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Technology To Bring In Radical Changes In The Underwriting Process Of Insurance Sector

Analytical models and simulators will allow underwriters to understand risks cover and pricing interlinks and eventually move to a more risk-based pricing model

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The Indian insurance sector until recently was away from the rapid technological change that was transforming the Indian banking and financial sectors. However, off-late this sector has received encouraging attention in technology application as customer’s behaviors, and expectations have undergone radical changes. This shift has been led by millennials, individuals born roughly between 1980 and 2000. This generation will constitute more than half of the workforce by the end of the decade. 

The era of relative stability has ended with the increasing deployment of advanced disruptive technologies. The rise of insure-tech companies; with innovative ideas and clubbed with the availability of huge amount of customer data and cutting edge analytical tools; poses both an opportunity and a threat for the industry as it braces for a scenario similar to the “Banks Vs. fintechs/e-wallets”. Insurers will have to keep themselves “young and alive” to adopt the changes that disruptive technology brings. 

The biggest concern for the Insurance Industry today is the low level of Insurance penetration in the country. The major challenge lies in spreading the insurance net to the common man predominately residing in rural and Tier-III/IV cities. This group is financially most vulnerable, where the death of a breadwinner transcends into financial catastrophe for the family and in some cases “no food on the table”. The social need to provide insurance to this sector is very critical. But, the group has it difficulties like lower insurance awareness levels, lack of proper documentation and distribution challenges. Technology has the potential to not only reach this group effectively but also address concerns on verification and validation of the customers. Availability of data and smart analytics can also help design a much wider variety of products targeted at various classes of consumers.

One example could be the use of data and analytics to understand and predict patterns of seasonality in income for the rural group; this will further help in developing tailor made products and address financial underwriting concerns. On the medical underwriting front technology can be used to identify customers availing treatment for various ailments in line with their adherence to treatment protocol, real-time sugar/blood pressure monitoring, and for fitness addicts in line with their level of physical activity and endurance.

The effective application of new underwriting technology and analysis of data would enable the distribution channels to better understand customer’s needs, preferences and behaviors. This would not only help in up-selling/ cross-selling to present customers; it could also identify new pockets of customers with unique needs that are currently not covered by conventional products. Charging of premiums in line with the individual’s needs and the risk posed would be another step towards treating consumers fairly. The future possibilities of analytical understanding and its use in underwriting is immense. Analytical models and simulators will allow underwriters to understand risks cover and pricing interlinks and eventually move to a more risk-based pricing model.

Many insurance companies are deploying analytical systems to identify risk factors. Combined with the future promise of artificial intelligence; this has the potential to develop processes where faster and more accurate decisions can be made at every point of the customer journey from “point of sale” to “claims settlement”.  Also, technology can be effectively employed in forging strong relationships with all the stakeholders in the business starting from actuarial and product development to distributors and customers thus enabling effective communication to engage with these stakeholders.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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insurance technology

Casparus Kromhout

The author is MD & CEO, Shriram Life Insurance

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