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Insurance Article

Is Digital Disruption Powerful Enough to Reshape the Indian Insurance Sector?

September 17 2019

Digital tools such as AI, machine learning and analytics are helping insurers to offer innovative and customised products

insurance landscape in India

Expected to touch USD 280 billion by 2020, the Indian insurance sector is on the cusp of a major change. Driven by the Government of India’s Digital India initiative and emerging digital trends, the country’s insurance sector is witnessing a paradigm shift in its business model.

Use of new-age digital technologies such as Big Data, Artificial Intelligence (AI) and Machine Learning (ML), among others are changing insurance from a push product to a pull one. Read on to know how this wave of digital disruption is reshaping a sector, which has grown at a CAGR of 16.5% [2] in the past 17 years

A steady increase in purchase of online insurance policy

The smartphone and Internet revolution in India have had a profound impact on every sector, including insurance. The popularity of buying online insurance policy can be gauged from the fact that over 60% [3] of Indians in over three metropolitan cities purchased drive-your-car-without-any-worries-with-these-car-insurance-add-on-covers motor insurance policies over the web, directly from company’s websites, according to a study.

Another study found about 30% [4] of Indian customers in the age group of 25-44 years to buy health insurance policies online. The convenience associated with buying online insurance policy has prompted this change in behaviour. The process being completely paperless is fast, easy and hassle-free. With smartphones and Internet becoming a part of modern life, the trend is expected to gain further traction in the coming days.

Big Data and analytics aiding insurers in underwriting and customising products

Underwriting is a fundamental pillar of insurance. It helps insurers assess risk and formulate plans accordingly. Through Big Data and analytics, insurers are able to gain meaningful insight from large chunk of data to arrive at actionable insights and curb frauds, a bane for the industry. It’s estimated that the country’s insurance sector loses USD 6 billion every year due to frauds[5].

Also, Big Data and analytics are aiding insurers to go beyond the information presented by prospective customers in the proposal form. Through these new-age digital tools, insurers are able to understand customer behaviours, their lifestyle habits and preferences and customise products accordingly. While every insurer has a lot to offer to their customers, the need of the hour is to offer tailor-based products.

AI improving customer engagement

Another important cog in the wheel of digital insurance, AI is redefining customer engagement in a sector, the basis of which is trust. Through AI, insurers are not only marketing the right products, but also setting up virtual branches to better engage with customers and settle claims.

For instance, ICICI Lombard has come up with an AI-based solution to instantly renew lapsed or expired motor insurance policy. All you need to do is to capture the images of your vehicle and upload them in the ‘Insure’ app. Developed in collaboration with software giant Microsoft, the images are analysed by an AI-module, following which the break-in proposal is either accepted or sent for verification.

Also, several insurers have chatbots on their websites to solve your queries instantly. Equipped with advanced algorithms, these chatbots are action-oriented, which also recommend products and solutions based on the interaction. They pick up keywords during conversation, derive meaning out of it and make suggestions accordingly.

Reward customers

Digital disruption in the form of telematics is helping insurers reward policyholders with responsible driving behaviour. Telematics captures and conveys essential data related to driving, which helps insurers gauge driving pattern and compute premiums accordingly. The Indian vehicle telematics market is expected to be around USD 300 million by 2021.

For instance, if you drive less and at moderate speed, then you are likely to gain from lower premiums. On the other hand, if your overspeed or drive at night, then there are chances of you shelling out higher premium towards your motor insurance policy.

To sum up

With digital insurance gaining prominence insurers embracing the latest technologies have an edge over their competitors. Digital disruption will aid the Indian insurance sector is looking forward to enhancing its penetration among the masses by aiding them in providing value-added services.

Though the need for insurance is well-known, when it comes to insurance penetration, India cuts a sorry figure. Insurance penetration in the country stood at 3.69% in 2017. However, with digital technologies coming in the picture, the situation is expected to change in the coming days.

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