Why this Insurer feels Startups Can Lead the Microinsurance Game in India Working with this mass market has demanded various operational and product innovations
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In a country like India, wherein, the insurance sector's penetration levels are poor, microinsurance has a very bright future because of its low ticket size.
Generally, microinsurance is defined as an insurance product that aims to provide financial protection for low-income families particularly those with approximate income less than Rs. 250 per day. But the segment in very tricky to operate as the average ticket size is low as against the service cost
One such insurer, which has managed to market the microinsurance well in the market, is Shriram Life Insurance Company (SLIC). The company mainly focuses on rural India with lowest average ticket size in the industry (INR 13,749 compared to INR 49879 for the private industry for Q1 FY 18-19).
Discussing the segment potential in India, Casparus Kromhout, MD & CEO, SLIC shares that the sector should move beyond the definition and the focus should be on spreading the protection net to the stratum of society that is financially most vulnerable, where the death of a breadwinner transcends into financial catastrophe for the family and in some cases no food on the table.
"Working with this mass market has demanded various operational and product innovations. We strive to develop products that add value to the segment and distribution channels that ensure mass reach," he added.
In a conversation with Entrepreneur India, Kromhout shares how insurance technology or insurance startups can lead the microinsurance league in India.
The Rise of Insurtech
India is presently going through an internet revolution which more the 400 million smartphones users (which account for only 27 per cent of internet penetration in the country. This has created cost-effective and yet viable opportunities for startups to carter to rural India.
He believes today the need and service requirements of customers are diverging into smaller sub-segments requiring the design of diverse products and processes. Also, the exposure to various digital platforms has enhanced the customer's need for best service.
"Startups come with fresh innovative thinking combined with the latest digital technology. Digital has capabilities like chat-bots and social media mining that enable real-time communication and assimilation of customer sentiments. Startups with their "fresh" thinking and competencies have the capabilities to leverage these technologies to add value to the customers. This also gives them the power to influence customers," he noted
Additionally, the focus on bringing analytics and artificial intelligence-driven innovation to every step of the value chain will be critical. To top it up, blockchain technology has the potential to change the traditional approach towards core insurance processes like underwriting and claims.
"A lot of companies have already put in efforts and we are witnessing innovative products and processes introduced regularly," he pointed out.
Having said, one cannot ignore the fact that the rise of insurance companies has also created – bank v/s fintech startups situation or, in other words, an opportunity v/s threat like sitch in the sector.
Kromhout believes its time that insurers need to update themselves and act young and alive to adopt the changes that disruptive technology brings.
Talking about how SLIC is dealing with the ongoing revolution in the sector, he added, "the company has adopted the strategy of driving customer centricity through technology. We have set up various processes; run on analytics platforms; like claim disbursement within 48hrs after requirements received, live investigations for detecting fraudulent cases and using simple yet novel techniques like customer selfies to facilitate the underwriting process."
Additionally, the insurer has engaged with various international insure-tech companies to find unique and innovative ways to extend insurance to the masses.
"Our collaboration with SureBüddy, an insure-tech from South Africa provides sponsored term insurance cover to Android users in return of watching some advertisements. We are also in talks with another international insure-tech - Indie-fin to develop a gamified platform to spread the protection net further," he says while adding that, "We have always been open and keen to work with young tech - entrepreneurs that share our vision for financial inclusion."