Insurtech or digital insurance companies are slowly but steadily growing their market share in almost every country. In 2020, reports pegged the market value of insurtech globally at around USD 2.72 Billion. While this isn’t a big figure to brag about, the study also pointed out that this sector will witness a compounded growth rate of around 48% annually. The COVID-19 pandemic was a grim reminder of the need to be conscious of our health and expect the unexpected at any moment. It was a game-changer for the insurance sector as well. More people now think about insuring their lives as well as subscribe to better health insurance policies to avoid unpleasant financial burdens in the event of such calamities.
The scene is pretty much the same in all countries. If we look at India, a country where there are just two major digital insurance players, and it was not until 2017 that the first one launched in the market. Their market shares today are at a meager 1% or less but their year on year growth for gross underwritten premiums are in the range of over 600%. So, what makes digital insurance providers more popular today? How are they disrupting an industry dominated by traditional insurance providers? A more interesting question would be how are they achieving success despite the fact that these traditional insurance companies have their fair share of digital transformation as well?
The simple answer is that digital insurance companies are pretty good at attracting the digital native population globally. A digital native, by today’s definition, is a person who has been born and brought up in an environment where technology was rapidly adopted, and the person is well aware of the nuances and capabilities of digital tech that is available in the market. For digital insurers, this population can be a hot target as they both share a common preference for less physical effort and more digital literacy.
Let us examine four ways in which digital insurance companies are able to attract the digital native population and flourish in their business.
This is the number one reason why digital insurance companies have a headway advantage over traditional insurance players in the digital era. By focusing on a digital-only operation for both consumer-facing and back-office administration, digital insurance companies are able to offer a more seamless digital experience to customers. From dedicated mobile app-based on-boarding to e-KYC, the conveniences available for tech-savvy consumers are in plenty.
Self-Service for Better Value Proposition
Every request or concern that a potential customer has can be addressed through digital-only means, and mostly through self-service portals in the case of digital insurance companies. This gives more control to the customers to decide on what products or services that they need rather than having to agree to biased sales tactics of insurance agents or sellers who often try to sell policies that fetch them the most commission rather than offer the best value for customers.
Faster Claims Processing
Irrespective of the features and benefits that an insurance company provides, the biggest factor that helps them keep a sustained customer base is the ease with which customers can process their claims. Traditional insurance providers often take days or weeks for claims processing with repeated rounds of verifications and validations happening across different departments and a never-ending string of back-office processing delays. Today’s digital-native consumers require speed and agility. Both these components can be offered by digital insurance companies as they use only digital modes for on-boarding, issuance, and record-keeping of consumer credentials. As such, the moment a claim is made by a verified consumer through a digital channel, there will be an autonomous verification of the insurance credentials, and the only processing time it takes will be for the verification of the cause of the claim.
Targeted Marketing and Partnerships
Digital insurers have a more flexible technology system that enables easy integration with other businesses to offer their insurance products through these partners. For example, eCommerce majors, leading store chains, etc. could all be sales channels for digital insurers as they have ready-to-deploy API-based interfaces that allow consumers to operate on their own at partner sales points like in an eCommerce store. Also, because most interactions for a digital insurer are via digital channels, there will be a treasure trove of data for them to capitalize while running highly personalized marketing campaigns. It will be easier to identify what the market needs and roll out custom plans and reach customers at their convenient time. All this is possible because every interaction is through digital means with a large data generation framework working continuously behind the scenes.
Digital insurers have a highly lucrative future in the insurance sector. Their faster service coupled with lower operational costs (courtesy of less physical presence in markets), and easier innovation (thanks to a modern technology infrastructure) can be a game-changer in the sector. With better customer satisfaction offered through digital means, digital insurers are in a much better position to meet the needs of today’s digital native population when compared to traditional insurance players.