How has the insurance space evolved over the past five years? Do you think it has embraced digitisation successfully?
The insurance industry is seeing disruption across the value chain. With rapid growth in digital as a channel, insurance companies are creating “online-only" products, micro insurance etc. Post-sales support and claims management is seeing some cutting-edge product development. With sluggish growth in other distribution channels, digital is emerging to be the next growth engine. Companies have started spending heavily on making themselves ready for the future.
With change in macroeconomic parameters like smartphone penetration, cheaper internet and better regulations, digital distribution is growing very fast. Users want to be “offered" and not “sold" plans. Digitisation is no longer a choice, but a necessity.
Do people have reservations about buying insurance online? If yes, why?
India is an under-penetrated insurance market. The reasons for this are complicated products, distribution issues and lack of innovation.
Insurance products, by design, are fairly complicated and difficult to understand. A very patient and intelligent user is the only category that can buy insurance without assistance. Insurance companies also rely on traditional distribution models like bancassurance and feet on the street which have inconsistent user experience and are prone to mis-selling. Further, most products across companies have little differentiation.
Digital distribution is the only way to distribute insurance to the millennials. Online insurance is growing 20 times faster than other channels. For instance, 100% of sales of two-wheeler insurance on Coverfox is online and unassisted.
What’s more easy to sell online, life or non-life products ?
Product categories that have a simple product construct, and an equally simple application and issuance process like car, bike, travel insurance naturally do well online. Complex products that have long-term financial implications like term life, health or investment products require intensive assistance either over phone or face to face before the sale can be closed. However, the online offerings of these categories are constantly evolving. Insurers and aggregators like us are constantly co-working towards simplifying product decisions and policy issuance.
Customers buy online term plans thinking everything is online but underwriting is usually offline where people have to undergo medical tests. How do you simplify that?
Of course, the key is setting expectations right. We and most other portals ensure customers are aware about the entire process and fulfilment cycle before they make payments. There is a lot of innovation happening here too. We are working with insurers to find alternative ways to assessing income and medical risk of customers. Insurers have started taking profile data into account to waive various documents or processes like medical tests. For instance, insurers are waiving off collection of financial documents as well as medical checks for customers who have a great credit score.
How many customers actually drop out when they realise there is also an offline process?
Less than 1%. Insurance customers come to us for many reasons beyond only the convenience of an online process. Customers are able to compare various options in an objective manner, are able to speak to experts and understand the product well over recorded calls, track their applications till the policy is issued online. Hence, wherever expectations are set right, customers do not drop out.
Plain vanilla plans are always easy to sell online, but what about savings plans? Do you think they will always need a human interface?
You are right. Plain vanilla plans that are short term and which are mandatory are easily bought by the customer. Products like savings plan, term insurance do require more telephonic interactions before the customer makes a decision, which is understandable as these are long-term financial contracts. Savings plans have the capability to be simple both in terms of product construct as well as buying process. Any product which can be explained in simple Give X, Get Y shouldn’t be a problem selling online. Few digital players (insurers/aggregators) are working hard innovating in all areas to ensure customers require minimal assistance. However, we are still far away from saying that digital has cracked it.
What is the level of customisation motor insurance needs? What issues should the working group on motor insurance own damage component be debating?
The committee needs to look at three aspects:
i) Addressing current market and consumer needs: Insurance has historically been a push product in India. When you force a multi-year policy to a consumer at the point of vehicle purchase, they are not going to be happy about it. But overall the decision is good for the masses, whether they realise the importance of insurance or not. Decoupling personal accident cover from motor insurance is going to give some relief to consumers when it comes to pricing.
Overall, recent trends are in the right direction. The process around claims is getting simpler. It’s only a matter of time that more and more people will buy motor insurance for the safety it provides, and not out of compulsion.
ii) Customisation but with benevolent oversight: A customer should have the option to pick the IDV (insured declared value) or add-ons they want. But right now, because there are no regulations on standard slabs for IDV or caps on add-on prices, there is a huge price disparity among products which are identical in features. This creates a lot of confusion and mistrust in the minds of consumers.
Customisation options should be available with some rules to simplify products.
iii) Making room for technology and data-led products: The industry has so far worked on a one-product-serves-all philosophy, with all motor insurance products providing similar benefits and features. Consumers today look for products that are tailored to meet their needs and that facilitate ease of purchase. Premium and features for a person who drives 50km daily in a metro, vs a person who drives 2km daily in a tier-II town, should not be the same.
Pay as you go, usage-based pricing, telematics driven pricing, on demand add-ons are some of the ideas that have now been discussed for a while and need to be implemented soon. Some of the ideas will involve help from other industries like auto manufacturers, cab services, servicing garages, etc. Regulations need to ease on tie-ups with such firms.