The Tech Panda spoke to an expert about how far insurtech has come in India and how emerging tech can help it shift from legacy processes to automation.
The insurance industry in India has been a people-intensive offline business. It has been a business since before we even got independence. Today, India is moving towards a digital overhaul, while companies like GoDigit and Acko, have been pioneers to bring the digital revolution to the industry, there is still a lot more to be done. Even today, 90% of policies are sold offline.
To understand how insurance and technology are working together in India and how far they’ve got to, The Tech Panda spoke to Adarsh Chokhani, Founder & CEO, Assurekit, a startup that simplifies insurance distribution for businesses.
While we have managed to digitize quote and policy issuance, a lot of work needs to be done in the after-sales servicing for insurance policies
“While we have managed to digitize quote and policy issuance, a lot of work needs to be done in the after-sales servicing for insurance policies,” he says.
Insurtechs are already looking at use cases for intelligent automation that will uplift the efficiency of the current processes and reduce operational costs at the same time.
“There are a lot of changes happening with good scope for automation in the insurance sector. Report data estimates that by the year 2025, up to 25% of the task force in the insurance industry may be merged or replaced, especially in operations and administrative support,” he adds.
Indian Insurtech: Where does it stand?
But where does India stand in the insurtech ecosystem in comparison to global standards? Indian insurtechs are solving an age-old problem and it’s very exciting to see where we are headed with this immense potential. However, the Indian insurance industry is under-penetrated, especially compared to the likes of the USA, says Chokhani.
“The level of technological adoption in the Indian market is fairly high, but because of smaller penetration and ticket sizes, the larger focus in the industry has been towards distribution,” he says.
If insurance becomes as widespread and commonplace in India as it is in developed countries, then we should see India emerging as a leader in the insurtech space
This is one of the reasons why there is a large funding difference in insurtech between the US and Indian markets. The US Insurtech sector raised over US$6.5 billion in private funding in 2021, which is approximately 34% of all investments to date in insurtech companies.
Indian insurtech on the other hand is quite young and filled with the potential to become one of the largest markets in upcoming years.
“There has been significant momentum in recent years, investor funding in Insurtech has doubled in the last two years. If insurance becomes as widespread and commonplace in India as it is in developed countries, then we should see India emerging as a leader in the insurtech space,” he adds hopefully.
Will Indian Insurtech Become as Big as its FinTech?
While Indian fintech is on top of things (a space worth $179 billion), does the success extend to insurtech as well? While Fintech has reached the mature stage as an industry, insurtech is at an early stage, reveals Chokhani.
I am certain that the insurtech space will be able to reach where FinTech today is in the next 10 years
“We have seen a lot stronger investment activity with funding for Insurtech companies doubling over the last two years. We also can see the regulator truly helping the industry grow using technology.
India has at least 66 insurtech companies and accounted for 35% of the $3.66 billion in insurance-focused venture capital invested in the APAC region, which are all impressive numbers. With 92.2 % protection gap still existing, I am certain that the insurtech space will be able to reach where FinTech today is in the next 10 years just like the Indian FinTech industry,” he explains.
“It’s good to see that we have people with years of expertise in tech and insurance finally creating better insurance as well as financial protection for India,” he adds.
Insuretech & Emerging Technologies
Usage of sensors and smart devices and the steady roll-out of 5G technology are driving the generation of a burgeoning amount of data, particularly in real time. Insurers can use this data for valuable insights to improve risk assessment and transfer as well as predict and prevent risk.
Chokhani says emerging technologies like IoT, 5G, data science, and blockchain provide much scope for insurtech to become more automated industry.
“IoT has great potential in the insurance of equipment, such as machinery, electronic items and even vehicles (where it is called telematics). Mobile device insurance plans already have some amount of tech that allows the insurer to check the status of the device and the extent of damage done as part of the claims process, but there is further scope here,” says Chokhani.
IoT in general will need the industry to come up with new ideas to leverage its full potential, instead of trying to shoehorn it into existing cover constructs
“IoT can also be a key component in parametric insurance, including lines like crop or downtime. IoT in general will need the industry to come up with new ideas to leverage its full potential, instead of trying to shoehorn it into existing cover constructs,” he adds.
5G networks can provide a large increase in bandwidth at the ground level, which can allow for more offline processes like documentation to be digitized easily. An inspection of a vehicle or an insured property can be done with just a smartphone, as 5G will allow the captured data to be transmitted and processed in real-time.
5G is an enabler, allowing for further digitization and ease for the end customer. However, the push to leverage this has to come from the players in the industry, as by itself, 5G cannot make a difference
“Because India primarily relies on mobile data for its internet access, faster speeds and higher data limits should help increase the penetration of insurance. 5G is an enabler, allowing for further digitization and ease for the end customer. However, the push to leverage this has to come from the players in the industry, as by itself, 5G cannot make a difference,” he explains.
The insurance industry has been using data science since before the term data science was coined.
Just like with IoT, the industry needs to start thinking about the best way to use emerging technology rather than sticking to the lens of their existing products and processes, and then seeing where things can be improved
“New AI innovations in machine learning and OCR (a process that converts an image of text into machine-readable text format) subdomains are beginning to be adopted across the industry, but there is scope for more. Just like with IoT, the industry needs to start thinking about the best way to use emerging technology rather than sticking to the lens of their existing products and processes, and then seeing where things can be improved,” he says.
Blockchain technology will likely bring about crucial efficiency profits, cost savings, transparency, faster payouts, and fraud mitigation while various parties will be able to share data in real-time in a trusted and traceable manner. Blockchains can also help new insurance practices to produce improved products and markets.
“Blockchain has applications in insurance, but all value-adding implementations will require cooperation among the industry participants, which usually means a push from the regulator/govt authority,” he concludes.
Technology transformed Indian FinTech into an industry to be reckoned with on a global scale. We can expect the same to happen in insurance, if everyone plays their cards right.