Innovation in Insurance

By Syed Meraj Naqvi, CEO & Principal Officer, Riskbirbal Insurance Brokers

Insurance covers have greatly changed with time. What was applicable in the 90s, has become redundant today and the policies offered today are constantly changing to be future-ready for requirements that will arise a decade later. But in these unpredictable times, how can we predict change- which remains the only constant!!

Syed Meraj Naqvi

Here, digitisation comes to the rescue!!
Digital innovation is the key driver of growth in any sector. The insurance sector is no exception wherein the incorporation of numerous digital transformations has completely redefined the growth trajectory of this sector. This transformation has further bolstered the sector through better risk identification, accurate risk predictions and seamless fraud detection. It eventually provides unmatched customer satisfaction with customised insurance solutions that understand and cater to their requirement better. We need to understand that insurance is not only important for personal risk transfer, but plays a critical role in the overall economic growth of a country. The right tools in place will direct the growth of the industry in the right direction.

Today, digital innovation is making an indelible mark in various facets of the insurance industry. Advanced automation tools, verified by risk experts, can provide precise, value-driven solutions along with operational ease for customers.

Although digitalisation is at a nascent stage in the Indian insurance domain, the enthusiasm around the adoption of these technologies is unparalleled. Some major impacts are visible in the following areas:

Embracing Digitisation
In today’s insurance ecosystem, digital technology armed with data analytics provides insurance companies with better insights into their customers. It also enables insurance companies to offer timely, tailored, and precise solutions and services. This digitised landscape constantly keeps the insurer and the insured updated about the changes happening on both fronts enabling both parties to update, upgrade, and change policies impromptu as per market fluctuations.

For instance, if a business, that has taken insurance policies for the sustenance of its operation, suddenly decides to sell off certain divisions, the insurance company can be in sync with the company’s development and seize the opportunity to revise the policies or incorporate new terms to best suit the business needs.

Embracing digitisation also generates a huge amount of data on each customer, which further enables insurance companies to leverage data analytics and make informed decisions to benefit the growth of the insurance company as well as improve the quality of insurance coverage.

Taking the Automated route
The insurance sector has forever been dependent on paperwork. Tons of forms, manually written notifications, follow-up letters- the paper piles are enormous. Automation has significantly reduced companies’ costs spent on paperwork, which can be instead reallocated to improve other workforce operations.

As automation is slowly becoming the backbone of every business, McKinsey claims that insurance companies hopping on the bandwagon of automation can automate up to 50 to 60 percent of traditional back-office operations. The savings on offer are momentous and especially significant for a mid-sized company!!

In another report, McKinsey points out that the adoption of automation will also lead to a dramatic reduction in the cost of claims by as much as 30%.

In my experience, I have observed that companies that have incorporated automation have not only attained improved service, faster processing time, and quick response to the insured but have also delivered better customer satisfaction, driven profit, increased customer retention, and new customer generation. Automation has given businesses a new lease of life with a renewed outlook. It also plays a pivotal role in realigning business operations to create significant cost optimisation across the value chain. Especially in the case of insurers and intermediaries, nowadays, the policy booking claim, intimation to claim settlement, and data analysis for underwriting decision-making have having immense role.

Optimising Machine Learning
The insurance sector is traditionally guarded, extremely cautious, heavily regulated, and subject to unforeseen change. The advent of Machine Learning in the insurance sector has brought in a huge transformation. It has empowered insurance companies to analyze massive amounts of real-time data to enhance risk assessment methods. This results in faster and better risk assessment and management operations. Many companies have also optimised chat-box and mobile applications to deftly understand the needs of the customers and to suggest a range of applicable policies without the need for a human interface.

It has also hastened claim processing, which is usually a very slow process. Today, the market is brimming with various claim management software, wherein insurers can automate the entire process and also keep their customers informed at all times. Through this agile process, insurers can process a larger volume of claims deftly in a shorter period.

Although many insurance brokers and companies have begun to take measured steps to incorporate this technology, there is still a considerable journey ahead to gauge the full potential of the technology. Given the complexity of the insurance industry, the adoption of this technology needs to be further refined and curated to suit the industry dynamics. It is an evolving landscape where continuous advancements are essential for the full realisation of its potential in the Indian context.

Agile Fraud Detection
Fraud is a major setback for the insurance industry. Fraudulent acts not only adversely impact the organisations’ financial stability but also hamper their reputation and affect the policyholders at large. A Deloitte India report pointed out that insurance fraud costs insurance companies approximately USD 6 billion annually, while insurers lose close to 10 percent of their overall premium collection to fraud. This is a major blow and further underlines the necessity for agile fraud detection software to curb the menace.

As observed in many organisations, digitisation is not ubiquitously applied. Instead, a compartmentalised approach is adopted. This makes way for breaches. Frauds occur due to unchecked loopholes within the system. But by adopting the right digital strategies, such situations can be managed by creating a controlled environment that prevents, detects, and deters fraudulent behavior among stakeholders.

Furthermore, these technologies can also help insurance agents and insurers with real-time information to deal with duplicate claims, inflated claims, fake dependent family members, data inconsistency, overpayments, and past scams involved.

The Way Ahead
Digitization has the power to create a holistic modus operandi for insurance companies to not just save the cost of operation, but also to identify the right customer and match them with the right policy. It also helps organisations to expedite the entire process, build trust among stakeholders, and be future-ready to adapt and adapt themselves in this extremely volatile industry.

On a cautious note, while significant strides have been made in the realm of automation and digitisation, particularly within the insurance sector, there remains ample room for improvement. Complete automation is yet to be fully embraced by any insurance company, primarily due to the numerous intricacies that demand human intervention.

Thus, insurance leaders need to be curious yet cautious to experiment with different technologies to find the best fit for their organisation. Adopting digital innovations is the only way forward to make insurance companies clear market winners.

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