The fintech disruption in insurance
Insurance in India, as it is the world over, has remained a traditional industry with little innovation. While product innovation is largely governed by regulation, there are other aspects of the business that will dramatically change, or even be disrupted, by technology and ‘new marketing’. The two major areas of customer experience (and profitability for the companies) in insurance are underwriting of risks and the sales process. Both areas are inefficient and will improve with progress the fronts of technology and new marketing. Let us examine these.
Before purchasing a policy
Intelligent and customised fact-finding : In the bygone era, when customers searched for insurance, they mostly relied on the agent. Today 60% of buyers search on the internet before buying any product. In this fact-finding process, the new marketing will play a role. It is already playing a role to inform and educate the customers. Several initiatives have been launched by the Insurance Regulatory and Development Authority of India (Irdai), and various insurance companies, for customer education but they primarily aim at hygiene matters such as: ‘Don’t fall prey to wrong selling.’ New marketing, on the other hand, will inform and educate the customers about buying the right product, the right amount of insurance and also navigate them through the process. Currently, several websites (including those of insurance companies) claim to do all of these but the quality of their content is poor to average and it also contains too much jargon for the common people to be comfortable with.
Insurance aggregators and comparison websites have been well-established for over 5 years now. There are also websites that provide calculators and guides to aid the decision-making. These will become more refined and sophisticated.
I also expect more such resources coming out in 2017 and beyond, which would offer customized suggestions (such as robot advisories) and simple few-clicks-processing of policy applications. The one who will simplify and clear the jargon jungle around product features, will win people’s attention and business. This new marketing can take-off the way digital payments took-off: exponentially.
Credible sources of information and advice are rare. Most of the sites are there to sell, sell and sell. But customers are not stupid and hence are not making purchases quickly. They verify, double check or worse, postpone their decision. However, customers can become loyal fans if given proper facts and guidance to helping them before purchasing the policy. Companies with clear direct to customer (D2C) strategies will succeed. An effective D2C strategy will employ technologies and tools to deliver the right product to the right customer segment at the right time. The days of hard-selling, pushy salesmen are over.
Better pricing and risk coverage: The insurance business is acquired through brokers, dealers, and agents or groups of agents. This means that insurers do not build the detailed data on their end-consumers, to whom they provide covers for risks to motor, life, health or property. This leads to a one-size for all approach. This is set to change with the advent of analytics in business. We already see this in the retail lending industry.
The growth and robustness of data from credit bureaus gives confidence to credit underwriters (banks and lenders) and also provides bargaining power to customers with good credit score. The same should become a reality in the future, even if the beginnings are crude, for insurance underwriting. Initiatives have been taken in this regard but given the size and heterogeneity of India’s geography and customer base, this will take time.
With growing penetration of insurance, there is an opportunity for insurers to collaborate and develop models to jointly to tackle the masses and the lower-income segments. Customers have to learn that they will pay an extra premium for risky behaviour such as poor health and bad driving habits. Conversely, good customers can expect better pricing, and will get it too.
Better Service Platform
Companies will try to be closer to the customer: The industry needs to move from managing complaints and grievances, to providing excellent service. This can be done through: ongoing survey techniques, use of technology for easy customer access, and by proactively providing information on the policy to the customer. But challenges exist. Online renewals are still less than 20% of total policies. If a customer was sold the right product in the first place, then the only reason she will lapse a policy is if she is unsatisfied with the service. Unfortunately, the latter happens too often—in the general insurance space during the claims process, and in life insurance because of poor (or even lack of) response from the agent.
Companies need to listen to the customers on a regular basis. In line with this, a rapid adoption of social media as a service platform is taking shape globally. I see an increasing number of insurers trying to upgrade their service infrastructure and make their procedures more convenient.
Rajiv Jamkhedkar is founder and managing director of Serengeti Ventures Pvt. Ltd.