By T Radhakrishna
In a significant development, automation of faster claims processing, adoption of artificial intelligence, internet of things, cloud computing, blockchain and digital platform solutions, including DigiLocker has helped India’s insurance sector to grow faster, reshaping the future of insurance. Insurance technology is poised to mature even more in 2021.
The insurance sector, powered by digitization, registered a growth of 17 per cent in April-May this year compared to nine per cent in the 2020-21 FY. The Finance Ministry and its regulatory body Insurance Regulatory and Development Authority of India (IRDAI) are confident about the growth prospects of the industry further by 40-50 per cent in the next five years if all goes well.
“The insurance industry with combined life and non-life can easily grow at 40-50 per cent in the next five years if things are settled down and otherwise it should grow at 25-30 per cent,” said TL Alamelu, member (Non-Life), IRDAI.
After the ferocious second wave of COVID-19 pandemic that swept India in April-May, insurance companies have settled about 80 per cent i.e., over 15.39 lakh health claims exceeding an amount of Rs 15,000 crore as of June 22 this year. Over 19.11 lakh covid health claims have been reported as of June 22 as far as medical insurance or hospitalisation is concerned. While in terms of death claims, which is handled by the life insurers, about 55,276 claims have been intimated and nearly 88 per cent i.e., as many as 48,484 claims amounting to Rs 3,593 crore have already been settled, according to the regular body.
The market size
India’s insurance sector consists of 57 insurance companies. Out of which, 24 companies are the life insurance providers and the remaining 33 are non-life insurers. Of the total, seven are public sector companies, LIC of India, GIC of India, New India Assurance, United India Insurance, Oriental Insurance, National Insurance and Agriculture Insurance Company of India.
The overall market size of the insurance sector in the country is expected to be Rs 21,00,000 crore (US$280 billion) in 2020-2021. Though the industry is expected to increase at a CAGR of 5.3% between 2019 and 2023, the current COVID-19 pandemic has accelerated the market, growing nine per cent last fiscal. In March 2021, health insurance companies in the non-life insurance sector increased by 41%, driven by rising demand for health insurance products amid the COVID-19 surge.
Alamelu gave credit for the growth of the insurance sector to digital transformation and employees of insurance companies. Complementing the insurance industry for ramping up its digital platform to cater to the increased online demand, she said, “Going forward, most of it will shift from offline to online, employees of the insurance companies have worked as much and more from their homes to ensure uninterrupted services to the policyholders.”
According to Finance ministry joint secretary Saurabh Mishra, digitization is one key factor that has contributed to the resilience of non-life as well as to a great extent in life businesses in every sphere of activity from distribution and sales to post-sales thereby providing to be a game-changer that helped largely avoided a standstill in the new business due to mobility restrictions implemented to contain the pandemic.
“In the new normal of technology, it is not just an important element for us to drive it out but is going to play a pivotal role in transforming the insurance businesses to make them more digital and customer-centric cutting across every sphere of customer experience – claims efficiency, fraud proofing etc.,” said Mishra.
Insurance technology trends
Insurance organizations have strengthened their digital platforms, replacing legacy systems and introducing virtual assistants. LIC introduced LIC Mitra- a virtual assistant. New India Assurance launched BIMA Bot. United India Insurance came out with UNI Help. National Insurance brought out NYRA.
Chatbots are digitally generated answers to FAQs, making it easier for policyholders to get information faster than before. The internet has to a large extent reduced or bridged the gap when it comes to turn-around time for several transactions. And, AI chatbots are a good example of cutting down the time frame. Insurers are taking advantage of chatbots to increase their resources with the help of digital technology. It also offers the scope to get customers to navigate various insurance products and services.
The insurance technology trends in 2021 will include predictive analytics and overlapping of various technologies, all in the name of improving accuracy. ML is one and a branch of AI. It can not only improve claims processing – it can automate it. When files are digital and accessible via the cloud, they can be analyzed using pre-programmed algorithms, improving processing speed and accuracy. This automated review can impact more than just claims. It can also be used for policy administration and risk assessment.
Telematics is another. Auto policies will continue to be impacted by telematics capabilities. In insurance technology, think of telematics as wearable technology for the automotive segment. Cars can now be equipped with monitoring devices that measure various indicators such as data on speed, location, accidents, and more, which is all monitored and processed with analytics software to help determine your policy premium.
Drones will join farmers’ insurance soon. Insurers are taking to the sky, or at least their drones are. Unmanned drones are an insurance technology tool that will be utilized more by carriers in 2021. They can be used across many stages of the insurance lifecycle – collecting data to calculate risk before issuing a policy, aiding in preventative maintenance, and assessing damage following a loss. These drones perform roof inspections and other assessments, and the drones transmit their data to the cloud for analysis. This is yet another instance of IoT and other technologies working together in the insurance industry.
The scope of IoT in the insurance market continues to go beyond telematics and customer risk assessment. Currently, there are more than 100 InsurTech start-ups operating in India.
In the 2021-22 budget, the Central government increased the FDI limit in the insurance sector from 49 per cent to 74 per cent. The government also announced to infuse Rs 3,000 crore (US$413.13 million) into state-owned general insurance companies to improve the overall financial health of companies. In addition, a fund of Rs 16,000 crore (US$2.20 billion) has also been allocated to crop insurance schemes.
The government has also come up with efforts to provide insurance for individuals below the poverty line (BPL) through various campaigns like Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), and Rashtriya Swasthya Bima Yojana (RSBY)
The IRDAI has announced the issuance, through Digilocker, of digital insurance policies by insurance firms. The Central government announced to infuse Rs 3,000 crore (US$413.13 million) into state-owned general insurance companies to improve the overall financial health of companies.
The public and private sectors have been actively working towards crop insurance. For instance, in October 2020, Andhra Pradesh rolled out a free of cost crop insurance scheme for the state farmers while Reliance General Insurance and SatSure partnered to launch the satellite-based crop monitoring and predictive analytics support for better risk management and to improve the efficiency of its crop insurance business operations.
The road ahead
The future looks promising for the life insurance industry with several changes in the regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers.
Alamelu added, “The industry has tremendous responsibility especially for a nation like India to offer protection and just not assume that people will not take insurance. There has to be aggressive probably, more sort of forcefully selling insurance because it is no longer an option.”
She noted that both the insurance industry and the regulator have worked together to design new policies to cater to the demands of new and unprecedented situations. “We have also eased some processes and procedures to make it easier for servicing the policyholders.”
LIC managing director Vipin Anand said that one of the critical needs for expansion of the insurance industry is that it is essentially a capital-intensive industry and for solvency-margin requirements, it is necessary that capital should come in.
News source- Economic Times