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Insurance on the Move: Go Digital or Go Bust

Zopper Team Basics of Insurance October 23rd, 2024
Benefits of Digital Insurance

Indians have exhibited an excellent propensity for tech adoption. The country has more than 820 million active Internet users, and Indians spend more than six hours on average daily surfing the net. This is probably led by the fact that Millennials form the largest cohort in India, comprising around 34% of the population. This particular affinity for innovative technologies is expected to grow, with Gen Z entering the workforce and Gen Alpha not being too far behind.

Most Significant Benefits of DigitisationAgainst this backdrop, digitalisation creates huge opportunities for businesses across industries. Digitalisation is particularly important for the insurance industry, which suffers from low penetration due to the lack of awareness. Digital insurance can help insurers reach new customers at a fraction of the cost and provide a wealth of data for increased accuracy in risk management, underwriting, and claims settlement.

Insurtech companies in India empower insurance providers to compete with newer digital-only players. A powerful digital insurance platform helps insurance companies reduce the cost of sales and distribution, increase operational efficiency, and reach customers at various touchpoints.

What Does Digitalisation Mean for Insurance Companies?

Digital transformation involves leveraging cutting-edge technologies to improve process efficiency, business models, risk and fraud prevention, and customer-centricity. The most prominent impact of digital adoption on the insurance industry is the decoupling of back-end and front-end processes. Known as the headless model, this allows insurance companies to reduce the dependence and impact of back-end processes on customers while enabling them to quickly roll out new features and scale on demand. Digital channels allow insurers to seamlessly update policies and communicate them to customers without any delay.

Insurtech companies in India allow leading insurers to reach where their customers are. Mobility and accessibility at the fingertips strengthen brand presence and improve conversion rates. Automation of repetitive tasks increases agent productivity by reducing redundancy and human error.

Most Significant Benefits of Digitisation in insuranceHow Digitalisation Empowers Insurance Companies

Mobile phone penetration in India is almost 77%, with over 1.2 billion users. Indians with smartphones spend nearly 5 hours per day on average for entertainment, connecting on social media, browsing for information, and shopping.

Digital insurance enables insurers to reach customers via social media, live chat, emails, and mobile apps. These avenues can be used for brand building, spreading awareness, collecting user data, and serving insurance right when the customer needs it.

Millennials and Gen Z, which together make up more than 50% of India’s population, are digitally savvy. Can your insurance company ignore this huge part of the total addressable market? There is an urgent need to transform your business model to cater to these individuals. Today’s customer wants anytime, anywhere access, hyper-personalised solutions, and unified omnichannel experiences that simplify self-service. Insurtech companies in India are aligned with this generation's needs and buying habits and have the resources and expertise to address them. Insurers can partner with Insurtech companies to reap the many benefits of going digital.

Improved Accuracy

Data-driven compliance, claims, and underwriting improve risk management and lower response time. This translates into streamlined processes with lower error rates. Moreover, AI-powered pattern recognition and anomaly detection capabilities can enhance fraud detection capabilities.

Better Customer Experience

A digital insurance platform offers 24x7 availability of customer support. The availability of GenAI assistants on mobile apps reduces customer anxiety and helps build trust. These self-service tools can filter requests and allow customer service agents to focus on more complex and urgent tasks. The underwriting and claims processing time can be reduced from weeks to days and even hours for low-risk products. Quick turnaround, targeted insurance products, and customisable solutions improve customer experience.

Data Efficiency

Insurance companies have access to a wealth of data. A digital insurance platform can increase an insurer’s data utilisation capabilities. Advanced technologies enable insurers to leverage this data to gain meaningful insights and make informed decisions. Insurtech also enables cross-industry data sharing, increasing data analytics' accuracy.

Flexibility

Digital insurance leverages real-time data to introduce innovative coverage models. P2P insurance, transferable insurance, and on-demand insurance are some of the many facilities that customers can avail at will via digital channels. Machine learning-based user profiles can be used to go through the entire customer journey to different solutions as individual needs change, with changes in their life circumstances and financials.

Insurtech Offers New Revenue Streams

The rapid evolution of the insurance industry is driven by an increasingly demanding customer base. Digital insurance platforms enable insurance companies to offer innovative solutions to meet the expectations of even the most discerning customers. This also opens up new revenue streams for insurers. Some of the insurance products made possible by Insurtech companies are:

Embedded Insurance

Digital insurance allows insurers to piggyback microinsurance products on other platforms. For instance, you can offer insurance for a smartphone on an e-commerce website or travel insurance on a website selling holiday packages. The insurance products can be tailored accordingly. For instance, the premium for someone planning domestic travel can be much lower than for those planning international travel. Also, predictive modelling helps insurers anticipate customer needs and proactively offer innovative solutions.

P2P Insurance

This unique Insurtech model is popularised by Lemonade, a US-based insurance company. The model facilitates risk sharing by allowing individuals to pool their premiums. While this lowers individual access barriers, it has paved the way for community-based financial protection practices.

Use-Based Insurance

Telematics is an emerging practice that integrates digital insurance platforms with IoT, AI, and blockchain technologies. You can adjust the premiums and offer rewards for individual behaviour. For instance, leveraging physical activity and lifestyle data can help adjust premiums in life or health plans. US-based Root Insurance uses a model to reward responsible driving behaviour by tracking vehicles through a mobile application.

Parametric Insurance

When a financial emergency arrives, policyholders are often unable to furnish all required details. Parametric insurance establishes predefined criteria allowing insurers to release a part of the funds according to available data. This sends out a clear message that you are truly there for your customers. California-based Jumpstart, for instance, offers earthquake insurance according to the intensity of the quake and the proximity of the epicentre to the insured.

Seize the Opportunity

Digital insurance platforms enable insurers to build more meaningful relationships via high-touch interactions and customer-centric operations. Seamless and convenient experiences drive loyalty. Most importantly, digital insurance platforms are extremely agile and enable providers to swiftly respond to changing market demands to gain a competitive advantage.

Advanced technologies and the penetration of smartphones have rendered traditional operation models obsolete. Further, large-scale data use and proliferating cyberthreats have led to stringent regulations and increased scrutiny. Leveraging digital technologies is even more crucial for ensuring compliance, with regulations becoming increasingly complex for businesses that operate across jurisdictions.

A hassle-free customer journey, from insurance purchase to claims settlement, and reduced response times have made digital insurance more popular among the on-the-go generations. Digital channels have also made paying premiums easier with simplified and customisable transaction options.

Insurance companies in India can collaborate with Insurtech solutions providers to future-proof their business. The challenges of tech adoption may be a deterrent. Partnering with an Insurtech company can help insurance providers navigate the digital space without disrupting their processes. Such strategic partnerships help bridge the gap between legacy systems and cutting-edge technologies. Insurtechs help accelerate insurance companies' digital transformation, infusing agility and driving customer loyalty.

Bibliography (Last accessed on Aug 30, 2024)

  1. https://www.emarketer.com/insights/insurance-challenges-opportunities/

  2. https://www.pingidentity.com/en/resources/blog/post/digital-insurance.html

  3. https://www.acko.com/digital-insurance-trends-and-benefits/

  4. https://www.swissre.com/risk-knowledge/advancing-societal-benefits-digitalisation/insurance-digitalisation-index.html

  5. https://www.swissre.com/institute/research/sigma-research/sigma-2023-05-digitalisation.html

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