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Bridging Insurance Gaps in India: The Digitalization Revolution
Bridging Insurance Gaps in India: The Digitalization Revolution

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The insurance sector in India is undergoing a continuous transformation. The country's population is surging, yetinsurance remains underpenetrated. A keychallenge with traditional insurance is the high fixed operational costs associated with the distribution channels. These costs, for long, have limited the industry's reach, as only a fraction of the insurance sector, in the traditional way, can extend its services to Tier 3 cities and beyond.Hence, the traditional approaches must evolve to bridge the insurance gap in India effectively.

How does Digitalization help?

The country boasts over 600 million smartphone users, and the COVID-19 pandemic has accelerated this digital shift. The insurance industry is swiftly pivoting towards digitalization to keep pace with this transformation.Insurtech companies, often the spearheads of this digital transformation, are simplifying insurance and its distribution model.

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They are working towards making insurance products accessible at the customer's doorstep, resolving the last-mile connectivity problem. These companies are also simplifying product comparison by offering multiple options at customers' fingertips. Advanced technologies such as APIs, machine learning, and big data analytics are enabling a smooth, hassle-free insurance experience. Through these technologies, instant policy issuance tailored to individual needs is becoming a reality. Some of the ways, in which the insurance industry is addressing the challenges to increase the insurance penetration, are:

  • AI-Powered Personalization: The use of AI is allowing the industry to engage more effectively with customers. AI detects shifting patterns in customers' behaviour, allows for tailoring insurance offerings, which, as a result, enhances the relevance of insurance plans for the customers.
  • Data-Driven Decision Making: Data science is unlocking the potential to offer better premium prices, innovative personalized products, and services by tapping into diverse data sources. With the availability of huge volumes of data, and capabilities to analyze and draw insights from that data, insurance companies are enhancing their risk analysis and management, which is transforming their underwriting capabilities.
  • Streamlined Claims Processing with Machine Learning: Machine Learning is fast-tracking the claims process and making it more efficient for customers. The technology allows for the identification of the best next steps in the customer journey to reduce manual touchpoints, improving decision-making on leakage, delinquency, accuracy, and fraud.

However, as the insurance industry rushes into the digital age, a major concern emerges – security. In a digital world, the integrity and privacy of customer data becomes paramount. Best practices in cybersecurity must extend over the cloud, securing personal data with encryption.The industry is investing in technologies like Blockchain, that can aid in ensuring that sensitive customer data remains private and is used exclusively for the purpose for which it is intended.

Some other challenges that the insurance industry in India is currently grappling withare:

  • Availability of Suitable Products: People need insurance products that can effectively cover their specific financial risks while remaining affordable.
  • Ease of Access: Access to insurance products and a trusted partner to guide customers through the process, from product explanation to usage and claim settlement, are crucial.
  • Viable Distribution Models: In the past, reaching some underserved customer segments required physical presence. However, with the growing availability of smartphones, internet access, and other digital platforms, the points of contact have expanded. This has also led to reduced customer acquisition costs. Digital issuance, facilitated by initiatives like the Ayushman Bharat Digital Mission (ABDM), is a game changer for the insurance providers in India.
  • Suitable Products for a Unique Market: With an increasingly digital-savvy population, companies can harness data analytics and AI for risk assessment and product pricing. These technologies can also be leveraged to develop new products tailored to customers’ diverse needs.
  • Reduced Costs of Service: Technology has simplified client onboarding and claims processing. This is critical for increasing insurance product penetration in low-income segments. Insurtech companies are using AI and machine learning to automate claims processing, significantly reducing processing times. According to PwC, the use of AI and ML in claims processing can reduce processing time by up to 90%.

While challenges persist, the future looks promising as technological advancements continue to reshape and expand the horizons of the Indian insurance landscape. The era of insurance for all, facilitated by digitalization, is on the horizon, which willmark a new chapter of financial inclusion and protection for all Indians.


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Dhiraj Sharma
Principal Analyst

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