'Buyers expect insurance products designed for them'
In part 2 of the InsureTech coverage, EnterpriseStory examines how the insurance industry is opening itself up in product development.
Buyers now expect insurance companies to create products and services for them, said Pushan Mahapatra, President-Strategic Investments, SBI General Insurance, at the BFSI Leadership Summit 2021, hosted by YourStory and EnterpriseStory, on July 16.
Watch the video from the BFSI Leadership Summit 2021 here.
"This has paved the way for very specific event-based insurance, like for flight delays, and sachet-sized health insurance," Mahapatra told Priya Sheth, Senior Anchor of YourStory Media, during a panel discussion on insurance technology (insure-tech).
Insurance firms can harness alternate data sources to underwrite products and adjudicate claims, where required. With vehicle insurance, for instance, products can now be designed based on 'number of kilometres driven in a year'.
"It is shifting from the vehicle to the driver, and how a person drives," Mahapatra noted. "That could become the basis of calculating insurance premium."
That means a safer driver should get a better (lower) premium, and entails a lot of data getting aggregated, he added.
While new-generation vehicles have the ability to capture this data, it is up to the owner to share it with insurers. "In that context, data security and data privacy are going to become very important issues in the industry," Mahapatra asserted.
Goutam Datta, Chief Information Officer and Digital Officer of Bajaj Allianz Life, agreed, citing the need for privacy and security considerations in the context of artificial intelligence (AI) and machine learning (ML).
"When an insurance provider or platform uses APIs (application programming interface) from a third party for an AI or ML feature, it must keep in mind how legitimate or legal it is, and where it must stop," Datta noted.
It is imperative that business, technology and process are aligned on data privacy and security, he added. Both business and technology can have a customer-centric view, but the privacy considerations have to be decided at the design stage itself.
"The stringency of regulations around data privacy will only get bigger and bigger," Datta said. "So, build the security architecture at the design stage itself, in anticipation of future challenges, and be cognizant of different needs of customers."
Collaboration is the way forward
Datta also pointed out that a vibrant fintech and insure-tech ecosystem is important for the insurance industry, especially in product development.
“The moment we identify friction in a process, there is already a startup or insure-tech venture that is working on it," he said. It is up to insurance companies to integrate with them, and build holistic solutions.
For the insurance industry, the whole process of business acquisition and customer-service delivery will become frictionless in a year or two because of such collaborations, Datta said.
Sumit Rai, Managing Director of Edelweiss Tokio Life Insurance, said insure-tech startups are also helping their larger counterparts in discovering new and previously-unaddressed market segments.
“Insurance companies may not have serviced certain customer segments because of inefficiencies of the chain, through which insurance reached consumers," Rai said.
Making that process with insure-tech and fintech ventures will help find a viable means to address such customers, Rai added.
The Medici Global's 2020 report of the insure-tech industry in India identified ventures that provide software solutions to insurance companies and brokerage firms. "They provide solutions such as risk assessment, underwriting, fraud detection, regulation, policy administration, marketing sales, data aggregators or providers, chatbots, CRM tools, APIs, and white-labeled tools," the report says.
In that backdrop, Mahapatra said technology—both in-house, as well as partnerships with insure-tech and fintech firms—will gather steam, and change insurance products, and even how claims are adjudicated.
Technology applications range from using video to estimate auto-damage and calculate claims, to using drones for surveying large losses in the commercial segment, and remote sensing to gauge health of crops.
"Using remote-sensing capabilities and algorithms to determine which crop is growing, and how, helps estimate what the yield will be," Mahapatra said, adding that crop insurance has been transformed because of data analytics and IoT (internet of things).
The three panelists concluded the discussion by emphasising the need for data privacy and security, as technology becomes more pervasive in the insurance industry. "Keeping the customers’ data safe is our obligation," Datta said.
Watch videos of all sessions from the BFSI Leadership Summit 2021 here.