By Sriram Naganathan, President and Chief Technology Officer, HDFC ERGO General Insurance
India is slated to become the sixth largest insurance market by 2032, with total insurance premiums growing on average by 9% annually over the next decade. A large part of this growth can be attributed to technological innovations, popularly known as ‘Insurtech’ – a blend of ‘insurance’ and ‘technology’. In an era of rapid technological advancements, insurance companies are embracing cross-functional business partnerships with technology companies to foster innovation and deliver enhanced services to customers. Tech companies bring expertise in areas such as artificial intelligence, data analytics, blockchain, and cloud computing, enabling insurers to leverage these technologies for improved risk assessment, underwriting processes, claims management, and customer experiences.
Let’s see how.
Streamlining the underwriting process
One of the most important functions in an insurance company – underwriting, wherein the risk profile of an individual/organisation is assessed, and an appropriate policy coverage is drawn up – has received a significant boost thanks to the power of artificial intelligence (AI) and data analytics. Leveraging AI and Big Data, insurers can get a firm handle over historical claims data, credit scores and even the candidate’s social media activity to create an accurate risk profile and finalise policy pricing.
Increasing the speed and efficiency of claim settlements
Paperless claims management that allows policyholders to submit claims online has already reduced turnaround times in the industry. Technology has helped leading health insurance companies bring down the average time to authorise cashless approvals on policies from days to under three hours. Paperless claims management has also been effective in overcoming adverse customer experiences caused by human errors and/or gaps in the documentation trail. The entire online process supplemented by predictive behavioural analytics and digital identity verification is expected to help minimise fraudulent claims in the future.
Taking risk management to the next level
With the help of IoT devices and telematics, insurtech is enabling companies to collect real-time data, and in turn assess risks more accurately. For example, in auto insurance, telematics devices can monitor driving behaviour, allowing insurers to offer usage-based policies and incentivise safe driving habits. On the other hand, is a first-of-its-kind farm yield insurance cover that uses remote sensing and satellite data to protect farmers across all stages of the cropping cycle. The satellite based prediction models aid in assessing potential risks such as droughts, pests, or diseases, helping farmers make informed decisions about their harvesting. This insurance product has been a game changer for both insurer and farmer who were plagued by multiple factors causing unpredictability of the yield and ended up wasting valuable time in manual surveys.
Creating new economic opportunities
Technology has provided a fillip to employment opportunities too, from new career options to nurturing the start-up ecosystem. There are more than 140 insurtech start-ups in India, including unicorns. When it comes to fintech, India took the lead with the fintech adoption rate of 84% as compared to the world average rate of 64% according to the Global FinTech Adoption Index.2 Insurance companies are increasingly focusing on recruiting professionals skilled in areas such as data analytics, artificial intelligence, machine learning, cyber security, and digital marketing, with an aim to develop and implement tech-driven solutions that streamline operations, improve efficiency, and deliver personalised experiences to customers. Moreover, insurance companies are reallocating budgets to invest in technology infrastructure, software development, and digital transformation initiatives, which include, adopting advanced digital platforms, upgrading current systems, and leveraging data analytics tools to gain insights into customer behaviour, risks, and market trends.
Offering hyper-personalised customer experiences
With access to vast amounts of data, including customer profiles, behaviour patterns, and historical claims information, insurers can identify trends, patterns, and correlations that help them make accurate risk assessments and create personalised insurance solutions. Also by harnessing the power of data analytics, insurers can identify fraudulent activities, expedite claims settlement, and enhance customer satisfaction by delivering faster, more accurate services.
Addressing the needs of an increasingly tech savvy, digital native audience
There is no denying that India is a young country and this demographic who is ‘always connected’ expects quick service, convenience, and personalisation from his/her insurance provider. The launch of mobile apps and enabling policy renewal over WhatsApp are a few examples of how insurance companies are looking to become more accessible to this customer. We are all aware how WhatsApp helped insurance companies, especially those dealing with health insurance, reach a wider customer base at a time when the world virtually came to a standstill. Further, customers can renew their break-in motor insurance policy via WhatsApp and also submit their claim, thus, enjoy 100% paperless claim experience. This trend is here to stay and besides the traditional routes to customers, insurers are increasingly adopting digital platforms including mobile apps, messaging platforms such as WhatsApp, and online portals to ease their access to policy information, claims filing, and other services. It is noteworthy to mention that insurance companies are embracing technology to create seamless digital platforms, heavily inspired by the Do-It-Yourself (DIY) trend and empowering customers to explore different coverage options, adjust policy parameters, calculate premiums, receive instant quotes and complete self-assessment of break-in motor insurance policy- all with just a few clicks.
Breaching the last mile via disruptive innovations
AI-powered chatbots and virtual assistants have become a significant part of the customer service function, providing instant support and claims assistance. Along with virtual assistants, they answer common queries and ensure round-the-clock availability of services. The advent of generative AI is slated to widen the horizon exponentially. Large language models (LLMs) with an impressive ability to produce text can become the backbone of modern natural language processing (NLP) and bots. LLM-driven automation can help professionals write and edit policies and contracts that are compliant with regulations, automate tasks such as document review, damage assessment, payment calculation and communication with the claimants, and enable chatbots to provide information, resolve issues and offer personalised recommendations, among others.
Moreover, technology advancements have led to the democratisation of vernacular chatbots which enable communication in regional languages, making digital services more accessible and user-friendly for a wider audience beyond metro cities. This is likely to open additional skilled employment opportunities in the insurance sector in the future as well.
Insurtech is driving a digital transformation and reshaping traditional insurance practices, fostering collaboration between incumbents and start-ups, and paving the way for a more tech-driven and customer-centric insurance landscape. While it is enabling personalised offerings, streamlined processes and improved communication channels, it is reshaping the insurance landscape by placing customers at the forefront of service delivery. According to McKinsey, applied AI, distributed infrastructure, future of connectivity, next-level automation, and trust architecture are poised to reshape the insurance sector, impacting products and processes alike.3 And while technology is rapidly revolutionising the sector, helping insurers with far greater risk management strategies and potential for new business opportunities, the ultimate winner is the customer whose entire experience stands to get redefined and re-energised.