INSURANCE 2 - Benori Knowledge

How is digitisation transforming insurance for good?

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1. Executive Summary

2. Insurance penetration in India: Witnessing a paradigm shift

i. Low penetration - one of the key concerns faced by Indian insurance players

ii. Changing consumer base and increasing government focus

3. Digitisation of insurance: A win-win for customers and insurers

4. How are insurance players adopting digital?

i. Adoption of digital across insurance verticals

ii. Digitisation across the insurance value chain

5. Final Thoughts

CONTENTS

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HOW IS DIGITISATION TRANSFORMING INSURANCE FOR GOOD?

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Executive SummaryDigitisation is changing the face of business processes across industries worldwide and the insurance sector is rapidly picking pace. Several players are already integrating leading digital technologies such as AI, big data analytics, IoT and blockchain across their business processes, while others are exploring opportunities for leveraging these technologies.

This fast-emerging trend has brought many revolutionary changes to the sector including increased value for buyers with personalised products and services, thereby, resulting in significantly improved customer experience.Digitisation has also led to rapid business growth for insurance providers with more prospects pouring in, better and efficient business processes and improved risk management, among other benefits.

In this white paper, we have looked at the digital initiatives being undertaken by the insurance sector in India and the benefits it has brought along for the two major stakeholders: insurance providers and consumers. We have tried to uncover various aspects of the digital transformation journey that Indian insurance is undergoing with the advent of disruptive technologies across its major sub-verticals and the entire value chain.

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Insurance penetration in India: Witnessing a paradigm shift

The penetration of insurance services in India has always caused unease to stakeholders as the figures for buyers have remained low since the beginning. As per India Brand Equity Foundation data till 2017, the total insurance reach in terms of premiums as a proportion of GDP was as low as 3.69%. This stands in stark contrast to countries such as Taiwan registering a 20.88% insurance penetration in 2018 and a global average of 6.09%.

Prevalent distrust for claim settlements among users besides the larger issue of not finding the right platform, provider or product that agrees with their needs, is the major reason why Indians are not confident enough to purchase insurance. Limited distribution – through company branches, agents or brokers – across suburban, semi-urban and rural areas, and the larger focus of insurers on sales than on services have been some other key factors that have kept buyers from building a connect.

Changing consumer base and increasing government focus

The picture described above is quickly changing in favour of the industry. The growing share of millennials amongst the working population in the country is building a new market base of primary decision-makers who have both, the pocket size and the willingness to spend on apt insurance policies. While their choices are mostly powered by their will to explore investment benefits with insurance, the rising health risks associated with their sedentary lifestyles and increasing realisation about the need for protective covers in the future is leading more young people to move towards insurance.

Besides, the Government has also increased focus on the promotion of insurance in terms of both, awareness and access. Regulatory changes, for instance, the Insurance Regulatory and Development Authority of India (IRDAI)’s plans to redesign initial public offering (IPO) for insurance companies in India and various other schemes - such as the National Health Protection Scheme launched to extend the reach of the sector to the unserved population in tier-2 & 3 cities and rural regions - are furthering the growing sector potential. Amid the above factors, the Indian Insurance Industry is expected to grow to US$280 billion by 2020.

Low penetration - one of the key concerns faced by Indian insurance players



HOW IS DIGITISATION TRANSFORMING INSURANCE FOR GOOD?HOW IS DIGITISATION TRANSFORMING INSURANCE FOR GOOD?

Add to this estimate, the fact that digital platforms and technologies are either taking over tedious processes in the form of automation or supplementing operations via integration of IoT, AI, big data, cloud computing and more. Auto and health insurance have been the sectors that have implemented digitally-enabled business functionalities more successfully than the others.

This is furthering prospects for the industry players and presenting them with unprecedented opportunities for growth. As per a BCG report, the insurance sector is likely to grow by 20 times from 2015 to 2020 due to digitisation. In fact, 75% of purchase decisions are projected to be driven through digital channels in the coming two to three years.

So, what benefits is digital bringing to the stakeholders?

For insurers: Greater savings, unrestricted business presence and improved ROI

With digital platforms, traditional agent-driven models have been disrupted. Players are extending their reach to unexploited regions and new market segments in lesser time and cost. From increasing sales to offering personalised services, these platforms are serving insurers as low-cost distribution channels that complement if not substitute humans.

Paperless exchange of communication and smart digital transactions have outdone the need for hiring a line of agents, mid-sellers and

intermediaries for sales. In addition, companies are increasingly using AI-powered, automated chatbots in place of deploying additional human service executives for providing 24x7 assistance to customers, hence enjoying substantial cost savings. As per a McKinsey report, automation alone can reduce the cost of the claims journey by up to 30%.

For customers: Personalisation, convenience and better-informed decisions

Buyers, on the other hand, are enjoying fast and seamless access from anywhere, anytime and any number of times. Customer-centred digital apps are transforming the first purchase experience by letting buyers get quotes and policy information, and helping them understand processes and benefits or find estimates and compare products to find the ‘perfect fit’ for their needs.

A study by PwC India supported the above by highlighting that about 67% buyers prefer aggregators or online channels to make calculated decisions by comparing different products. Besides better sales experience, the digital channels also inspired more confidence among users through their self-service model as a customer can clarify doubts, make policy and billing changes, file a claim and perform other tasks on their own, without having to wait for an agent to get back to them.

Digitisation of insurance: A win-win for customers and insurers



3.69% premiums as share of GDP till 2017

Less confidence in claims process

Limited distribution, especially in semi-urban & rural areas

Traditional agent-driven approach disrupted

Seamless, 24x7, self-service experience

Customised offerings to match the individual needs

Faster claims settlements & query resolutions

Reach to the new, underserved markets

Significantly lower costs for significantly smarter processes

Lack of product options to find the ‘Perfect-Fit’

More focus on sales than on services

Low insurance penetration

Massive growth potential

67% buyers prefer online insurance channels

A consumer’s perspective An insurer’s perspective

24x7

Challenges in insurance Insurance with digital

Transformation of insurance






How are insurance players adopting digital?On closeup, insurance purchase trends show increasing adoption of digital platforms among consumers, wherein insurance is majorly handled at backend and the information is offered to the customer through a platform. Be it the rise of service aggregators or market entry of insurtech players, insurers across the sectors are piggybacking on such online/mobile channels to serve the new-age consumer.

Adoption of digital across insurance verticals

Auto insurers are exploring low-cost vehicular telematics devices/apps from customer engagement to risk profiling and loss prevention for drivers and vehicles. This helps insurers read the driver behaviour and their motor history, thus, leading to the creation of innovative products that accurately meet the needs of buyers.

Healthcare insurance providers are evolving their data analytics capabilities by capturing, storing and assessing large volumes of medical data that wearables such as fitness bands are bringing in from users. These players are consistently improving and customising their offerings for prospects by using AI and automation over the layer of this health data recorded over a prolonged period.

Also, when it comes to home and contents insurance services, thanks to the intertwined applications of smart, connected IoT devices, sensor technology and AI, providers are looking at exploiting data from smart homes installed with advanced devices such as virtual assistants and other home automation tools. The trend will further mature into heightened home insurance penetration, especially in tier-1 cities.

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Digitisation across the insurance value chain

Increased penetration of high-speed networks and ever-widening base of mobile users throughout the country are enabling providers to gather volumes of data about their lifestyles, financial histories and purchase decisions. With big data analytics, automated dashboards and AI, insurers are able to understand their customers closely and hence, offer them competitively priced, customised products/services. This enables the insurers to appeal to a wider user base, many of which buy covers for the first time.

One of the major factors that add to the cost of insurance (or payable premium) for customers is the losses incurred by insurers through fraudulent claims or internal fraud risks. Studies indicate that insurance fraud cases in India cost about INR 40,000 crore to the industry every year which accounts for 8.5% of its annual revenue. The neural networks technology in artificial intelligence can be used by companies to read, identify fraud patterns and thus, eliminate risks for any possible frauds. However, what could be an even precise solution towards more robust and fraud-proof offerings would be consolidated databases on frauds shared among all players. To this end, about 43 insurance companies have already placed their bets on the big data and analytics solutions of a credit rating agency, Experian, which is working on a common repository of information since 2016.

Case in point:

GOQii Health is an Indian fitness tech startup that tracks health vitals for users through wearables and uses its own AI-powered ‘wellness engine’ for providing them health reports and advice. In 2018, SwissRe – a global insurance and reinsurance provider and Max Bupa Health – an Indian health and medical insurer partnered with GOQii. The goal of this association was to optimise the claim payouts and devise more attractive health insurance plans by these insurance players, basis GOQii’s insights.

Case in point:

Indian government’s Ayushman Bharat, their flagship public health insurance system decided to adopt a Biometrics-as-a-Service (BaaS) model with the aim of curbing health insurance frauds. They plan to implement a system that uses AI-driven, smart tools such as fingerprint sensors and IRIS sensors for biometric verification of individual patients to cut down on ‘ghost admissions’. Once brought into execution, these systems are also likely to find wider applications across the private health insurance players.

Better fraud risk management:

Improved offerings:



The claim settlement process is basically the backbone of the entire insurance purchase to payout cycle. Before the overhaul brought in the system by digital, the process was mostly manual, involving lots of effort, huge costs and a wider scope for errors. Not to mention, this was prone to frauds and often resulted in delays in clearances, hence causing inconvenience to most claimants. This practice was disrupted with the integration of CRMs and cloud computing, leading to a seamless and highly synchronised process involving much less paperwork and real-time updates for all stakeholders. As a direct impact, claim settlement has become much more cost-effective and quicker.

AI chatbots have pretty much become a hygiene exercise for any insurance provider with an online presence. These smart applications use neural networks to understand and answer the bulk of commonly raised customer queries over email, chat and even phone calls, around the clock. Saving time and resources on the regularly encountered, common questions, these applications are supplemented with human executives, who dedicate their efforts instead on unique situations or escalated cases.

Case in point:

Reliance General Health took to video chat amidst the rise in home insurance claims during the Kerala floods in 2018. The two-way video conversation technology was used to monitor the extent of damage to property and hence speed up the claim process. The original procedure involved the submission of documents followed by a physical inspection of the property – a process that lasted over two weeks. With video conferencing and real-time analysis of the loss, the cycle was effectively cut down to less than 3 days.

Case in point:

PNB MetLife, a life insurance player gave a push to its digital journey with ‘Dr. Jeevan’ – which was introduced in 2017 as the industry’s first AI-powered interactive chatbot solution on Facebook Messenger platform. The tool was aimed at resolving top queries for India’s top two critical illnesses that account for 70% of the cases – cancer and heart diseases – by conversing with users on these topics, providing them with simplified information and helping them know their health quotient.

Enhanced customer services:

Faster claim settlement:



Digitisation in insuranceKey technologies:

Key tools:

Key takeaways:

CRM

Driver/motor telematics

Biometrics

Home sensor/virtual assistants

Chatbots

Online platform

Wearables/smart health devices

Two-way video chat



Customer-focused products

Automated fraud/risk mitigation

Optimised claims payouts

Round-the-clock service

Internet of Things

Machine Learning

Robotic ProcessAutomation

Neural Network

Cloud Computing

Artificial Intelligence

Natural Language Processing

Big Data Analytics





Looking back, we see that online channels such as websites and mobile apps, digital tools such as CRM and chatbot applications, and various other AI-enabled technologies have enhanced the business functionalities for insurance players for a long time.

However, the industry still holds room for further use of digitisation — at least 30-40% as per experts. Players, big or small, are finding it

critical to advance their ecosystems towards highly connected, digitised and smarter business functionalities.

Therefore, while new-age digital technologies such as AI, IoT, big data and blockchain, among others are beginning to take a definitive place in the Indian insurance sector, a large portion of its true potential remains yet to be seen.

Final Thoughts:

References:• IBEF (2019): Indian Insurance Industry Overview & Market Development Analysis• LiveMint (2018): Four reasons why Indians buy such little general insurance• LiveMint (2019): Insurance penetration in India at 3.69%, one of the lowest across the world• BCG (2014): Insurance @ Digital - 20X by 2020• McKinsey (2017): Digital disruption in insurance: Cutting through the noise • PwC (2019): Competing in a new age of insurance• Cognizant (2018): India’s Insurers Embrace Digital’s New Normal• Business World (2020): Digitization Picks Up The Pace In Insurance• Economic Times (2019): India’s insurance industry is improving efficiency through the use of new-age tech-

nology• Biometric Update (2019): India’s public health insurance system implements biometrics to cut fraud• ET Brand Equity (2017): Meet Dr. Jeevan, PNB MetLife’s new AI chatbot• Entrepreneur India (2019): Re-Imagining the World of Insurance – Digital Transformation• Data Quest (2019): India is an emerging player in the InsureTech space: Samrat Das, CIO, PNB MetLife


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https://www.livemint.com/Opinion/mZXybE4ywQZQag12KzY7TO/Four-reasons-why-Indians-buy-such-little-general-insurance.html

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https://www.mckinsey.com/~/media/McKinsey/Industries/Financial Services/Our Insights/Time for insurance companies to face digital reality/Digital-disruption-in-Insurance.ashx

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https://benoriventures-my.sharepoint.com/personal/benori_it_benoriknowledge_com/Documents/Marketing/Website/Resources/•%09https:/www.cognizant.com/whitepapers/indias-insurers-embrace-digitals-new-normal-codex3794.pdf

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https://economictimes.indiatimes.com/industry/banking/finance/insure/indias-insurance-industry-is-improving-efficiency-through-the-use-of-new-age-technology/articleshow/70902516.cms?from=mdhttps://economictimes.indiatimes.com/industry/banking/finance/insure/indias-insurance-industry-is-improving-efficiency-through-the-use-of-new-age-technology/articleshow/70902516.cms?from=mdr

https://www.biometricupdate.com/201909/indias-public-health-insurance-system-implements-biometrics-to-cut-fraud

https://brandequity.economictimes.indiatimes.com/news/marketing/meet-dr-jeevan-pnb-metlifes-new-ai-chatbot/57506580

https://www.entrepreneur.com/article/325829

https://www.dqindia.com/india-emerging-player-insuretech-space-samrat-das-cio-pnb-metlife/

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