By Bragadish Sureshkumar, Chief Technology Officer, Zopper
October 2024 has to be different across many levels. One being, Elon Musk’s latest gig – the latest colossal Super Heavy booster which was successfully caught by the launch tower for the first time in the history. That’s the power of technology and innovation, it can reach heights no one could have imagined!
In the BFSI and Fintech space too, this is a period of rapid and significant changes, at the global and local levels. Companies that fail to keep up with the pace of change are doomed to be left behind in the race. However, in the recent past, it is proven that technological progress coupled with innovation have catapulted the Fintech / Insuretech sector from the fringes to the forefront of financial services.
And the growth has been buoyed by the robust growth of the banking sector, rapid digitisation, changing customer preferences, focus on financial inclusion and increasing support of investors and regulators. During this decade, fintechs have profoundly reshaped certain areas of financial services with their innovative, differentiated, and customer-centric value propositions, collaborative business models, and cross-skilled and agile teams. This fintech sector saw a nearly 60% slump in funding for the first six months of 2024 and is expected to grow hereon. India is amongst the fastest growing Fintech markets in the world. Indian FinTech industry’s market size is $584 Bn in 2022 and is estimated at ~$1.5 Tn by 2025.
Its high time now that insurtech firms not only adopt tech but couple tech with innovation and forge strategic partnerships, educate customers and masses across length and breadth of India. The role of innovation is now even important and innovative solutions will ultimately establish propositions and deeper with customers. Anticipating and adapting to emerging market demands with agility is now the most efficient way to remain relevant and a step ahead of the competition. However, new opportunities also bring fresh and more complex challenges.
So, how can the Fintech and insurtech sectors transform and match up to customers’ expectations? Here’s a look how:
Why innovation is the key To growth
Innovation in the insurance sector goes much beyond adopting the latest technology. It is about reimaging customer experiences, business processes and models – finding unique solutions to age-old problems and capitalising on the emerging trends to reinvent insurance. In fact, the insurtech industry is increasingly seeing innovation as critical to success, with 90% of insurance providers worldwide intending to increase investment in AI in 2024.
Leveraging insurance technology is the best way to not just fulfill customer expectations but also to predict their needs proactively. Brands that respond quickly to emerging needs gain the first-mover advantage. Technological innovations have given insurance companies in India the power of big data. Data analytics has not just transformed risk assessment and identification of new markets but also provided insights to redefine business models. On the other hand, AI/ML has revolutionised customer interactions and underwriting. At the same time, cloud computing has given the power of scalability. The recent PwC report highlighted the fact that the application of AI, including the rapid advancements in GenAI, is a major focus area for FinTechs and Insurtechs. Over USD 12.1 billion was invested in AI-powered FinTech solutions in 2023. AI is being leveraged in various solutions catering to fraud detection, credit scoring, personalised financial advice, etc. Hence in the long run and in order to reap the benefits, innovation needs to become part of the DNA of the brand.
Move resources to innovation initiatives
Novel ideas cannot emerge in a vacuum. You need to first identify untapped markets and needs. This will give you insights into how best to address them. The next step is to test solutions and business models for these markets and needs. However, entering unchartered territory without sufficient resources, including manpower, management focus and assets, amplifies risks. Therefore, if you want to innovate, you must support it with adequate financial resources and talent. India being home to millions of potential across rural and urban areas, there are people who still are not privy with insurance and tech expertise.
Companies now even more, need to take care of business and people without disrupting existing systems or operations, while, simultaneously, testing new offerings and business models that might re-balancing product portfolio for stronger growth and expansion.
P.S: the need for addressing three P’s (product, process and pathways)
Different innovation projects might need distinctive approaches. For instance, most insurance companies in India and the rest of the world can predict the potential gain in total written premiums from improving an existing policy or tweaking a core process. This insight gives clarity regarding possible risks and how to overcome them. But such innovation is very different from building and launching a unique, disruptive product, such as a brand-new life insurance policy that offers amazing flexibility over living benefits.
New, disruptive products come with their own share of risks, which insurers tend to have lesser clarity on. A key example of this was the rise and rapid decline of mutual-aid platforms in China. In 2019, numerous such platforms were launched, providing easy access to basic health insurance. It represented a radical shift in product design.
Ant Financial’s Xiang Hu Bao was perhaps the most successful of these platforms, garnering over 100 million users within a year of its launch. But these initiatives started winding down just as quickly as they had arisen due to increasing regulatory oversight and errors in customer selection, with young and healthy users abandoning the platforms. The result was that the remaining participants had to bear increasing costs. With support from InsurTech companies in India, one can access tools to analyse each product’s economics and probability of success. This will determine which products need redesigning and which can be coupled with another product to offer a value-add to consumers.
Innovate approaches to engage customers
Innovation isn’t limited to developing new value propositions for products. It should also focus on marketing and distribution. An amazing new product will only give justified returns when its value is understood by the end-user. This is especially important, given the evolving customer expectations, where hyper-personalisation, immense flexibility and complete convenience are fast becoming the norm.
To engage new and existing customers, you first need a more granular understanding of customer profiles across different markets. This will help you tailor your messaging for maximum impact. In addition, an Omni channel approach is rapidly becoming indispensable to capturing and holding onto customer attention. Example, Generation Z and Millennials largely opt for sachet size products. For instance, 64% of customers expect brands to connect with them on social media, while 70% feel more connected to businesses who’s CEOs are active on social media.
Spur innovation with the right InsurTech partner
The time now is for insurance companies in India to partner with a skilled and experienced InsurTech provider to enhance the quality, breadth and pace of innovation. Given that customer expectations and market dynamics are evolving, delivering consumer-centric and personalised products is the need of the hour. Insights regarding what constitutes such a product for your target market can be best supported by tech solutions for AI/ML-powered data analytics. Technology tools can also accelerate innovation while easing change management within the organisation. So, choose your partner carefully to integrate innovation within the DNA of your business.