By Surjendu Kuila, Co-founder and CEO, Zopper
The year 2025 is poised to usher in an ‘unwarrantable year’ for the world economy, per the GDP forecast and Economist’s predictions. Global warming, wars, economic crises, fear for jobs, plummeting insurance growth—undoubtedly, we are living in difficult times. But there is always a ray of hope. Crisis is often said to be the best teacher as it forces us to confront difficult situations with problem-solving measures to help society grow.
If you take the example of insurance, India is pegged to be the world’s sixth-largest insurance market by 2032, according to various business news reports, but the penetration level/understanding of insurance remains low (less than 4% as per Global standards). In the insurance distribution parlance, there is a concept called Combined Operating Ratio, which measures the insurer’s underwriting profitability. Unfortunately, most of the channels of Insurance companies’ operate at more than 100% COR, which means no insurance company or very few insurance companies in India make any underwriting/operating profit. This simply means that in the last 23 years, insurance companies have not been able to build efficiency in their distribution.
The mushrooming awareness problems in the insurance sector are steadily getting addressed – thanks to the government’s removal of FDI restrictions in the insurance services sector. The most recent Boston Consulting Group (BCG) and India Insurtech Association (IIA) report, reveals a vibrant landscape of over 150 insurance tech firms that have attracted over $2.5 billion in funding, generating over $750 million in revenue. With the help of insurtech, innovative and customised products, India’s economic growth can be accelerated in the coming months.
Digital Transformation Leads Growth For India’s Insurance Sector
Insurtechs leverage technological advancements to offer personalised, real-time coverage and dynamic risk management, helping mitigate risks when consumers need it most. Further, they are strengthening their expertise while fostering cross-functional industry collaborations, bridging gaps in terms of insurance distribution and penetration, teaming up with reputed banks to offer personalised bancassurance solutions to customers and innovating through technology to provide real-time bite-sized and contextual solutions that enable instant coverage and minimal hassle for consumers. Insurtechs are harnessing the power of digital services and innovative products for underserved segments and strengthening regulatory frameworks for sustainable growth. These initiatives are essential in our diverse country to bridge gaps and expand financial security for all. Now, when it comes to technology, one of the strongest pillars, it helps reduce the marginal cost of distribution, which means the amount of money that one needs to invest in deploying insurance to the last mile reduces as and when one sees economies of scale. In the coming decade, technology will be the fulcrum of insurance distribution.
Creating New Economic Opportunities
Technology has also provided a fillip to employment opportunities, 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. Insurance companies are increasingly focusing on recruiting professionals skilled in data analytics, artificial intelligence, machine learning, cyber security, and digital marketing, aiming 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.
Role of Digital-savvy Customers
There is no denying that India is a young country, and this demographic, which is ‘always connected,’ expects quick service, convenience, and personalisation from their insurance provider. We know how WhatsApp helped insurance companies, especially those dealing with health insurance, reach a broader customer base when the world reached a standstill. Further, customers can renew their break-in motor insurance policy via WhatsApp and submit their claim, thus enjoying a 100% paperless claim experience. Insurers are increasingly adopting digital platforms, including mobile apps, messaging platforms 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, and receive instant quotes and complete self-assessment of break-in motor insurance policy – all with just a few clicks.
Reaching The Last Mile
AI-powered chatbots and virtual assistants have become a significant part of customer service, providing instant support and claim assistance. Along with virtual assistants, they answer common queries and ensure the availability of services around the clock. 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, technological advancements have led to the democratisation of vernacular chatbots, enabling regional language communication. This makes digital services more accessible and user-friendly for a wider audience beyond metro cities, likely opening additional skilled employment opportunities in the insurance sector.
Insurtech, in isolation, will probably not be the right business model. Insurers and Insurtechs must work closely, hand in hand, to ensure that the marginal cost of distribution reduces. With 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. A shared vision can reshape the insurance landscape, with the sector aiming for a future where a strong safety net reaches a large population segment and encourages financial inclusion for all.
