Five emerging startup opportunities in insurtech in a post-COVID-19 world

With all of us restricted to our homes, huge stress triggers about our health form the backdrop of the coronavirus pandemic. How many times do you find yourself worrying anxiously about the what-if scenarios, only to search online for COVID-19 insurance? A quick search online, a few clicks on your favourite digital wallet app and you are all set to face the novel virus just with a few hundred rupees. Phew, easy isn’t it?

The insurance sector is now witnessing a slew of new players joining the fray, selling insurance primarily online, keeping costs and premiums low (including ‘sachetising’ the product) to disrupt the traditional model of buying and servicing the insurer.

Appealing to the digitally-savvy Indian consumer is easier than ever as more Indians take to the internet and offer the largest opportunity globally (apart from the US) for venture capitalists to target Indian customers. And why not, you ask?

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India is a goldmine for any investor as it has:

• The second-largest population in the world (second only to China which is closed to outside investments)
• More than 50 percent of its population is below the age of 25 and more than 65 percent below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years.
• The lowest cost of data globally
• The second-largest smartphone population in the world
• Roughly 600 million monthly active customers accessing the world wide web
• Lowest levels of insurance penetration at 3.69 percent.

Consumers are bombarded with product information, how to buy insurance online for their cycle, their mobile phone, even their branded spectacles – all on their devices.

This zealousness of the investor community in India’s fast-emerging disruptor of the large insurance companies (standing at 24 life insurers, 34 general insurers) is reflected in the $183 million that flowed into the ecosystem in 2019. This has lead to the emergence of a new category of fintech called InsurTech.

InsurTech is a combination of the words “insurance” and “technology,” inspired by the term fintech. InsurTech is a term used for a company using technology to disrupt the insurance industry.

India stands at the second position, globally, given PE/VC investments in InsurTech (cecond only to the US). It’s noteworthy, that large technology companies, global digital giants such as Amazon, Google, Alibaba, and Tencent have all entered the InsurTech fray, creating global disruption.

PolicyBazaarand Bankbazaar have become the go-to destinations for aggregated experiences across search, discovery, and comparison. Customers aren’t, however, looking for life insurance but searching for incident-specific protection – like missing a flight, taking a cab ride on a cab aggregator platform or a hotel stay during a low-cost holiday.

This need is served by micro-insurer startups marking the emergence of an interesting new trend disrupting the traditional model by making insurance available to all and for various micro categories, easier, cheaper and faster.

Some have partnered with large digital giants to scale distribution and use case coverage to innovate on new product categories.

Quoting from a recent piece by Rahul Mathur, Startup Lead at Accenture FinTech Innovation Lab, who writes on this sector, there are three emerging InsurTech “trends” in India —

• Embedded insurance – ACKO Insurance leads the pack here with its recent partnership with OyoRooms.
• Small ticket insurance – Incumbent insurers have caught on fast with this trend, but Toffee Insurance stands out with its Kamai Bachao Yojna, dengue insurance, etc.
• Novel distribution mechanisms – Bancassurance 2.0, digital channels etc; Max Bupa Health Insurance and IDBI Bank win with the Any Time Health (ATH) machines.

In the post-COVID world, where contact-free becomes the new mantra, face-to-face meetings and operational processes requiring high touch methods are bound to get obsolete.

To deal with the pandemic, we have observed that the speed of policymaking is unprecedented, therefore, it is the right time to identify opportunities of disruption and striking while the iron is hot — the opportunity is here and now.

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Opportunities for insurers post-COVID-19

Here are five opportunities for Incumbents and Disruptors in the post-COVID world to lower the barriers of friction, knowledge, and pricing, for customers to participate in this value chain to protect themselves, their family, business, homes, and other valuable assets

1. Reimagining the core market and product

• Reaching the un(der)insured with the right products and fit

• Emerging solutions for new markets and new customers (bite-sized insurance, pay-as-you-use, bundling insurance with Use Cases)

• Usage or behaviour-based personalised insurance (one size fits all strategy will not work for the new segment of users, customisation is key)

2. Customer Experience Management and Reducing Friction in the product life cycle

• New players have been able to instantly stand-up all insurance-related processes to provide a digital experience to consumers. Taking a leaf from their book, creating a digital-first, mobile-only experience is key to winning new users.

Friction in disjointed experiences and ease of finding information has been sighted as the major reasons why consumers opt for searching for insurance products with new-age players instead of traditional insurers. Usher in innovative ways to settle claims, and catching fraudulent users while safeguarding the experience of good trustworthy individuals.

• Online payments are observed even in hinterland even though India is a cash-based economy. Focus and prioritise safety, security and, convenience in payment methods to appeal to all consumers in buying insurance, paying premiums, receiving settlements, etc.

3. Leverage New-Age Tech to Bolster Growth

• With the emergence of blockchain, AI, and other technologies, integrate them into now to reap the dividends later.

• Sharper Underwriting to bring more people into insurance covers. Reinvent this area use of data, analytics, and Machine Learning.

• Robotic Process Automation (RPA) for the automation of business activities and processes.

• Using technology to aid fraud detection at the point of underwriting, assessing risk, and weeding out gamers from the ecosystem.

• Robo Advisory to help users pick the right insurance products.

4. Digital First (Selling and Servicing)

• Move away from the brick-and-mortar model of selling insurance covers, servicing clients.

• Overuse 3V’s: voice, video and vernacular to over-communicate why insurance is a priority for everyone in the post-COVID era, and how to stay invested in the long term.

• Drive retention and renewals with aggressive digital selling and service.

• Create a social revolution: Moving education online and educating users digitally.

• Rethink Human Capital Strategies: Upskilling sales and agents is key to ensuring customers do not opt for competitors who have highly qualified staff to address queries and concerns emerging from the lack of face-to-face interaction involved in the sell and the retain stages of the customer life cycle.

5. Addressing Cyber Security as an Emerging Category while protecting consumer data

• Invest in data privacy for customers, employees, and the business. Data breaches cost the business; brand risk is only a small casualty when compared to the cost of acquiring servicing a customer over the lifetime of the product.

Digitisation brings huge responsibility of being able to protect customer and business-sensitive data from malicious hackers.

• Addressing Cyber Security Insurance as a product category: The risk of escalating cyber threats have created a completely new need for businesses to safeguard themselves with risk mitigation solutions against data breaches and cyber-attacks. Cyber insurance market is expected to grow to $9 billion by 2020. Startups in cyber insurance are enablers of ‘CISO-as-a-service’ for SMBs. This is a big opportunity as the threat of cyber attacks increases

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Conclusion

Whenever customer friction intersects with untapped profit potential, disruption is bound to occur. The Indian insurance sector is at the cusp of exponential growth.

For insurers to participate and contribute to this growth, it is imperative that they are not only aware of emerging trends, but also that they embrace these trends holistically.

Embracing digital transformation forged by quick decisions and investment into the business is the key to future growth and sustenance.