Digital transformation is paving the way for the future of insurance providers in India
In the wake of digital transformation in the insurance industry, Indian insurers are facing manifold challenges in the I.T. space.
The Indian insurance sector is going through a paradigm shift. Technology is transforming the insurance ecosystem not just in scale but also in fundamental aspects. Insurance companies can either ride the digital wave or be hit by it. In their pursuit to digitise and revamp business processes and functions, Indian insurance providers are facing multiple challenges that they must overcome.
The insurance industry in India has adapted to numerous developments and amendments. Whether it be raising the upper limit on the participation of foreign insurers in joint ventures or the issuing of IPOs by public insurers, the insurance landscape has witnessed a burst of advents.
The digitisation of operations has called for a remodelling of the entire insurance value chain. Moreover, artificial intelligence in business and the internet of things (IoT) demands a disruption through digital transformation, something that comes with challenges. Let us dive deeper into understanding the economic, operational and competitive challenges that Indian insurance companies face in this digital world:
Cybersecurity
With business processes becoming increasingly dependent on I.T., it was imminent for cyberspace attacks to enter the insurance territory. Data privacy and security are essential aspects as emerging technologies usually deal with personal data of stakeholders. This has forced insurers to look into the matter of cybersecurity seriously. According to a recent KPMG Cybercrime Survey Report, 58% of organisations included cyber risk as part of their boardroom agenda.
On the other hand, for customers as well, the issue of cybersecurity is a top deciding factor while choosing an insurance provider. Customers today are becoming increasingly conscious about protecting their data. Cybersecurity laws in India are still evolving and are not as comprehensive they should be.
Cleaning Big Data
Insurance and mediclaim companies are burdened with an overwhelming amount of customer data. Insurers are required to collect personal data of individuals not just to fulfil legal obligations, but also assess risks and analyse future trends. Advanced Artificial Intelligence (A.I.) programmes and machine learning tools are being brought in to perform data mining tasks.
A new study of data scientists revealed that 80% of an average data scientist’s time is spent in basic data assembly which involves data collection, preparation, refining and laying the groundwork for data modelling. Conversely, only 9% of their time is focussed on mining data for patterns and 4% on actual value addition activities like refining algorithms. Absorbing useful information out of large volumes of data poses a grave challenge to data miners in the insurance industry.
Also read: Telematics –transforming how motor insurance works
Upgrading to Online Platforms
While the use of online platforms (web and mobile applications launched by insurance companies) have helped increase awareness, offer direct customer touch-points, and better access to insurance products and services; shifting to the online space comes with significant problems.
A problem unique to India is the language barrier of online content. More than 75% of internet users in India look to consumer online content in their regional languages. With only 120 million people fluent in English out of the 200 million familiar with the language, online applications of insurance providers lose out on aspects like personal touch, approachability and penetration into tier-2 and tier-3 cities.
While consumers today have value transparency and seamless experience, studies suggest that 57% of customers still face challenges related to understanding policy terms. This is because social media is still not being used to its fullest potential for insurance products.
Rise of New-Age Insurers
Today’s evolved and mature consumer mindset is testament to the fact that the insurance market is warming up to new-age technologies. As the digital transformation in the insurance space becomes more ubiquitous, the business environment is bound to get fiercely competitive.
New-age insurers offering digital solutions are expected to gain more popularity and capture significant market share. Traditional insurance companies in India must prepare themselves to face unprecedented competition from modern-day insurers focused on online presence, customised covers and state-of-the-art technology.
Prospective ROI
The issue with digitally transforming a business’s operations is that investment in technological infrastructure is a capital-intensive process. Technology cost drivers in the insurance industry include specialised machines, subject matter experts, Blockchain tools, analytics and Internet of Things (IoT) programs, artificial intelligence and skilled human capital competent in running I.T. operations.
Considering the ever-increasing costs of technology and substantial employee costs, determining and pinning down a hard return on investment figure for the future years may be difficult for
insurers.
In Conclusion
Automation in insurance can not only add value to the seemingly difficult task of making processes leaner but also reduce risk and cut costs. According to McKinsey & Company, automation in the industry can reduce the cost of processing claims by 30%.
Digital transformation is critical to the success and growth of present-day insurance and mediclaim companies. It becomes imperative for insurance providers to identify and effectively overcome obstacles and challenges that I.T. brings to their business.