How Insurtech Has Played a Critical Role In Transforming the Insurance Sector In 2022 While legacy insurance companies continue their path of digital transformation, insurtechs are helping them accelerate their efforts with plug-and-play solutions
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Indian Insurtech startups raised around $500 million across 20-plus deals in 2022. While this is almost 40 per cent lower than 2021, that set the record at around $800 million, it still is very significant considering the funding winter. Combine this with the regulator IRDAI, easing up licensing benefits and requirements of insurers and intermediaries, and opening up foreign investment opportunities, the industry can expect the impact of these investments and easing of regulations to have a significant impact in 2023.
While legacy insurance companies continue their path of digital transformation, insurtechs are helping them accelerate their efforts with plug-and-play solutions that cover the entire lifecycle of insurance right from underwriting to claim settlement.
Insurtechs are transforming the insurance industry
Underwriting: Insurtechs are using AI and ML to automate underwriting process, which involves evaluating an insurance applicant's risk and determining the premium for their policy. AI can analyze large amounts of data about an applicant, including their demographics, lifestyle, and medical history, to help determine their risk profile and the appropriate premium for their policy. This can lead to more accurate premiums and a better customer experience.
Claims: Insurtechs are also using technology to automate the claims processing process, which involves reviewing and verifying insurance claims and paying out benefits to policyholders. For example, they may use AI and ML to identify and prevent fraudulent claims and increase transparency. A lot of insurance claim techs are also working with hospitals and insurance companies to ensure claims experience is optimized for the end user along with streamlined operations.
Policy management: Insurtechs are using technology to automate the policy management process, which involves managing and maintaining insurance policies for customers. This can include using AI and ML to handle customer inquiries and resolve issues or using digital platforms to allow customers to easily access and manage their insurance policies online.
Distribution: Insurtechs are also using technology to make it easier for consumers to purchase insurance online. This includes the use of comparison websites that allow customers to compare quotes from multiple insurance companies, as well as fully digital insurance companies that sell policies directly to customers online. Embedded insurance is taking things up further with API solutions available to attach insurance to multiple use cases such as travel, theft, credit, etc.
Product innovation: Insurtech companies are leveraging data from a variety of sources, including credit reports and medical records, as well as newer sources such as social media, wearable devices, and smart home devices. An insurtech company may use data from a customer's fitness tracker to offer them a discounted premium on their health insurance policy or, they may use data from a customer's smart home to offer them a discount on their home insurance policy if they have installed certain safety features. While the above may not be actively used in India, we can see some products getting introduced soon. The use of data and analytics can help insurance companies better understand and price risks, leading to more accurate premiums and a better customer experience. It can also enable new business models and insurance products, such as pay-per-use insurance or on-demand insurance, which may not have been feasible without technology.
What to look forward in 2023
India's Insurance penetration potential has ensured that a steady pace of investments have kept flowing to the sector. Now that even the regulator has become active and is looking to liberalize the industry, expect the industry to be even more active and a hot favourite for investor interest.
Insurtechs are likely to continue automating and digitizing processes, on underwriting, claims processing and policy management. They are also likely to continue leveraging data and analytics to better understand customer needs and risks, and to develop more personalized and targeted insurance products. Online distribution is likely to continue to grow, with insurtechs using digital platforms to make it easier for consumers to purchase insurance online. Even some government led initiatives such as a claims exchange and universal health records can help set us apart globally.
The year 2023 can be a moment where the Indian insurance industry takes a step towards become global leaders in insurance innovation. Indian fintechs accelerated the Indian banking industry to become global leaders in technology. It is time for insurtechs to do the same for the insurance industry.