Role of Insurtech in shaping insurance scenarios in India – going the digital way

By 2025, more than half of the population in India will be of working age. In the years to come, insurance companies will have a sizable market to explore. The population of millennials and Gen Z is expanding, and the hinterland of India now has access to technology, so the insurance sector is poised to change in the years to come. With an increasingly progressive regulatory environment, insurers are starting to open up to these possibilities and are even fundamentally reshaping the product to take advantage of real-time data collection. The regulatory body's commitment to fostering innovation and cooperation within the insurance industry is reflected in its vision, "Insurance for All by 2047." According to several reports, there is a significant lack of insurance ownership between rural and urban areas of India; as a result, the A&A approach—affordable and accessible insurance solutions—is required, supported by automation and technology.

The above solutions can bridge protection gaps and make India’s people and economy better prepared to deal with unforeseen disruptions. Insurance technology, or InsurTech, will shape the evolution of this industry to a great extent. InsurTech could transform India’s insurance landscape just the way FinTech did for banking – by creating relevant, personalised insurance products and democratizing insurance distribution through online channels to serve a huge customer base of digital-first millennials. Cognizant of the fact that one size cannot fit all, InsurTech firms seek to design products that are accessible, affordable, and relevant for every consumer type. By analyzing data at a customer or group level, it is possible to create an accurate risk profile for each customer, which helps in determining a fair premium for every individual or group.

Technology has always played a pivotal role. Leveraging data analytics and predictive modeling algorithms are great ways to curb fraud and helps in risk management. With a heavy population country like ours, it is imperative we have a robust digital engine to assess risks (potential and current) and determine policy premiums quickly and accurately. Digitalising the process of determining a quote and issuing the policy has some added advantages – it reduces operational costs and delivers a hassle-free customer experience. The latter is a powerful differentiator, a significant competitive advantage, because buying insurance in India through conventional means is a tedious process involving arduous paper applications and medical exams. InsurTech simplifies or eliminates many of the steps in the application process and provides customers with a digital insurance policy in a convenient, transparent manner. The online medium offers the benefits of choice and comparison, enabling consumers to browse a wide selection of insurance products and choose the one that best matches their needs.

Customer behaviour and their data consumption habits are evolving rapidly. These variations can be tracked and predicted at some levels by combining new sources (to extract granular data), technology and advanced analytics. InsurTech firms are fully automating their customer service by integrating aspects such as policy issuance, policy administration, claim management, and regulatory reporting, to eliminate any error and have a seamless customer experience. Today, AI-powered systems can assess damage, verify policy coverage, and process claims speedily. Predicting future events and measuring their risk or value is an important aspect of the insurance business, and InsurTechs employ Big Data, Artificial Intelligence, and Machine Learning to determine risk and claims with higher predictive accuracy. Using these technologies in conjunction helps in identifying and preventing fraud by monitoring trends and mapping potential risks.

Machine Learning has proven very effective in risk-modeling. By analyzing user behavior and data, Machine Learning models can even predict active loans that could be at risk in the future. Taking such proactive measures helps insurers manage risks better, avoid costly incidents, and ensure adequate customer protection. Automation and risk management practices thus help InsurTech firms make their business more resilient, agile, and compliant.

Aiming to reach heights

The prospects for InsurTech are bright. The sector is growing steadily and profitably. According to Straits Research, the global InsurTech market will grow at a CAGR of 46.1 percent from 2022 to 2030 and reach a valuation of USD 114,489 million by 2030. In India, InsurTech will grow strongly on the back of several factors – a growing realisation of the need for financial security; rising demand from young, digital-first consumers for insurance products; attractive government schemes for the masses; and regulations that facilitate the entry of small and niche players into the sector and encourage insurers to pursue product innovation and new distribution models. By transforming the way insurance products are developed, distributed, and used, InsurTechs power the transformation of the insurance sector and help in building a strong nation with resilient communities.

It will be essential for insurers to succeed in the digital age to embrace technology and promote partnerships with InsurTech/FinTech companies as the insurance industry continues to develop quickly.

Author: Mayank Gupta, Co-Founder & COO, Zopper