How pandemic has accelerated the need for insurers to provide SMBs more seamless digital products and services

The first quarter of this financial year has been dominated by the second wave of COVID-19. It has taken lives, pushed the economy on to a knife's edge, and completely eroded any complacency that might have crept in after a comparatively sedate first wave.

All major insurers have started reporting massive losses in Q1, as a result of a spike in claims. At the same time, those without insurance have been scrambling to get insured. The insurance industry in India has reached an inflection point- and the ones best able to cater to the huge spike in demand will win the market.

An often-overlooked aspect of this change is the rise in demand for Group Health Insurance from SMBs, including early-stage startups. Any form of Group health Insurance is likely to offer better terms than retail insurance- even a company with five employees has greater bargaining power than an individual.

Since the pandemic began, many startups have increased the sum-insured amount for their company's policy. They are worried about losing candidates to larger companies offering better coverages and this conversation often comes up in the job interview.

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This spike in demand for health insurance has coincided with teams being spread out all across the country, working from home. This has accelerated the process for insurers to offer end-to-end digital services for five reasons:

Physical paperwork is not practical

Employees can't be in the same room as the HR for paperwork. Everything from addition of new employees to the policy to issuing insurance ID cards and filing of claims needs to happen online.

SMBs lack large teams

SMBs don't have large admin teams that can manage large bureaucratic overheads. As such, they are increasingly turning to tech-first insurance brokers who offer services such as a G-Suite or Microsoft Teams integration, or an HRMS integration- thereby significantly reducing the overheads on the HRs.

Shorter purchase cycles

Traditionally, the insurance buying process involves multiple rounds of back-and-forth conversations, for even small changes in the policy terms. Want to explore how much more it would cost to add parents to the policy? Do you also want to check the prices for top-ups that your employees can add? Earlier, it would take a week or more to get a clear answer - and that works for large companies with sales cycles that are two months long.

For startups, it's often the founder that's directly negotiating with the insurer- and can't possibly spend that much time following up for basic answers. To solve for this, insurers and brokers have come up with online calculators where you can check these questions on your own, reducing purchase cycles to as low as one day.

Demand for better customer experience

We are now used to tracking our food or ecommerce delivery orders, even if the order value is low. Insurance claims are usually for a much bigger amount than your dinner order, and yet people have historically had no way to track progress in real time.

This is rapidly changing - even insurers have an incentive to set up scalable online dashboards to manage the level of claims they've seen during the pandemic.

First mover's advantage

Today's seed-stage startup can be tomorrow's unicorn. Getting these companies on-board early, and getting them to renew year on year is an attractive strategy, especially for new players in the market. Any insurer or broker that doesn't adapt fast enough to these new trends, will end up losing market share in the medium term.

Overall, the insurance industry is likely to see rapid growth due to the hard lessons learnt during the pandemic. The old ways of doing business are already being disrupted by a tech-first approach. Long may that continue.