The COVID-19 pandemic and subsequent global lockdowns triggered plenty of structural changes that forced insurance companies to enter the arena with their eyes on the prize. The pandemic year thus proved to be a catalyst, in turn, nudging insurers to shift their focus and prioritize customer experience, market agility, and business resilience.
According to BCG, “Globally, insurtechs raised $7.5 billion last year, as COVID-19 accelerated the need for digital transformation in insurance.”
Investor funding in insurtech came to $5 billion in the first quarter of 2021 with 261 deals, according to Forrester’s “Insurtech funding roundup, Q1 2021” report.
How has the pandemic impacted Insurtechs in India
India is the second-largest insurtech (insurance technology) market in the Asia-Pacific region, accounting for 35% of the $3.66 billion of venture capital coming into the sector, according to S&P Global Market Intelligence data.
“Insurance technology investors are attracted to India since it is one of the fastest-growing insurance markets in the world,” said the report.
Insurance premiums in India have been reported to have totaled $107 billion in India until March 31, 2020, growing at a compounded annual growth rate (CAGR) of 10% from FY15 to FY20.
“While big techs are vying to become digital intermediaries in the insurance space, established carriers are building proprietary digital channels. Startups that assist both incumbents and big techs in making this transition will likely emerge as winners,” the S&P report continued.
“Partnerships between large insurers and insurtechs have the potential to enable more personalized online distribution, predictive underwriting, and more efficient claims management,” said Alpesh Shah, managing director and senior partner, Boston Consulting Group while speaking with the business daily, Mint.
The fast-growing industry is introducing solutions for AI-based underwriting, virtual claim filing, among others. The next big revolution could come in the form of blockchain contracts, where customers might not need to file a claim. Bajaj Allianz General Insurance has already introduced a travel insurance product that uses blockchain to settle claims on flight delays automatically.
In another scenario, Acko General Insurance tied up with over 20 digital platforms across retail, travel, finance, and others to distribute bite-sized insurance. Ola’s trip insurance by Acko has insured more than 23 million rides in less than 10 months and is being hailed as one of the most innovative insurance products in the industry.
Another Insurtech startup, Toffee Insurance, offers insurance against theft or damage to bicycles and accidental injuries related to a fitness activity or sport.
Image Courtesy: fintechnews.sg
Speaking about the Insurtech evolution and their funding in India, BCG’s India Insurtech Landscape and Trends reports that, “Global funding in Insurtechs have grown from about $2 billion in 2016 to $6 billion in 2020. While Americas account for the largest share of funding (68 percent of funding in 2020), Asia has been the fastest-growing geography till 2019 (5-year CAGR of 60 percent). In India too, albeit with a smaller base, funding has seen an increase from a modest base of $11 million in 2016 to $287 million in 2020. The funding trend has continued with Turtlemint raising $30 million in November 2020 and Digit raising around $84 million at the start of 2021.”
“APAC-based insurtechs attracted $1.4 billion—up 15% year-over-year from the previous year—driven by companies headquartered in China ($800 million) and India ($450 million). Representative examples are Medbanks, a medical database-services company offering oncology-related services, which brought in $305 million in Series E+ funding, and Policybazaar, a price-comparison portal that raised $130 million in Series E+ funding,” the report continued.
Insurers vs. Insurtechs in the current ecosystem
Image Source: everis.com
Claims in the digital age
Even before the COVID-19 pandemic struck, customers had already begun leading digital-centric lives that required insurers to rethink their MO and strategies. “With the demands and constraints of the pandemic, a technology-enabled service delivery with a digital claims process is non-negotiable and mission-critical. In the past, these needs may have gone unmet due to lack of technology solutions or an insurer’s inability to capitalize on technology, but the situation today is very different,” reports Deloitte.
The COVID-19 pandemic affected Insurtech firms on various levels, impacting demand, claims, and loss patterns in a number of ways across product lines and operating models.
Thus, arose a need to overhaul and reset the core value system and give way to a new growth engine led by customer retention and loyalty, both driven by customer interactions with insurers, specifically during the claims experience.
“Claims operations, which have been traditionally treated as outputs of a “reactive back office,” will have to become a powerful differentiator—innovative and uncompromising on customer service, with multifaceted talent and capable of driving strong results,” continues the Deloitte report.
Digit, an India-based multi-line insurer, launched a new product that covers pre-and post-hospitalization expenses, road ambulance charges, and a second medical opinion regarding eight viral diseases, including COVID-19 and dengue.
For Care Health Insurance, erstwhile Religare, Mantra Labs, the Bengaluru-based Insurtech firm deployed Hitee, a conversational chatbot to be the first-level customer support for existing and new customers. This led to higher New Business Conversions by a factor of 10X, and a significant drop in Customer Queries over Voice Support by 20%.
The pandemic and its subsequent wave accelerated the shift towards going digital in the insurance industry. In 2021, there is an apparent inclination towards personalization, data mining, automation, and cloud computing in the Insurtech space.
Read the 7 key trends we’ve expected this year in Insurance here.
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