The Indian InsurTech space witnessed rapid growth in 2018 after receiving total funding of approximately USD 378 million across 17 deals to emerge as the third best-funded FinTech segment. As of February 2019, 142 InsurTech startups were operating in India. Amongst these, the top 10 InsurTech start-ups by their amount of funding have received an aggregate of USD 660 million in the past decade.
Key business models
InsurTech refers to the practice of using technology-based innovations to drive disruptions across the insurance value chain and achieve cost efficiencies and product democratization. This space is currently dominated by nascent startups that operate across various facets of the insurance life cycle— that is, lead management, underwriting, sales and distribution, claims and renewal.
Digital insurance advisors
Digital advisors are the web/application-based service providers who aggregate and sell product offerings of both traditional and new-age digital insurers on their platforms via a commission-based revenue model. The key value propositions offered to the customers are convenience to access and compare products from multiple insurers on the same platform, and an end-to-end, seamless digital experience across the insurance lifecycle.
PoS insurance providers
PoS insurers address customers’ need for insurance when they shop for other products and services. These players partner with digital service providers who cater to customers’ needs like buying a car, electronic appliance, furniture, house, vacation, etc., and offer personalized insurance products to these customers. By partnering with online service provides and e-commerce aggregators, the PoS insurers gain access to a significant market base. This is further leveraged by insurance companies to cross-sell traditional insurance products like life, health, auto, etc.
Key emerging trends
Even though the Indian InsurTech market is at an early stage, the following three trends are emerging:
The rise of real-time analytics and increased availability of data using IoT devices have altered the nature of insurance products, giving rise to sachet insurance policies. This has also transformed methods used for underwriting for these new-age policies by using alternative data.
Insurers are creating customized profiles on a customer-to-customer basis. This helps them understand their unique risk profiles and offer personalized pricing in policies.
Business model innovation
Companies have adopted new models like P2P insurance, and offer platforms to pool insurance premiums wherein peers can purchase group insurance policies. This enables them to team up and contribute to each other’s losses if required.
Global standards for InsurTech solutions
A leading InsurTech in the US offers insurance policies for homeowners and renters for houses and apartments by coupling behavioral economics and technology. The company has achieved operational efficiencies and generated profits by doing away with the need for insurance agents and using AI/ML-based chatbots to distribute policies.
The claims process has been completely automated using a mobile app that has an AI-based chatbot for cross-checking claims filed using a video recording and approving the same, thereby doing away with the need for agents and reducing the TAT for claims. The company keeps 25% of the premium amount as a profit and uses the remaining 75% for claims settlement and purchasing reinsurance.
Telematics and HealthTech have driven insurance use cases are examples of innovations taking place across the globe in the vehicle and health insurance space and are slowly catching up in the Indian market too. The use of connected data has the potential to change the insurance industry by triggering changes in customers’ behavior to achieve better risk-based pricing. However, regulatory barriers to collecting such data and consumer behavior have been a major hindrance to the mainstream adoption of these technologies. Another emerging area in the Indian space is the role of InsurTech in agriculture for use cases such as crop simulation modeling for predicting the weather and crop yields and using the drone and satellite monitoring for reducing the cost of inspections and fraud monitoring.
Going ahead, these developments are set to gather pace as the insurance industry embraces digital business models. Moreover, with the immensely low level of insurance penetration in India (2.76% in life insurance and 0.93% in non-life insurance), and the need for the scaling up of insurance owing to factors like increased awareness and decreased costs due to low-cost technology-based distribution models, InsurTech remains poised to disrupt the FinTech space in the coming years.