This piece, by Dhirendra Mahyavanshi, originally ran on Entrepreneur.com.
Insurance, as a sector and a hedge against unexpected eventualities, has gained increased prominence in 2020. This can primarily be attributed to the global pandemic which plagued individuals, businesses and communities, and led to a marked decline in market growth and realignment of consumer needs and behaviour. With the world relegated to working from home and global lockdowns necessitating digital services, insurtech—the optimal combination of insurance and technology—has evolved as a sector unlocking tremendous value and potential in the insurance ecosystem.
India has the largest smartphone user base in the world according to a PwC and ASSOCHAM report ‘Video on Demand: Entertainment Reimagined’, which predicts that the country will have 820 million smartphone users by 2022, pushing the demand for digital services. The increasing use of smartphones coupled with the availability of cheap data is drawing consumers to the digital realm. Consequently, the next surge of growth for several industry is going to be enabled by technology and digital solutions. The country’s insurance sector, aided by insurtech, is expected to reach a market size of $280 billion by the end of the year, according to MEDICI’s new ‘India InsurTech Report 2020’. The ‘World InsurTech Report 2020 (WITR)’ recently published by Capgemini and Efma states that 67 per cent of the surveyed insurance companies are keen on collaborating with insurtech enterprises to boost penetration and efficiency. Indeed, the future looks promising for the insurtech sector and 2021 is likely to see a proliferation of emerging technologies which will help deliver on this prospect.
Traditionally a contact-driven industry, insurance has largely been dependent on physical channels comprising of advisors, resellers, offices and call centres. However, with the pandemic, insurance has also climbed on to the digital bandwagon, with insurance advisors actively leveraging digital tools to interact and transact with their clients. Additionally, the self-service digital channel is expanding with booming customer demand for online policies. With offline processes seamlessly transitioning into the digital ecosystem, with the help of innovative technology, digital insurance is set to flourish in 2021.
SMART DEVICES, IoT, AND DIGITAL IMAGING
With the increasing number of smartphone users, technology is at the forefront of the service industry. A trend which is likely to accelerate in 2021 is that of Internet-of-Things, or IoT, which minimizes the gaps between connected smart devices. Gadgets such as wearables which monitor health aspects are expected to boost personalization of insurance coverage for individuals while also reducing health risks. A pillar of Industry 4.0, IoT is poised to transform the insurtech ecosystem in 2021.
With everything from work, education and entertainment moving to the hybrid realm, organizations are increasingly adopting hybrid cloud technology to leverage the advantages of both cloud and public clouds. Offering enhanced speed and flexibility to insurtech enterprises, hybrid clouds are seen enabling service providers to deliver personalized customer solutions and strengthen customer relationships in 2021.
ARTIFICIAL INTELLIGENCE (AI) and MACHINE LEARNING (ML)
Data is the foundation of the digital era and AI and ML can enable insurtech companies to swiftly sort through massive quantities of data and access actionable insights. These can be further leveraged to boost customer service and efficiency while promoting automation. Insurtech providers can enhance claims turnaround cycles and transform the process of underwriting with AI. These revolutionary technologies can support fraud prevention, anti-money laundering and pricing processes for improved and more efficient experiences.
With digital technologies boosting personalization, a new sphere of insurance is gaining ground, namely micro-insurance or insurance catering to micro-targets or specific individual requirements. Every company aims to address individuals, establishing a one-to-one, interactive and dynamic equation boosting loyalty and lowering the churn rate. Digital transformation and big data enable this vision of personalisation by permitting insurtech companies to access insights that can help them create tailor-made solutions for individual needs.
The pandemic has taught every industry that adaptability, flexibility and agility are the prerequisites for futuristic models and insurance is no different. A recent Deloitte survey on how insurance companies responded to the COVID-19 pandemic depicted that most companies transitioned fairly well to a virtual process and this transition is seen accelerating further in the new year. Undoubtedly, companies that refuse to transform with the times fail to progress and remain at the starting lines. Insurtech, being an innovative, digital, and customer-driven industry, is expected to engender tremendous transformation in the insurance industry ecosystem in 2021, driven by the trends described here.