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AI can help bridge customer gaps for microinsurers

Microinsurance targets low-income households and individuals with little savings. Low premium, low caps, and low coverage limits are the characteristics of microinsurance plans. These are designed for risk-proofing the assets otherwise not served by traditional insurance schemes.

Because microinsurance comprises of low-premium models, it demands lower operational cost. This article covers insights on how AI can help bridge customer gaps for microinsurers.

Challenges in Distributing Microinsurance Policies

Globally, microinsurance penetration is just around 2-3% of the potential market size. Following are the challenges that companies providing microinsurance policies face-

  1. Being a forerunner in a competitive landscape.
  2. Making policies accessible through online channels.
  3. Developing user-friendly interfaces understandable to a layman.
  4. Improving the organization’s operational efficiencies by automating repetitive processes.
  5. Responsive support system for both agent and customer queries.
  6. Quick and easy reimbursements and claim settlements.

Fortunately, technology is capable of solving customer support, repetitive workflow, and scalability challenges to a great extent. The subsequent section measures the benefits of AI-based technology in the microinsurance sector. 

Benefits of Technology Penetrating the Microinsurance Space

#1 Speeds up the Process 

Paperwork, handling numerous documents, data entry, etc. are current tedious tasks. AI-driven technologies like intelligent document processing systems can help simplify the insurance documentation and retrieval process. 

For example, Gramcover, an Indian startup in the microinsurance sector uses direct-document uploading and processing for faster insurance distribution in the rural sector.

Gramcover - automated document processing for faster microinsurance distribution

#2 Scalable and Cost-effective 

Because of scalability, technology has also enabled non-insurance companies to distribute insurance schemes on a disruptive scale.

Within a year of launching the in-trip insurance initiative, cab-hailing service — Ola, is able to issue 2 crore in-trip policies per month. The policy offers risk coverage against baggage loss, financial emergencies, medical expenses, and missed flights due to driver cancellations/ uncontrollable delays.

Ola Cabs in-trip insurance

AI-based systems are also cost-effective in the long run because the same system is adaptable across different platforms and is easily integrated across the enterprise.

The microinsurance space is in need of better customer-first policies that are both convenient and flexible to use. ‘On & Off’ microinsurance policies for farmers, especially when they need it, can bring about a change in their buying behavior. The freedom to turn your insurance protection off, when you are not likely to use or benefit from it can give customers the freedom to use a product that maximizes their utility.

At the same time, insurers will be able to diffuse their products with greater spread across the rural landscape because the customer is able to derive greater value from it.

#3 Easy and Customer-friendly Claims

Consumers want faster reimbursements against their plans. Going with the traditional process, claim settlement may take several months to approve. Through distributed ledgers and guided access, documents or information can be made available in a fraction of seconds. 

MaxBupa, in association with Mobikwik, has introduced HospiCash, a microinsurance policy in the health domain. It has identified the low-income segment’s needs and accordingly takes cares of out of pocket expenses (@ ₹500/day) of the customers.

Mobikwik wallet ensures hassle-free everyday money credit to the user.

MaxBupa X MobiKwik Hospicash policy covering out-of-pocket expenses during hospitalization

Another example of easy claim settlement is that of ICICI Lombard motor insurance e-claim service. InstaSpect, a live video inspection feature on the Lombard’s Insure app allows registering claim instantly and helps in getting immediate approvals. It also connects the user to the claim settlement manager for inspecting the damaged vehicle over a video call.

Real-time inspection and claims can benefit farmers. In the event of machine or tractor breakdown, they need not wait for days for the claim inspector to come in-person and assess the vehicle. Instead, using Artificial Intelligence and Machine Learning models, the inspection can be carried out within seconds via an app, following which the algorithm can determine (based on trained models) to approve or reject the claim. 

#4 Automating Repetitive Tasks

Entering data manually is subject to human error, whereas, data entered through scanners, document parsers, etc. are up to 99.94% accurate.

Microinsurance sector is also a victim of self-centered human behavior, where agents consider personal profit before the benefit of the user. Automating the customer/agent onboarding journey can improve the distributed sales network model too. 

MaxBupa uses FlowMagic for processing inbound documents, for enterprise-wide flexibility and fit. With AI, they are able to halve the manned human effort for gains in operational accuracy. 

Automation can bring down the challenges of mis-selling, moral hazard, and distribution costs to level zero with agnostic digital systems.  

#5 Operational Efficiency

Where human employment calls for dedicated working hours, with chatbots, a large number of queries can be handled anytime during the day, weekends, and holidays. It is even convenient for customers also.

Religare, India’s leading insurance provider has introduced AI-based chatbots that can handle customer queries without needing human intervention. It is capable of helping a customer to buy or renew a policy, schedule appointments, updating contact details, and more. This technology has helped Religare to increase sales by 5X and increase customer interaction by 10X. 

The microinsurance sector can also take advantage of chatbot technology to improve response time.

Religare Chatbot

Final Thoughts

As more microinsurance products continue to surface in the market, insurers need to place the rural customer upfront and center of their strategic efforts. By understanding and fulfilling the rural insuree’s needs, cutting down operational costs through process automation such as adding AI-powered chatbots to handle general queries or quickly settling claims without the need for unnecessary human intervention —  microinsurers can realize better market penetration and adoption for these policies.


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Retention playbook for Insurance firms in the backdrop of financial crises

4 minutes read

Belonging to one of the oldest industries in the world, Insurance companies have weathered multiple calamities over the years and have proven themselves to be resilient entities that can truly stand the test of time. Today, however, the industry faces some of its toughest trials yet. Technology has fundamentally changed what it means to be an insurer and the cumulative effects of the pandemic coupled with a weak global economic output have impacted the industry in ways both good and bad.

Chart, line chart

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Source: Deloitte Services LP Economic Analysis

For instance, the U.S market recorded a sharp dip in GDP in the wake of the pandemic and it was expected that the economy would bounce back bringing with it a resurgent demand for all products (including insurance) across the board. It must be noted that the outlook toward insurance products changed as a result of the pandemic. Life insurance products were no longer an afterthought, although profitability in this segment declined over the years. Property-and-Casualty (P&C) insurance, especially motor insurance, continued to be a strong driver, while health insurance proved to be the fastest-growing segment with robust demand from different geographies

Simultaneously, the insurance industry finds itself on the cusp of an industry-wide shift as technology is starting to play a greater role in core operations. In particular, technologies such as AI, AR, and VR are being deployed extensively to retain customers amidst this technological and economic upheaval.

Double down on digital

For insurance firms, IT budgets were almost exclusively dedicated to maintaining legacy systems, but with the rise of InsurTech, it is imperative that firms start dedicating more of their budgets towards developing advanced capabilities such as predictive analytics, AI-driven offerings, etc. Insurance has long been an industry that makes extensive use of complex statistical and mathematical models to guide pricing and product development strategies. By incorporating the latest technological advances with the rich data they have accumulated over the years, insurance firms are poised to emerge stronger and more competitive than ever.

Using AI to curate a bespoke customer experience

Insurance has always been a low-margin affair and success in the business is primarily a function of selling the right products to the right people and reducing churn as much as possible. This is particularly important as customer retention is normally conceived as an afterthought in most industries, as evidenced in the following chart.

Chart, sunburst chart

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        Source: econconusltancy.com

AI-powered tools (even with narrow capabilities) can do wonders for the insurance industry at large. When architected in the right manner, they can be used to automate a bulk of the standardized and automated processes that insurance companies have. AI can be used to automate and accelerate claims, assess homeowner policies via drones, and facilitate richer customer experiences through sophisticated chatbots. Such advances have a domino effect of increasing CSAT scores, boosting retention rates, reducing CACs, and ultimately improving profitability by as much as 95%.

Crafting immersive products through AR/VR

Customer retention is largely a function of how good a product is, and how effective it is in solving the customers’ pain points. In the face of increasing commodification, insurance companies that go the extra mile to make the buying process more immersive and engaging can gain a definite edge over competitors.

Globally, companies are flocking to implement AR/VR into their customer engagement strategies as it allows them to better several aspects of the customer journey in one fell swoop. Relationship building, product visualization, and highly personalized products are some of the benefits that AR/VR confers to its wielders.  

By honoring the customer sentiments of today and applying a slick AR/VR-powered veneer over its existing product layer, insurance companies can cater to a younger audience (Gen Z) by educating them about insurance products and tailoring digital delivery experiences. This could pay off in the long run by building a large customer base that could be retained and served for a much longer period.

The way forward

The Insurance industry is undergoing a shift of tectonic proportions as an older generation makes way for a new and younger one that has little to no perceptions about the industry. By investing in next-generation technologies such as AR/VR, firms can build new products to capture this new market and catapult themselves to leadership positions simply by way of keeping up with the times.

We have already seen how AR is a potential game-changer for the insurance industry. It is only a matter of time before it becomes commonplace.


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