Technology will power the new wave of change for the Indian Insurance Industry, reveals the CII-EY report titled Insurer of the Future. The report recommends pursuing technology to improve the traditional insurance process and to re-configure the insurance business model. The customer is at the center of digital transformations across the value chain and Insurance in India has moved from being a sellers’ market to that of a digitally driven buyers’ market, says the report.
Technology has played an important role impacting customers, intermediaries and insurers in a holistic approach to connect with customers digitally in each stage of the value chain including product design, marketing or sales, underwriting or pricing, customer servicing and claims management. However, insurance has been slow as compared to the rest of the financial services in adopting the new technology value propositions available in the market as an enabler of business strategy:
Internet of Things (IoT) can play a crucial role in assessing and pricing the risk of loss
- Robotic Process Automation (RPA) that replicates human behavior and executes non-judgemental sequence of activities can help insurers to automate client servicing activities
- Insurers’ through collaboration with third party data service providers can make informed strategy and policy related decisions for insurance risk-management and fraud monitoring
- Insurance bundling on ecommerce platforms has enabled greater customization in product and pricing thereby targeted marketing to customers
- Blockchain technology is current used for Bitcoin payments. However, it has the potential to eliminate error and detect fraud by providing a decentralized digital repository to verify the veracity of customers
Commenting on the report, Mr Chandrajit Banerjee, Director General, CII said “The drivers of Insurance Business in India are rapidly changing. Over the last decade and a half several innovations have smoothly blended into the ecosystem of Insurance, be it in terms of products, distribution, technology or the basic way in which business is done. “Business as Usual” of today is very different from what it was in the last decade and the Insurer of the Future will conduct business very differently in the decades to come. Technology and Digitization disruptions have brought the sector to a point of transformation and as the sector maneuvers itself to the changing paradigms there is a clear multiple level growth envisaged throughout the ecosystem of Insurance in India.”
Sanjiv Bajaj, Chairman, CII National Committee on Insurance & Pensions, CII said “The insurance industry is at the threshold of a long period of growth. With the rapid change in technology and digitisation, the drivers of insurance business are changing. Those insurers who disrupt themselves continuously would be the ones who will succeed in the long run. All stakeholders – the industry, intermediaries, Government and regulator- need to work together in transforming customer experience”.
Rohan Sachdev, Global Insurance Emerging Markets Leader and Partner, EY India says, “The Indian insurance sector has evolved and in order to realize the full potential, the industry must focus on aspects of technology that will fundamentally change the way customers know and interact with each other and the insurers. With increasing capital infusion and the arrival of new technologies, insurers have been readily adopting digital solutions to improve customer experience. With the rising population and changing demographics, insurers and intermediaries will have to constantly innovate to remain relevant.”
Cyber and data risks are a key concern area for businesses today. The risk is expected to increase in the future, with growth in big data and data analytics requiring even more data to be accessed. While cyber liability insurance products are available in India, providing comfort to global clients on cyber risks is one of the key challenges for technology businesses. This challenge presents a great opportunity to the reinsurance through cyber-risk insurance products that can assure stakeholders of market leading preventive measures around cyber risks.
Goods and Services Tax (GST) in insurance
As a service industry, insurance has one single tax (service tax) with one administering authority (the Central Government). Under the dual GST structure, a significant impact on this industry would be the emergence of dual stakeholders in every taxable supply of service: the Government of the State where the supply is made and the Central Government. From dealing with a central service tax for pan-India operations, insurers will potentially start dealing with 38 taxes: 35 State GSTs (SGSTs) of the states and union territories, 1 Central GST (CGST) and IGST on inter-state supplies. When the tax regime changes with GST, insurers would need to focus on the following elements as part of their customer acquisition strategy: customers’ resident location (location of the service receiver); location of the acquiring distribution channel, policy issuance and servicing framework.
Process-readiness and technology-readiness to take on higher compliances and transaction-level reporting will help insurers smoothly transition to the GST regime. It will be essential to ensure that all transactions are appropriately mapped and measured.
The report clearly indicates that the technological disruptions erupting in the Indian Insurance Sector will lead to a transformational change in the sector and will soon catapult it at par with the developed economies across the globe.