awareness of insurance has gone up way higher. Corporates, as well as the Government, have enrolled in health schemes, making the concept even more popular. With the ever-rising healthcare costs, insurance comes as salvage as paying the entire expenses out-of-pocket cost a lot,” he stated.
Shrikhande highlighted the role of government in pushing such schemes by stating, “New add-on attachment to existing products, a government mandate on crop insurance and increasing awareness of the need of health insurance are some more triggers for this revolution.” Talking about future trends, Mahyavanshi sees a good future when it comes to offering health wellness solutions like regular health check-ups, fitness bands etc.
Even motor insurance has become a compulsory deal for new vehicle buyers. IRDA has mandated multi-year policy to increase two-wheeler insurance penetration. However, only 80 per cent has been witnessed yet due to two-wheeler riders dodging the compulsion to save a few bucks, inviting high risk in case of mishaps. Nonetheless, India's auto sales are growing healthy at 10 per cent, which makes motor insurance a growing sector in India.
“With the Government aided and funded schemes for Crop, Health, and other insurance covers reaching out to the length and breadth of the country, there will be increased awareness over the next few years. It is critical that this awareness is leveraged to ensure that the uninsured, as well as the underinsured population of the country, is covered adequately for risks,” Deshpande said.
Move from Traditional to Innovative
The insurance industry has embarked on a radical transformation spurred by a series of digital innovations. We are experiencing spur in small ticket products in all segments of general insurance. Startups are coming up with innovative and affordable solutions to fit the bill for millennial by offering non-conventional services like insurance for fitness, daily commute etc.
Traditionally, these kinds of OTC products were treated as luxury and not many would invest in the services but with time and increased awareness, customers are more willing to spend on something of relevance. Explaining the inclusion of motor insurance cover as a necessary service, Shrikhande said, “Customers do their research online and also want to engage in communication before buying (these) products.”
Besides Health and Motor insurance, other services are still at a nascent stage of growth in India. “We observed customer’s preference on small ticket size policy purchase via an online media such as retail health and motor policies. In the case of large ticket size products, the customer does seek traditional purchasing channels where human interactions are present,” Deshpande expressed.
With the recent cases of data leak becoming the highlight, enterprises are getting concerned about their cybersecurity. This threat to online documentation has led to the increased demand for innovative insurance products like Cyber insurance to prevent the breach or loss of data and identity theft.
The increased usage of smartphones has raised the need to get mobile screens insured too. “With the explosion of smartphones and travelling Indians, both domestically and internationally, insurance products like mobile and travel have been both beneficial and attractive,” Kumar further provided.
New World Order
There is an acceleration in the pace of change in the financial services industry, and fintech firms are leading this change from the front. From banking and lending to payments and wealth management, we see fintech firms leverage technology to make financial service more customised and accessible to the average consumer. Insurance is an old business, encumbered by stringent regulations and complex products that find little consumer appeal. However, the insurance industry is now changing and slowly adapting to the new paradigm. Enhanced customer experience, developing new uses, mastering advanced technologies and an upgrade of the entire insurance value chain is changing the face of the insurance business.
Insurtech lies at the confluence of insurance and technology. It’s the technology that is being deployed to create, distribute and administer solutions in the insurance business in an effective and efficient manner. Smartphone apps, wearables, claims processing tools, online policy handling, customised premium pricing and automated processing are all insurtech. Insurtech is well positioned to reflect the nuanced reality of a consumer’s everyday life and create products that are more intuitive and fit the customer requirement better.
The Possibilities
Broad actuarial tables that assign a risk category to policy seekers are a mainstay of the insurance industry. People are grouped in certain risk baskets basis the broad level of data gleaned. Consequently, this results in some people ending up paying more than they should, based on their risk profile. Insurtech is looking to effectively tackle this issue of data assimilation and analysis.
Using inputs from all manners of devices, including GPS tracking of cars to the activity trackers on our wrists, these companies are building more finely delineated groupings of risk, so that the products can reflect the true risk of the individual customer and are priced more competitively.
For example, motor insurance can be tailored through GPS tracking telematic device that can provide micro information about the owners driving habits. The more responsible and risk-averse drivers can benefit from lower premiums or discounts. Insurtech empowers customers to take control of their insurance and make value accretive choices rather than settle for expensive products that don’t really fit their needs.
Insurtechs are also using artificial intelligence (AI) technology to provide a tailored and more customised user experience to consumers. Basis of the customers’ preferences and lifestyle, the technology can quickly summarise and present the most relevant and useful products to the customer. Internet of Things (IoT) can provide insurers with detailed data about customers to help them develop and offer the right products at the right time.
The Way it Has Helped
Insurtechs involvement has immensely helped the insurers view the business from a customer-centric perspective. The adoption of AI, IoT, robotic process automation (RPA) and machine learning has provided a new dimension to the insurance business as it allows for the automation of a lot of mundane and redundant tasks. Insurers, with the help of insurtechs, can develop products to better meet the ever-expanding and changing needs of customers. Emerging technologies will not only enhance customer experience but also introduce operational efficiencies to back-office operations. While technology brings with it myriad benefits, insurance companies must also be cognizant of the accompanying risks. Companies must have adequate safety and risk mitigation tools in place to ensure data security and sanctity.
The insurance business is notoriously characterised as being risk-averse, in contrast to the agile and disruptive methods of startups. However, insurance companies must view insurtechs as the harbingers of positive change and devise ways to mainstream technology into legacy cultures that are unaccustomed to the speed and agility of insurtech.
The digital transformation within the insurance space has given birth to a new category of companies called insurtech startups. According to Tracxn, there over 142 insurtech startups in the country at present including unicorn Policy Bazaar along with several promising companies like Digit Insurance, Acko, Coverfox, Turtlemint, etc.
In the age of the internet of things, artificial intelligence, machine learning and other new age technologies, these start-ups are not just focusing aggregating products but also developing new products, streaming distribution and providing last-mile support to customers.
Considering the penetration level of the sector in the country is so poor, we at Entrepreneur India, decided to catch up with industry veterans on how these insurtech startups could leverage on this opportunity.
Unlearn Everything about Insurance
Insurance is one of the most complicated product and there is no ruling against this. From buying insurance to claim settlement, a customer is always in the dilemma on what is right process to go about it.
Hence, Mehmood Mansoori, Member of Executive Management and Group Head, HDFC ERGO suggests insurtechpreneur to forget everything they know about insurance and focus on the customer.
“Insurance is a complex product. When you try to develop a solution keeping insurance in mind, you always make complex products. Instead of focusing on insurance, focus on the customer mindset,” he says while adding that, “When a consumer looks at insurance, all they want is ease of service or buying. The experience should be similar to buying from an e-commerce platform or transacting through a mobile wallet or watching content on OTT platforms.”
According to Mansoori, the moment an entrepreneur masters this, he or she is likely to end up in a different customer journey as against its peers.
Digital is the Key
Most of the problem in the insurance sector can be solved with a digital outlook. Like every industry, today insurance is also waling in the same direction. Amartya Sen the famous Nobel laureate and economist is of an opinion that the insurance sector is not adapting to the changes the way it should.
So in order to make a lasting impact in the insurance industry, Manik Nangia Director & Chief Operations Officer, Max Life Insurance says it is important to follow the mantra of ‘Being Customer First and Thinking Digital’.
“Digital disruption has changed the way financial institutions and businesses across the board are interacting with customers. Generating awareness of the value of life insurance products sooner rather than later is vital but understanding the fact that when human interaction is desired, digital channels are preferred, and how these preferences are influenced by demographic factors is also necessary. Businesses that will be able to strike this differentiation accurately will succeed in the future,” he noted.
Simply put, no matter what insurtech startups cannot afford to ignore customers and experiences.
Even businesses with great products and hungry markets can fail. If you don’t take care of the “boring” stuff, your company won’t last long enough to deliver on all the promises you made to your customers.
That’s not to say your product or service isn't an essential component of your success -- bad product-market fit is a top killer of failed startups. However, factors like lack of capital, inadequate management and marketing mishaps are more often to blame for turning both promising startups and established companies into tales of what could have been.
To avoid joining the league of companies that didn’t quite make it, business owners need to pay attention to the back-office tasks that keep operations running smoothly. It doesn’t matter how dedicated your employees are or how revolutionary your product is: If paychecks don’t come on time, the electricity is off or an unexpected legal battle crops up, your odds of survival can plummet.
Related: 7 Ways to Help Ensure Your Business Succeeds
Take care of these "boring" tasks ahead of time so you can focus on the fun parts of growing your business:
1. Payroll Processing and Administration
No matter how lean your company runs, employees must have their paychecks on time every time. The moment people have to ask about the status of their direct deposits is the moment your best performers start looking for new opportunities.
Payroll processing and administration company OnPay recommends that companies follow a six-step process to get ahead of any payroll issues as soon as they start hiring employees. Businesses need to register with the IRS and, in some cases, state-specific agencies. They should also hammer out the logistics for paying employees ahead of time to ensure employees never have any reason to doubt their employer’s solvency.
The same is true of benefits beyond paychecks. Workers depend on their employers for health insurance, PTO and other perks. If an employee gets denied at the doctor’s office or docked pay for using earned PTO, she might wonder whether the business really has its affairs in order.
Related: 17 Incredible Employee Perks of Successful Companies (Infographic)
The bottom line? Don’t play around with payroll and benefits administration. Get it done first -- and get it done right -- to keep your team together.
2. Information Security
Good technology management shouldn't be reserved for technology companies. Any business with a computer in the building needs an IT plan that can scale with the company's needs.
Businesses that use customer data should be especially proactive in this area. Nothing can tank a promising startup more quickly than an early data breach that kills customer trust.
“Having the right technology in place is a critical line of defense when faced with hackers, malware, and other cyber threats,” says Erik Brown, chief technology officer at GigaTrust. “Smaller companies may do some of this manually, while larger organizations will want to automate as much as possible."
Get the best of both worlds by investing in good security from day one. Set up systems and databases that comply with new rules, such as GDPR. Don’t know what that means? Find someone who does. The upfront costs may be steep, but the long-term protections are more than worth the investment.
Related: Why Startups Should Consider A Cyber Resilience Strategy
3. Business Insurance and Legal Protection
Your LLC can’t protect you from everything. Even if your company structure insulates you from certain lawsuits and judgments, you could still be held personally liable if someone gets injured on your property, if you accidentally break the law or if you’re careless about intermingling business and personal finances.
For a fairly low price, business liability insurance protects business owners from threats outside the norm. The Balance reports that most annual premiums fall somewhere between $750 and $2,000.
Different types of insurance cover different types of events. Product liability insurance, for example, protects companies if a product injures a customer. Professional liability insurance covers service-based businesses against errors that lead to losses. In many situations, businesses may be required by federal or local laws to carry insurance.
Owners should consult with a law firm to make sure they remain in compliance. However, law firms can do much more than help businesses mark checkboxes. Rather than wait until a small problem turns into an expensive legal battle, growing companies should work with lawyers early and often to protect themselves from future problems. Attorneys who help small businesses get set up are generally much cheaper than litigators who represent companies in messy court battles.
Business owners can't afford to ignore the details as they push their products and services. Only employees can do that. Things like payroll administration and business insurance might not be fun, but they're essential components for growing companies. If you want to run a successful business, you have to lay the "unsexy" groundwork first.
Customers these days tend to live in an Omni-channel world! However, still, there are many businesses that force the significantly evolved customers onto engagement paths that are relatively outdated. A recent report by global research and advisory firm, Gartner highlighted that by the end of the year 2020, 85per cent of the customer interactions will be managed without a human. This is because businesses are now employing machine learning to provide an intelligent and informed customer experience. This broadly results in re-imagined customer experiences that are integrated and completely personal. The experience is significantly natural to the customers.
As the latest advancements in the technology industry strive to transform how businesses are being developed, business owners are now actively looking for efficient and progressive ways to operate and eliminate issues related to customer satisfaction. Measuring the many attributes of marketing to access revenue growth is becoming more real-time and accurate, all thanks to Machine Learning.
What is Machine Learning?
Machine learning is an effective application of artificial intelligence also known as AI that makes any system efficient of learning and improving automatically from the experience itself without the assistance of the program. The application usually focuses on the development of different computer programs that can directly access data and use it to learn for themselves. The entire process of learning begins with the analyses of data which can include direct experiences or even any given instructions to properly study a pattern in data. This plays a vital part to make better and improved decisions in the future.
The key objective of machine learning is to let the computers automatically learn without the intervention of any human being and adjust the actions as per needs and requirements. Machine learning software was once thought to be a very technical and complicated application however it is now widely available and used by most businesses. Machine learning primarily heightens any organization’s sheer ability to build all data-backed applications to enhance the overall customer experience.
Importance of Machine Learning
As an entrepreneur, it has become very important to know what all is driving more marketing leads and how to best optimize the marketing campaigns. Industry leaders believe that improving the precision and profitability of pricing is one of the integral areas where machine learning is revolutionizing the concept of a customer centric approach. As per a recent survey, in the last 2 years, small businesses have spent over $55 billion on just cloud-based services, wherein an average professional uses anywhere between 10-16 apps daily. If trends are to be believed, by the end of the year 2020, more than 80per cent of the small businesses operating today will be using cloud-based services, increasing the current numbers by 37per cent .
Moreover, 84per cent of the marketing organizations operating today have already started implementing machine learning. Out of this, over 75per cent of the enterprises using machine learning are already experiencing enhanced customer satisfaction.
Uses of Machine Learning in the Insurance Industry
Insurance companies selling health, life, motor and home insurance can use machine learning (ML) in numerous ways for driving enhancements in operational efficiency, customer service and fraud detection. One of the most effective uses of machine learning is Policy Lapse Management wherein by using the technology, the insurer can easily identify the policies that are about to lapse and when to approach the insured regarding renewal of the policy. Machine learning also plays a significant role in Fraud Detection in insurance as it helps in identifying potentially fraudulent claims. In many cases, machine learning even helps the consumers in getting the right insurance as per their current life situations such as marriage and birth of a child.
Conclusion
In order to analyse and significantly reduce customer mix, machine learning has proved to be very fruitful in streamlining the various risk prediction. Businesses instead of completely relying on expensive methods to minimize customer churn must turn to machine learning.
Buying insurance is one of the most difficult tasks. Imagine this, after a lot of efforts, you shortlist a product along with the insurer but just when you are about to the buy the policy, the terms and conditions pages will arrive to confuse the hell out of you. And this vicious circle goes on and on.
And if at all, god forbid, if something goes wrong then the claim process is another set of a nightmare for customers.
Wouldn’t life be easy if insurance could be simple? Sounds more like an oxymoron, isn’t it? However, Kamesh Goyal plans to turn this paradox into a reality.
After spending over two decades in the industry, what bothered him the most was how much insurance was mistrusted by people as jargons complicated the product. This is where he saw an opportunity and started Digit Insurance with an idea to simplify the complexity around insurance products.
“If there is one thing that would truly make a difference to people in the insurance context, it is busting the complexity of the industry and bringing in simplified insurance,” Goyal said in a conversation with Entrepreneur India.
The Approach
Apart from simplifying insurance and customising process as per customer requirements, Digit is also known for its claim settlement process.
The start-up professes a 92 per cent claim settlement ratio for private cars own damage, 91 per cent for two-wheelers own damage, 99.5per cent for domestic travel, 97 per cent for mobile and 93 per cent for international travel.
On asking him how a 16-month old insurtech company could manage to achieve this claim settlement ratio, he says, “One of the reasons why the processes in insurance are full of checks is because they are made for fraudulent cases. We flipped this and said how the processes would look like for genuine customers.”
Pain Points
With the increase in smartphone penetration and internet boom, India is transiting to a digital nation. However, working with authorities and access to official records continues to haunt both traditional and new age insurers.
Take an example of motor insurance. If companies could access RTO data, driving license data, etc. wouldn’t life be easy for these institutions which in turn could help them focus on customer experience.
“Working on more technology solutions that would challenge how buying and claiming is experienced right now. With more consumer data insights, we will be customizing our plans further with sharper offerings relevant to that segment,” Goyal shared.
Expansion
Presently, Digit is marketing motor, travel, home and phone insurance. However, hinting at fundraising by end of this year, the entrepreneur says he will soon launch health insurance under Digit’s umbrella.
“The principles on which we build our other products and processes will apply to health as well. Apart from that, we will see more institutional partnerships and more strategic partners added to our network. We are also continuously expanding the number of locations where we are doing business,” concluded.
Insurance is a very complicated product. Every time you try to buy a policy either through your financial advisor or the internet, the entities will leave you more confused than ever. But times are changing and complexity around the product is getting solved.
With the rise of technology and increase in smartphone users, the insurance sector is looking at a bright future. According to IBEF, gross premiums written in the country touched INR 5.53 trillion (USD 94.48 billion). However, the penetration levels in the country need to improve which presently stood at 3.69 per cent in 2017.
In a conversation with Entrepreneur India, Mehmood Mansoori, Member of Executive Management and Group Head, HDFC ERGO General Insurance says there is two way to look at this number - on one side, it is a cause of concern because there so many people are underinsured which only means they are vulnerable to problems. While on the other hand, it is a great opportunity from the insurance industry point of view.
The Challenge and the Solution
If one looks at the insurance sector in India, there is a lack of awareness within the masses. Take an example of the health insurance space where people are often happy when their employers cover them and they do not feel the need to buy an additional policy. While on the side, people living in states like Kashmir, Uttarakhand, North East region, Kerala and states which are prone natural disasters, do not feel the need to ensure their houses.
“The market needs to be developed and this is a matter of people's awareness. For many years, insurance has been looked at as a tax saving instrument. Having said, the perception is changing but the pace is slow and hence, I think a lot needs to be done to increase awareness among people,” he said.
Secondly, with a country like India, for insurance companies to reach out to the hinterland, depending on the physical network cannot be a sole solution. Hence, Mansoori feels distribution needs to be improved and digital has a major role to play here.
Digital has indeed played a significant role among other financial services industry, especially on the payment front. They have increased the adoption among masses as these platforms are available on their fingertips via their smartphones.
“By simply adding manpower and infrastructure will not help us meet our goals, we have to adopt digital. In order to survive, we have to adopt technology. This has become a mantra for us.” he pointed out.
The Insurtech Way
In the last two-three, HDFC Ergo took an approach of transforming the more insurance organization. The move yielded significant results for the company. Today, the company claims to issue policies within five minutes.
Furthermore, 95 per cent HDFC ERGO’s policies are issued in a straight-prude processing mode which is either bought by the customer directly or via B2B integration or by a channel partner online.
Mansoori shares, “This has been a massive transformation which we have been able to achieve. On the customer service front, we have adopted the net banking style. Our overall call volume is not increasing with the linear growth of our business. While our self-service is continuously growing up but I still believe that we are yet to reach to the tipping point,” he added.
Elaborating on how the company is looking at artificial intelligence, he says the technology is shaping up well - both on the conversational and intelligence side because this domain is full of transformation.
“We are dealing with humungous data and that’s the perfect recipe for any AI solution to work. Though it is too early to say as there is a lot of room for improvement,” he concluded.
The insurance industry in India has existed for nearly a decade now but only recently it underwent the phase of liberalization and deregulation. Despite over 100s of insurance companies operating across health, life and general sectors, not many citizens realized the importance of non-life insurances until recently. Investing in safety packages for auto, health & travel was treated as expenditure rather than a way out to navigate through various risk scenarios.
Over time, the increased disposable income and improved general awareness have played a crucial role in amplified general & health insurance subscriptions. Having been nationalized in 1972, the industry has come a long way. Consumers have started to realize the value of non-life insurance products. With the upsurge of the start-up ecosystem in India, a significant boost of technology integration into insurance services has been noted, leading to increased adoption of such products.
Entrepreneur India talked to some leading names in the health & general insurance space to assess the market scenario.
Technology – The Game Changer
The penetration of the internet across the Indian borders has brought along endless opportunities for business aspirants. The insurance sector is reshaping with the entrance of new players in the market, by merging product thinking, data and technology with the existing bone structure of the industry. There are about 450 million digitally active consumers today, using more than 8 GB of data per month.
65 per cent of the Indian population is below the age of 35, representing the largest cohort in human history stated Rohan Kumar, the CEO and Co-founder of Toffee Insurance, adding, “With new technologies rapidly emerging, consumers now want insurers to deliver superior, personalized and seamless services across all channels.”
The new-age consumers are supremely active online and are looking to adopt a safer lifestyle. To fit within this scope, insurers need to be relevant to the end user and technology can help accelerate the process. However, for real-time results, conventional mediums need to be sidelined. Kumar suggested three areas to challenge traditional enterprise structures:
· Blockchain technology can be used to drive smart insurance contracts in Policy Issuance & Claim Servicing. This will also allow for real-time claim processing.
· AI & ML and advanced data mining techniques can help in assessing real-time risk scenarios to provide variable/dynamic pricing. This will help fuel the on-demand personalized insurance structure.
· Insurers can integrate with various IOT devices to drive data loops and personalised insurance plans.
In the global insurance space, emerging technologies are changing the business landscape. While in India, technology adoptions for both company and individuals are still in the budding phase which will continue to affect insurance penetration, provided Atul Deshpande, the Head of Operations, Strategy & PMO at SBI General Insurance.
He further added, “The use of web-based technologies as an Insurance service delivery medium has added new elements to service dissemination. The escalation in self-service technologies has provided customers with multiple choice for using services offered by insurers. The online service attributes of ‘convenience’ and ‘ease of use’ are being given priority by customers for designing web-based solutions.”
A Hotbed for Startups
Private players have gained momentum in the insurance space with their flexible approach towards providing such services as they are more open to tailoring their products to the specific needs of the customer. Currently, there are around 30 Private General Insurers operating in India offering a variety of products. According to Neeraj Prakash, Managing Director, Shriram General Insurance, Insurance Awareness Program has played a crucial role in the growth of general Insurance market in the country.
More so, people have started understanding that paying premiums of general insurance is like depositing the amount in a savings account. Giving a context, Prakash said, “Valuable possessions in our life, such as home, business and vehicle are also very important as our life. Some of the recent disasters Like Mumbai Floods, J& K Floods, Uttrakhand tragedy and Chennai Floods also prompted this revolution. Most of the Property, which was damaged under these catastrophes, were uninsured.”
Buying insurance online has become a fad in recent years. While the share of premium received through online sales is still small in India but the medium holds great potential. The unconventional method provides convenience, quick execution of services and most of all, clarity about the product. A number of start-ups in the insurance space have jumped the field to address the pain points of customers through their unique identification.
One such organization is Digit Insurance. The startup has witnessed the insurance industry evolving over the years. “The industry is coming up with insurance solutions that cater to the changing lifestyles and life products of people,” Vijay Kumar, CEO & Principal Officer Go Digit General Insurance Ltd, adding, “Customized products are the way forward to increase penetration of insurance products.”
Further providing testimony to the increased consumption of online insurance services, Kumar claimed, “Digital claims give customers speed and ease, so it’s a win-win situation.” The insurance industry is undergoing a major shift. Major European insurers have set up innovation divisions or labs and have set up huge investment funds to invest in Insurtechs, verified Pallav Singh, Co-founder & CEO, Kruzr.
He further suggested that we see this trend even in some Indian insurers, which makes us quite bullish about the InsurTech domain in India. Recently, online startup Acko General Insurance Co. Ltd raised $65 million in a Series C round of funding led by Flipkart co-founder Binny Bansal, recommending an increased interest of investors in the insurance space. Taking a glance at other deals, we see a string of online insurance platforms raising funds.
In January, Turtlemint raised $25 million in a fresh funding round led by the Indian arm of global venture capital firm Sequoia Capital whereas the parent company of insurance startup Digit Insurance Go Digit Infoworks Services Pvt. Ltd raised $45 million from existing investor Fairfax Holdings in July last year.
Corporate-Government Connect
Post the economic liberalisation, tonnes of opportunities were available for private players to explore and the government was there to handhold. With reference to health insurance policies, the Insurance Regulatory and Development Authority (IRDA) of India has lineated certain regulations to further support the insurers. “Portability options opened by IRDA in health insurance category is now providing a valuable boost to this category,” provided Anand Shrikhande, the CEO of Quickinsure.
Insurance is a complex and high involvement product. People have started considering Health and Motor insurance policies as a compulsory part of their financial portfolio. According to Dhirendra Mahyavanshi, the Co-Founder of Turtlemint protecting vehicles against damages has become a priority for customers and the digital intervention has made the claims way easier to apply and track.
“For health insurance awareness of insurance has gone up way higher. Corporates, as well as the Government, have enrolled in health schemes, making the concept even more popular. With the ever-rising healthcare costs, insurance comes as salvage as paying the entire expenses out-of-pocket cost a lot,” he stated.
Shrikhande highlighted the role of government in pushing such schemes by stating, “New add-on attachment to existing products, a government mandate on crop insurance and increasing awareness of the need of health insurance are some more triggers for this revolution.” Talking about future trends, Mahyavanshi sees a good future when it comes to offering health wellness solutions like regular health check-ups, fitness bands etc.
Even motor insurance has become a compulsory deal for new vehicle buyers. IRDA has mandated multi-year policy to increase two-wheeler insurance penetration. However, only 80 per cent has been witnessed yet due to two-wheeler riders dodging the compulsion to save a few bucks, inviting high risk in case of mishaps. Nonetheless, India's auto sales are growing healthy at 10 per cent, which makes motor insurance a growing sector in India.
“With the Government aided and funded schemes for Crop, Health, and other insurance covers reaching out to the length and breadth of the country, there will be increased awareness over the next few years. It is critical that this awareness is leveraged to ensure that the uninsured, as well as the underinsured population of the country, is covered adequately for risks,” Deshpande said.
Move from Traditional to Innovative
The insurance industry has embarked on a radical transformation spurred by a series of digital innovations. We are experiencing spur in small ticket products in all segments of general insurance. Startups are coming up with innovative and affordable solutions to fit the bill for millennial by offering non-conventional services like insurance for fitness, daily commute etc.
Traditionally, these kinds of OTC products were treated as luxury and not many would invest in the services but with time and increased awareness, customers are more willing to spend on something of relevance. Explaining the inclusion of motor insurance cover as a necessary service, Shrikhande said, “Customers do their research online and also want to engage in communication before buying (these) products.”
Besides Health and Motor insurance, other services are still at a nascent stage of growth in India. “We observed customer’s preference on small ticket size policy purchase via an online media such as retail health and motor policies. In the case of large ticket size products, the customer does seek traditional purchasing channels where human interactions are present,” Deshpande expressed.
With the recent cases of data leak becoming the highlight, enterprises are getting concerned about their cybersecurity. This threat to online documentation has led to the increased demand for innovative insurance products like Cyber insurance to prevent the breach or loss of data and identity theft.
The increased usage of smartphones has raised the need to get mobile screens insured too. “With the explosion of smartphones and travelling Indians, both domestically and internationally, insurance products like mobile and travel have been both beneficial and attractive,” Kumar further provided.
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