India is emerging as one of the fastest growing insurance markets in the world. Insurance penetration in India has risen steadily from 2.7% in 2000 to 4.2% in 2020, as per the Economic Survey 2022-23 released on January 31, 2023.
Insurance has largely been driven by traditional channels like agencies or third party distribution. LIC, the largest Indian player, has more than 1.3 million agents on the ground that distribute insurance products. However, the digital channel is now seeing higher acceptance both from insurance companies as well as customers. With the government’s focus on Digital India, there is a massive push towards creating digital infrastructure and of enhancing digital empowerment of citizens.
Since the recent pandemic, things have changed across sectors and the insurance industry has seen not only an increase in the demand for insurance products, but also a change in the way their system architecture operates. There is a higher integration of technology and use of digital platform by means of offering a larger product portfolio, selling policies online to settling of claims as well. This has not only helped the insurer to increase efficiency and cut down on process redundancies but also aim at lowering cost of offering services. According to McKinsey’s study on digital disruption in insurance, automation can reduce the cost of a claims journey by as much as 30%.
With the middle class Indian population increasingly adapted to use of mobile and internet for ecommerce, it is also becoming discerning in terms of researching and buying insurance products online. Another potential area of growth and development is the India beyond metros which has largely been serviced till date by agents selling standardised policies. The population in these segments offers a new challenge as well as opportunities for players in the insurance industry.
Digitalisation of insurance services offers increased access and availability of products, allows for scaling up of solutions while creating new data models for specific population sets. Data models can help products to be structured for the specific needs of populations in different geographies. Access to a larger population through technology and digital platform will also help increase the customer lifetime value cost.
Insurance in these segments has often been considered not very important by customers. The penetration is low with customers questioning the need for buying a policy as also the resultant return on that investment. However, integration of behavioural insights in not only designing the products as also developing the architecture for mass access of product and claim journey can go a long way in resolving the challenge.
In the space of Insurance, we see digital playing different roles depending on the nature of the client:
- In case of financially evolved customers who can identify their own needs, assess product, and select the best possible products, digital can serve the end-to-end transaction platform where clients can select the most efficient product.
- Second category of customers who need guidance to select the product but has capacity to pay, digital plays a role of facilitation platform for the advisors who are on the ground and works as a subject matter expert. In this space, digital again reduces the friction in the product offering and allows the advisors to provide a seamless journey.
- Third category of the customers is the one that has limited capacity to pay but has very specific requirements of low-cost products focussed on their need. In this space, it becomes critical to design product as per their need and provide end to end journey of sales and post sales servicing. This is what is going to drive significant penetration of Insurance in this segment and digital has the key role to play to drive next level of growth here. Right from capability to provide curated products to end to end claims journey, a digital platform can facilitate a seamless delivery of diverse services and hence drive a long-term change in the behaviour.
(The author is Vinod Singh, Chief Executive Officer & Co-Founder, Finhaat, and the views expressed in this article are his own)
