Insurance is an industry that is ripe for a technological overhaul. Now that the government has allowed 49 percent foreign direct investment (FDI) in this sector, insurers can go ahead and expand and innovate. To a certain extent this has already begun with the use of chatbots, artificial intelligence and robotic process automation. Insurers who have been in business for 10 years can now raise funds via initial public offerings (IPO).

This will help make it much easier to break the usual barriers of low product awareness level, knowledge access, limited customer touchpoints, availability of service and payments. A PricewaterhouseCoopers (PwC) report states that ‘by maintaining transparency in product features, cost and services, and digital channels are levelling the playing field.”

As per the survey findings, customers can be classified into three different types based on their buying behaviour, attitude and expectations. As customers evolve and all the world’s goods and services are now being made available online, old marketing and communication strategies are not going to help with customer acquisition and retention. Interaction points will be needed instead of just one-way communication channels. Below are three customer types:

Traditional customers are people who like the conventional approach, prefer a human touch to the inanimate one, and are apprehensive of digital modes of buying insurance. For them, trust is more important than cost and they appreciate highly responsive insurers who prioritise their interest.

Rational customers are those who make decisions based on what brings value for their money. So they are price conscious, prefer human interaction but are willing to move to digital transaction methods.

Lastly, digital natives are those who recently have got jobs and they are the ones who are most comfortable with technology and demand flexibility. They are most open to innovation in the way insurance is provided to them but without T&Cs being too tedious to read and complex to understand. They want a simple benefits structure explained in a lucid manner. Not dense text in tiny font.

Right now web aggregators like Policy Bazaar make it easy for people to look at multiple options from various insurers. After a regulation was passed in 2013, the number of registered web aggregators increased from 11 in 2013 to 21 in March 2017. On these sites, while comparisons between products are made on pricing, it’s recommended that they do so on the basis of benefits, behaviour of the customers, and suitability of the products. In one word: Personalised products.

But going digital is not a question of when but how soon can insurers be ready to deal with the generation that is their future customer, who will show up in the next 10-20 years. As it is customers are expecting this, and boundaries between industries are blurring. Hence an extended ecosystem of inter-connected products that cover all aspects of a person’s life is what is going to come along. Insurers will also provide other services apart from their core products, like financial planning and health monitoring.

All of this will help the insurance industry scale up in India because at the moment, insurance penetration, (measured as the ratio of insurance premium paid and GDP of the country), has increased from 2.71 percent in 2001 to 3.69 percent in 2017 in India. We are behind the rest of the world (6.13 percent) and even among emerging Asian economies (5.62 percent).

Currently, according to PwC’s survey, 55 percent of people are still old school and prefer face-to-face interaction when buying insurance and only about 4 percent would buy online. However, for feedback, 47 percent prefer digital sources for their information, 27 percent from word-of-mouth, 22 percent from agents and 20 percent from aggregators. For communication channels, 49 percent prefer digital methods, 32 percent prefer agents and 18 percent prefer emails. Smartphone apps don’t rate highly because they are too nascent and adoption hasn’t spread because they are not simple to use and also due to lack of awareness.

Social media is useful as 44 percent of customers choose insurance after seeking the opinions of others. To make informed decisions, 67 percent of customers prefer to leverage aggregators/online platforms.

To overcome digital phobia, a big step in that direction would be to make policies easy to understand, paperwork simple to deal with and transparency, so that irrelevant products are not pushed on to people. Simplifying the process by making product documents and videos available in local languages will help.

Insurers still have a long way to go, to use technology that people can feel comfortable with.

As of now, the chatbots I’ve chatted with will only send about three programmed responses to a query, which don’t always address my concerns, and I still feel the need to have a human being to deal with my problem, rather than a robot which doesn’t understand nuances. Other barriers are burden of the legacy system, interoperability, earning return on investment, consumer adoption, data privacy and security concerns, and disruption of the existing business model.

As for data sources, insurers will be spoilt for choice, as IoT, wearables, geographic information systems, location and object sensors will provide a mine of information. That’s a lot of data to clean, understand, analyse, strategise and make compliant. Right now, artificial intelligence is being ‘used to automate repetitive tasks to reproduce known answers”, according to the PwC report ‘Competing in a New Age of Insurance: How India is Adopting Emerging Technologies’.

As Joydeep K Roy, Partner and Leader, Insurance and Allied Businesses at PwC stated, “Finally, merely adopting technology and automating processes will not eliminate inefficiencies. New technology gives rise to new capabilities and processes should be redesigned accordingly to reduce wastage and delight customers. A change in approach is needed whereby technology is viewed as a fundamental business tool rather than an operational and process tool.”

Manali Rohinesh is a freelance writer who explores financial and non-financial subjects that pique her interest.

First Published:Jul 3, 2019 6:00 AM IST