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The Advent Of Tech-Enabled Insurance Ecosystems

82% of insurance companies confirm that claims innovation is their most important priority. In India, referring to IRDAI numbers, premium growth rate for Mar ’20 was ~10% in the non-life insurance segments, and ~11% in the life insurance segment.

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Today’s unforgiving COVID-driven economic situation is a challenge for every industry including insurance. To manage cost, insurers are looking at technology. However, technology alone cannot suffice the ever-increasing insurance expenses. The major portion of which comes through claims processing and settlement. Sometimes claims are so complex that it can ruin the entire KPIs of insurers. For example, in property and casualty insurance, the reason for damage may be so complicated that it requires multiple expert adjusters from different fields to do the evaluations. Along with time and cost, professional reputations may also be at stake. Thus, companies spend large sums on legal and expert fees working up their cases. Fraudulent claims also add up to the cost.

In short, any measure which can help in reducing the number of claims or claims severity, creates significant value for the insurers and their customers. In the latest Insurance Nexus survey, 82% of insurance companies confirm that claims innovation is their most important priority. In India, referring to IRDAI numbers, premium growth rate for Mar ’20 was ~10% in the non-life insurance segments, and ~11% in the life insurance segment. This strong growth is subdued due to a higher number of insurance claims and fraudulent cases.

However few incumbents have understood this problem earlier than others and took advantage of digital technologies to launch focused strategic business initiatives to offer risk preventive services. Seamless integration of these additional services with insurance operations helped in risk avoidance and thus reducing the number of claims. Examples of such services are:

- In health insurance or benefits plans along with covering hospitalization expenses and loss of pay, companies have started offering:

o Wellness and Care services to avoid hospitalization

o Digital wearables for wellness tracking and offer behavior-driven premium discounts

- In Property & Casualty insurance, along with risk avoidance financial measure, companies are offering:

o Regular maintenance plans offered by a supplier network

o Smart homes and Connected devices with antitheft sensors

o Third-party Repairing services

Few Indian insurers such as Religare, Max Bupa, Reliance, and HDFC Ergo have pioneered such services as telemedical services including doctor consultations over the telephone. However, a lot more is possible if some unique challenges can be resolved as:

- Overwhelming amount of unstructured customer data with highly fragmented systems

- Multiple regional languages and content in use for physical customer interaction and services

- Complex Policy language and workflows

- Lengthy processes and long waiting periods

- Evolving Data privacy laws and growing confusion among customers about sharing their data

Due to these challenges, customers prefer to talk for understanding policy and use aggregator websites to compare premium prices. A PWC study confirms that more than 45% of Indian customers prefer to use customer care then web/app/email or chatbot. Whereas if we compare banking or financial service industry, customers prefer online medium predominantly.

New-age technologies such as Data-Analytics, Artificial Intelligence, IoT combined with design thinking and low code development practices have the potential to mitigate these challenges and change customer habits. The strategic focus needs to deliver a rapid multichannel and multilingual customer experience while simplifying and automating critical business processes. This is only possible by accepting digital as a centralized business process and instituting a long-term digital strategy. Key Tenets of such digital strategies are:

- Long term vision of target ecosystem

- Identify short term and long-term digital goals

- Invest in people, processes, and technology partnerships to gain new-age capabilities

- Define data, security, and legacy modernization roadmap

Such new-age insurance as a Sevice business model will be win-win for both insurers and insureds. Additional services will help insurers to reduce claims probailities and have more revenue options with increased customer touchpoints. Better understanding of customers will also help in better products, behavioral-based pricing, and fraud reduction. For customers, it will help in increased transparency and standardization of insurance products to choose from. With prevention services in place, customers will also be well informed to manage the adversaries and attain higher value for the money spent. Claims settlement will also be faster and thus customer satisfaction will also be increased.

Indian insurance landscape is changing very rapidly. The government is also pushing digitalization with multiple large schemes (PM-Fasal Bima Yojna, Jan Arogya Yojna) or policy changes as increasing the upper limit of foreign insurer joint ventures. Every insurer wants to have a close customer relationship. To build such a relation, undergoing digitalization is the need of the hour. Along with delivering daily operations and meeting deadlines, such massive digitalization is an uphill task. Though the more important question is – can there be an option not to do so?

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.

Tags assigned to this article:
insurance Ecosystems economic situation IRDAI HDFC Ergo

Devashish Mishra

Client Partner, BFSI at Persistent Systems Ltd

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