The Potential of Insurtech: Doubling India’s insurance penetration in the next five years
By Mayank Gupta, Co-Founder & COO, Zopper
India has one of the lowest insurance penetration rates in the world, with only 3.42% as the contribution of insurance premium as a percentage of country’s GDP. Historically, our population has struggled to wrap its head around insurance as a concept for a variety of economic, cultural as well as societal reasons. However, just like technology is all pervasive and has fundamentally disrupted our lives in the most ubiquitous of ways, it also holds the potential of transforming how insurance is perceived in the country, and also make it more accessible to previously underserved communities.
One of the key issues with respect to how the insurance business has traditionally worked is the failure to contextualise products to target customers better. For example, agents might solicit you to buy a scheme when you go to a mall with your family to relax on a Sunday evening. This sort of a sales approach doesn’t factor the mind-frame a potential customer is in. Hence conversion and perception is poor. However, imagine if insurance products could be targeted via a person’s interests or consumer habits. For example, if somebody is booking a flight ticket, then travel insurance, or home theft insurance, can be shown to them. If somebody has been browsing a lot about a certain disease on the web, then health insurance can be pitched to them. If somebody is browsing a smart phone on Amazon, then smartphone insurance can be sold. Hence, targeting potential customers in a contextual and relevant way at the point of purchase increases the propensity to purchase insurance thereby substantially increasing conversion. This can solely be done by using advanced insurtech tools.
One way how insurance penetration can be increased is by demonstrating the benefits of insurance to communities that haven’t been exposed to it previously. This can be done by using bite-sized insurance schemes to initially demonstrate the benefits of insurance to lure customers. For example, a Rs. 99 bite-sized health insurance plan could be shown to someone buying a fitness band on an e-commerce platform. A person who has never bought insurance before will be far more willing to buy this plan as opposed to a buying a full-fledged health insurance plan which will require a lot of deliberation. Once they have experienced the benefits of a scheme, they are far more likely to opt for comprehensive coverage. Technology makes it possible to sell bite-sized schemes as distribution costs are very low, with minimum human intervention. If bite-sized schemes are made available at the right channels at the right price point, they can transform the sector.
A connected point is to increase the touchpoints where insurance can be made available. So while insurance can be made affordable, if it’s not available at the places consumers visit or transact at, they will not purchase it. Insurtech can enable the sales of insurance at points of sale, like grocery stores, post offices, ATM machines or even on mobile apps, which are widely used across the country. So by removing the friction and by eradicating the opportunity cost of skipping a work day and going to a bank to buy insurance, adoption can be increased in a more palatable way. With the scale and distribution of technology, customers in Tier 3, 4 and 5 markers can be served efficiently and effectively at a local touch-point.
Another key point is creating the right product at the right price point for the right consumer. And insurtech, with its analytics capabilities, really aids in ensuring a compelling product offering. More importantly, the hassle of buying insurance is greatly simplified by use of technology. Traditionally, the process of buying insurance usually is very complicated. Heavy documentation, formalities and verification is required. Insurtech eradicates all these problems. Policy issuance is simplified with digital records on SMS or WhatsApp. It also helps in easier claims settlement, because with technology driven insurance products, the claim can be filed using digital channels and insurance companies can access the claims, quickening the claims journey.
The benefits of insurance are manifold, even for businesses – particularly large businesses with a large captive audience and millions of customers. Insurtech can really help promote brand loyalty with these customers. For example, if a digital lending company or an NBFC is offering a credit protection plan along with the loans that they disburse, then customers are more likely to return to the same lender for their second or third loan because they know that their loan is guaranteed in case of any mishap. Similarly, if Amazon is selling smartphone insurance to their customers, then customers are more likely to buy a smartphone from Amazon and not from a competing e-commerce platform, because if a likely mishap such as screen damage is covered by paying a small premium, it will draw customers to the platform.
These technologies are not reinventing the wheel. However, by combining intuitive and data-packed solutions with impeccable execution, they’re laying the foundations for Indians to have better health, financial and social security, making large gains year on year. By combining all of the factors mentioned above, India has the potential to double its insurance penetration.
