What's Next For Insurtechs in 2021?
The regulator will have a major role in balancing the key factors that define insurance-risk, data privacy, and insurability
Industries and society have suffered economic and psychological shocks ever since COVID-19 struck. However, the silver lining here is that people started realizing the importance of insurance as a financial protector in such unprecedented times. Digital technologies are rapidly changing the way we live and work in the pandemic and insurtechs are playing a vital role in bringing digital innovation to the insurance sector as a whole.
Traditionally, the insurance sector has been synonymous with legacy IT systems. Volumes of data need to be maintained due to the critical need of a heavily regulated sector. Core applications of the sector have been the same which include claims filing, policy issuance, policy management, underwriting, etc. However, the behaviour of customers has evolved over the years. Earlier, they used to buy insurance through a family friend, relative, etc. With the increase in urbanization, customers prefer doing online research before buying insurance. This is why insurtechs are crucial for the entire ecosystem.
Digital is driving buying decisions including interacting with the insurance provider, on the mobile or website, or getting all the information about a product easily. Customers now prefer speed, smooth claim settlement processes, contact-less issuance of policies, etc. Therefore, a range of new technologies has come up that is disrupting the market including artificial intelligence-based claims resolution, usage-based insurance, micro insurance, etc.
Looking at the number of COVID-19 cases globally, social distancing is here to stay at least for a year. So, there is a need for end-to -end digital processes in the insurance space. Insurtechs need to focus on the following aspects in 2021 for a better customer experience:
Underwriting will move towards additional data points
Insurers are using additional parameters, which were previously not being used for risk assessment. Newer parameters are being used to assess and segregate risks in collaboration with intermediaries. The information sought requires two key things. Firstly, the data should be dependable and secondly, data obtained should be computed from elsewhere so that it's hassle free for the customer.
Insurers are increasingly using data points than can give a sense of differentiation between low risk profiles and the higher risk customers, so that they are able to give those at a lower risk a better value proposition while making sure the later ones pay for their risk levels fairly.
Even as unlock has happened and people have started to step out of their homes, the fear of COVID-19 still remains. The impact of COVID-19 in terms of digital transformation of insurance will continue. Insurtechs will have to focus on remote fulfillment to offer services quickly and conveniently to customers. Remote fulfillment includes remote examinations, inspections, claims fulfillment, etc. For instance, Policybazaar and leading insurers have come together to issue life and health insurance policies by doing medical check-ups over the phone or through video calls. The insurance firms arrange for a telephonic consultation with an accredited doctor who would remotely assess your medical history, also known as telemedical. Videomedicals are also taking place wherein a doctor conducts a medical examination through a video call.
Combating fraudulent claims
Insurance fraud is a big concern for the industry and it is increasing every year. It is not practically possible to check records of fraudsters manually as the number of false claims is on the rise. Data analytics can play a big role in mitigating this challenge. It is also an accurate way of checking frauds compared to a manual method. For example, Policybazaar identified an insurance fraud where there were 125 purchases in a month from a particular city and the conversion rate suddenly increased from 8 per cent to 23 per cent. We use advanced technologies like audio transcriptions and correlating the conversations with the details provided which help to identify suspicious customers.
Digital claims would improve customer experience
We expect robotic process automation across the value chain right from the time a customer raises a claim till the point the payment is made to the customer. This includes accepting a claim, validating if the claim is permissible, hospital raising the bill against what was validated and finally deciding what has to be paid and then the payment.
Overall, the regulator will have a major role in balancing the key factors that define insurance-risk, data privacy, and insurability.