The Indian insurance industry is not new to changing consumer preferences. Indian consumer preferences have known to change with rising and falling economic growth (eg. stock market booms), social communication trends (eg. advent of the mobile) and structural (eg. rise of the motor OEMs). However, the push towards Digital stands apart from all these changes in terms if the size and speed of the change. Till now, insurance companies largely had an ability to tackle these changes, absorb them into their operating models and hence, have a revised customer proposition in quick time.
Probably for the first time, the market change has left the insurance industry well behind in a very short period. Over the last three years insurers have begun to feel the need to relook at the way they can position themselves in front of the client in a fundamentally new manner. This is especially a challenge for the industry as the direct customer touchpoints with insurance companies are few. The Digital push brings three types of opportunities for insurers in India. The first is in terms of repositioning themselves in front of the customer. The opportunity stems from the fact that insurers now have a channel to directly reach out to the customer. Creation of a new ecosystem, or being a part of one would be essential to stay relevant in a customer's mind. However, in order to do the same, insurers would need to break the barrier of low awareness for risk management The second opportunity is in terms of helping improve revenues by increasing the number of insurance customers and by increasing risk management products being sold to existing customers. Given the nature of products, the non-life insurance segment is better suited to tap into Digital based revenue growth. The third opportunity is in terms of reducing operating and distribution costs. While the business case forcost reduction is fairly obvious in Digital, implementation and value accretion has been a challenge for insurers. The key constraint to implementing changes for a Digital value chain are the legacy systems (manpower and technology) that currently drive today's insurance companies. As a result, we also see a clear focus of insurers on the revenue enhancement side and little or no focus on digitizing their operating models.
In the short to medium term, we expect to see new insurance companies (more so in the non-life segment) looking to tap into the digital space while existing insurers ready themselves to innovate and deliver new propositions. These companies would test the boundaries of what products, channels and processes can actually be digitized and to what extent the industry will continue to be driven through traditional ways of doing business.