By Vaibhav Mishra
The insurance industry has undergone massive transformations in the last few years. An industry that was branch-led since its foundation shifted its focus towards technology and introduced better distribution, new products, use of emerging technologies, while navigating through rapidly changing regulations. The developments have opened new avenues for growth and have been helping insurance reach out to consumers in a decentralised way. Both IRDAI and the industry are determined to achieve India’s mission of “Insurance for all by 2047.”
The industry is jointly trying to address the challenges in insurance, and technology is being equipped as the key means for mitigating these challenges. Technology in insurance has witnessed a surge after the pandemic, which has been a blessing in disguise. Both insurance players and consumers have realised the value of contactless and paperless insurance and the reach that digital channels have.
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New products, digital channels, distribution processes, and newer ways of risk evaluation have been introduced in the industry to make insurance seamless. These have reduced the turnaround time substantially and increased outreach to consumers in smaller towns and cities. More and more players are now using the man-machine collaboration, ensuring more value to consumers and other stakeholders.
Consumer behaviour is another key factor pushing the fast growth in InsurTech. Especially after the pandemic, consumers have realised the value of insurance, and therefore, there has been a huge demand for life, motor, and health insurance products. The industry is jointly catering to consumer expectations and, most importantly, making insurance reach India 2 and India 3 that live in smaller cities and remote districts. Consumer affluence is also undergoing a major shift, especially in Tier 2 cities and beyond, which will further push InsurTech to come up with more innovations.
In the past two years, India has witnessed growth in InsurTech landscape with the emergence of new consumer segments ( in Tier 2/3 cities and beyond, growth in women consumers, corporate insurance growth across SMEs); data and analytics emerging as core capabilities, creating data around consumer behaviour and experience; driving operational efficiencies; and the emergence of National Health Stack (creating a data bank for health insurance in the country).
InsurTech companies that were established with the concept of paperless/ contactless processes using technology, made optimum use of their models during and after the pandemic. For example, InsurTech company RenewBuy increased its consumer outreach by two times, increased their workforce by almost 40%, expanded their footprint from 500 to 800+ districts, towns, and cities, and doubled the insurance advisor network in the last 2-3 years. The company used technology as its core, from guiding consumers to providing the most suitable insurance policy, insurance servicing, and claim settlements. Almost 75-80% of the company’s business originates from the country’s semi-urban and smaller towns and districts.
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As per the India Fintech Report 2022, artificial Intelligence (AI), machine learning (ML), internet of things (IoT), automated claims, e-commerce insurance marketplaces, web aggregations, and software/white label/application programming interfaces (APIs) are growing at fast pace in the country. Embedded insurance using technology will drive significant consumer growth in the coming times. Companies like Digit Insurance, Artivatic. AI, Mantra Labs, to name a few, are making optimum use of these technologies. To give another example, Artivatic.AI, a deep tech (InsurTech) company, offers ML and AI-based algorithms to both insurers and consumers. It has been providing risk-based personalised automated solutions which cater to underwriting claims, risk and fraud intelligence, embedded distribution, and sales intelligence across the insurance value chain.
In terms of funding, India has shown a very strong momentum as funding doubled in the last two years in the InsurTech space. Unicorns were built post-pandemic. Funding in InsurTech, has grown at a CAGR of 34% from FY 20. Almost $800 million was raised in equity funding in 2021, which is more than the funding amounts, combined in 2019 and 2020. Though the funding market is globally impacted due to global economic and geo-political disturbances, the funding in the Indian InsurTech space is expected to pick up impetus in the coming months.
To survive the InsurTech game, incumbents must keep adapting their business models to newer technologies. Applied AI, well-connected digital infrastructure, next-level automation, and trust architecture need to be on the move to connect insurance companies with consumers. Cybersecurity also needs to be taken care of by the industry to ensure end-to-end data protection. Indian insurance is clearly in the limelight. Compared to the Global InsurTech market, the industry is poised to grow faster in the coming years.
The writer is manager and fintech and banking sector analyst, EY Knowledge