By Vikul Goyal, Founder & CEO, Bimaplan
With an insurance penetration rate as low as 4.2%, insurtech sector holds significant untapped potential. So far, traditional distribution channels are restricted by fixed structures and high operational costs. These channels often find it challenging to effectively serve the needs of the missing middle segment. Despite being capable of paying nominal premiums, this segment remains uncovered due to the inaccessibility of affordable and effective insurance plans.
Additionally, as projected more than 70% of consumption by 2030 will be from tier 2 and below segments, hence digitising the existing insurance distribution is imperative. Starting with digitising affinity channels that focus on distributing insurance products to a tightly connected group of customers with similar interests. Traditionally, this involved peer-to-peer networks, brokers, and aggregators. With the emergence of insurtechs, it is becoming end-to-end digital and seamless, making insurance more accessible and easy to purchase while eliminating the need for extensive document submissions. This streamlined process includes user-friendly payment interfaces, instant policy issuance, and real-time mobile updates for claims, all while utilising digital KYC and not physical documents such as Aadhar, PAN, etc.
Insurtechs act as technology enablers by providing seamless API integration of insurance products to platforms across various segments such as travel, health, lending and e-commerce, which boosts insurance purchases. Furthermore, embedding insurance seamlessly into digital customer journeys during the point of sale ensures the provision of relevant insurance products. Before integrating insurance, insurtechs conduct a detailed performance analysis of micro-segments to understand customers’ needs and provide tailored plans to ensure high customer engagement.
Insurtechs and their embedded platforms facilitate a 70% faster integration of insurance products. This speeds up the process of introducing insurance offerings at various phases of the customer life cycle. Let’s take an example of the rural microfinance lending segment since the number of borrowers seeking small loans grew twice as fast in rural areas (22.3%) as in urban areas (11.4%). Under unforeseen circumstances, such as the borrower’s death, the outstanding loan amount becomes a significant burden on the borrower’s family and on the lending platform. In such scenarios, credit life insurance helps cover the outstanding loan amount, but manual policy issuance of credit life insurance is a huge cost factor. This is where insurtechs can help and provide end-to-end digital processes for instant policy issuance with no additional cost. Hence the policy is available to the borrower at low cost, and the loan is secured.
Hence, technology fundamentally bridges accessibility gaps and empowers underserved groups while propelling the growth of the industry. The need for transformation of traditional insurance channels syncs well with the promising macro growth drivers such as a 7.3% year-on-year increase in GDP and rapid migration from rural to urban cities. Also, individuals are becoming more mindful of protecting their assets and prioritising insurance in their financial portfolios. By revolutionising traditional approaches, technology lays the foundation for a more inclusive and efficient insurance landscape, capable of meeting the diverse needs of customers across the spectrum.