Changing the game: Technological disruptions in the Indian Insurance Sector
By: Gautam Rege
Tags: Disruption, Insurtech, Insurance, Technology, Tech

Did you know that there are more than 55 life insurance and non-life insurance companies that operate in India alone? That’s a huge number, and it allows for fierce competition! Owing to individuals’ higher disposable income, increasing life expectancy, economic growth of the country and the Government’s increased FDI limit, investments in the insurance sector have increased manifold and the horizon for growth has expanded even further. With a CAGR of 14.4 percent, research and predictions state that the Indian insurance industry will reach $280 billion by 2020. While the last decade saw a lot of scale, the upcoming decade is all about operational efficiency backed by technology! The Insurance companies that do not leverage technology to reduce their overheads and increase operation efficiency will find it very difficult to sustain themselves. The most important aspect that will lead this growth on is consumer behaviour along with scalable distribution channels and lower overheads. In today’s technological day and age, most customers have turned to digital channels to understand more about premiums, compare products and analyse diverse insurance offerings. It is imperative that the insurance sector implements technology wisely to achieve a holistic growth.

Retaining the human factor with point of sales persons (POSP)

I say that technology is one of the main drivers of innovation for almost every industry today. That, however, does not mean that we can let go of the human factor completely. It needs to be a combination of both, because the value of human experience and understanding is unparalleled. While we know that there are various offerings that each insurance industry provides to its customers, the fact of the matter remains that the level of penetration in the country is still low. To increase penetration, we need distribution models that can explain to the masses the benefits of insurance and what all it entails. These distributors until recently operated as “Insurance Agents”. Earlier, when people were not that aware about insurance, these agents would sell insurance policies on behalf of the insurance company. Awareness amongst the masses has risen and now, consumers themselves want to compare insurance quotes. This means that insurance agents are now at a loss as they are tied to only a single insurance company.

Recently, the IRDAI (Insurance Regulatory and Development Authority of India) allowed Insurance Broking Agencies to appoint “Point of Sale Person” or POSPs. A POSP is a registered agent of a Broking Agency and, these Agencies can access live quotes from multiple Insurance companies! Ever since the introduction of these POSPs, the benefits of comparing and buying insurance have increased significantly. With smart training courses of at least 15 hours with certification, the number of POSPs is on an exponential rise as the basic qualifications for them have been relaxed. The ‘survival of the fittest’ race has begun, because IRDAI has standardized agent commissions. This has now forced companies to increase their operational efficiency and reduce overheads to achieve scalability and remain profitable. To remain relevant and tackle competition effectively, insurance companies will have to use technology to focus on empowering these POSPs along with keeping an eye on their customers. Without that, the chances of success are fairly slim.

Technology and talent: The perfect combination

Insurance companies now have two models to choose from: the B2C model and the B2B model. Using the first model involves empowering the end-user to buy online insurance and bypass the agent model altogether. This requires substantial advertising budget and branding, which means a higher customer acquisition cost and low rates of conversion. With the B2B model, companies can empower POSPs and help them compare different insurance premiums to assist their customers buy the right policy. This has a significantly lesser acquisition cost and a much higher chance of conversions. Which one do you think is better? I definitely think the second one, because it has a direct impact on the business revenue and its bottom line. The technology challenges insurers face are complex, including the need for flexibility, better cost control, robust data analysis capabilities, talent retention and adapting to mobile tech and social media. These challenges are all related to capacity, and McKinsey research states that these changes can all be impacted through a culture of continuous improvement. Think first, then move on to implementation. How do you do that? Through something called as ‘Lean Management’.

Lean Management: Building a culture of efficiency with technology

Using the principles of lean management, scalable technology can be put into place. It manages a large workforce easily, across larger geographies and delivers more customer value. Not having a regional workforce employed to leverage scale, and having a mobile technology scalable POSP with Regional Managers managing their respective circles is a starting point to ensure lower operational overheads. Lean management for insurance companies means evaluating customer insurance needs, enabling price comparison, building larger scalable teams and analysing data in detail for effective customer acquisition and retention. Creating such a setup to empower POSPs is what will set apart successful insurers from those who fail to leave their mark behind.

This does not mean that transformation should happen at a large scale in the beginning itself. Start with a smaller area like a city, then evaluate the results, and then move on to larger areas. Insurance companies can thus scaleup without having a regional office everywhere! Automating various functionalities like getting online and offline quotes from insurance vendors, sending vehicle inspection reports and health reports using mobile technology is a great start. Enabling instant policy issuance and instant commission can give companies the edge in retain and hiring POSPs. Rewards and Recognition for POSPs like gathering reward points for redemption and discount coupon codes could easily be powered by technology, utilizing a minimal work force. Adapting to technology, thus, has become a necessity and is not a choice anymore. Disruption is the only way ahead, and the sooner industries realize this, the better chances they will have to succeed!