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Digital Insurance Trends and Opportunities

Overview

The digital boom in India has affected almost all retail focused industries. Starting with transportation and retail, it has now even spread to niche segments such as salons and tiffin services. All these industries are driven by the need to build direct bridges with the end consumer through the smart phone in order to survive in an era where the customer is using the phone as the primary medium of communication with the rest of the world.

The trend in India has been fast paced driven partly due to the large base of phone users and partly due to lesser weight of legacy systems (for eg. radio cabs). This made Indian consumers increasingly depend on their smart phones for reasons beyond just communication or entertainment. While initially, digital spread was limited to metro and Tier 1 cities, recent data has begun to show signs of breaking that barrier, and growth into semi urban towns and villages. In this, government efforts to increase use of digital across the country have also begin to pay dividends for greater penetration.

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Key Customer Digital Trends

Growth in digital penetration in India is a well-known and visible phenomenon. However, the exact extent and nature of this phenomenon is little understood. Everyone remotely connected (or unconnected) to the Digital phenomenon has an independent view on the size of this inflection point. Add to this, the absence of single source of public data for the entire digital footprint of Indian customers makes approximations necessary.​

Market Opportunities For Insurance

Digitalization presents a growing opportunity to improve market share and profitability for the insurers. It also urges insurers to apply digital technologies in new ways and offer tangible value to customers. After having elucidated the extent of digitization in the country in the previous section, we now present the possible opportunities of digitalization for insurers & customers and digital trends in Insurance industry worldwide.​

Operating Model Imperatives For Insurance Companies

Having understood the changing behavior of the new age digital consumer and the increased importance that the companies are giving to the digital transformation of the business, we now dwell on some of the imperatives that must be incorporated in the operating model of insurance companies to successfully tread on the digital transformation path. While technology will remain at the core of this new operating model, it is critical to build systems that are resilient and capable of working on data from varied sources at high velocity to provide highly scalable solutions.​

CONCLUSION

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​.