It is obvious that the global pandemic has had a profound impact on all aspects of life. While different sectors and regions have had different impacts, the insurance industry is no exception. Insurance is a protective measure and we have seen how curative remedy has been put to the test this year. Be it a general liability and business interruption insurance, workers’ compensation (WC), travel insurance, health insurance, life insurance, short and long-term disability, or others, the impact of these products on carriers’ ability to serve the welfare of the communities through their distribution forces has brought in sharp relief.
While fintech and digital adoption are on the rise, people are actively looking for ways to incorporate more digital products into their lives. In the same vein, the digital payments segment in India too has matured significantly with 405 startups across the country. On the contrary, India’s general insurance market is still playing catch up in comparison. We see the insurtech startup space budding now with a number of insutech startups growing to 111, indicating a significant amount of room to grow and opportunities that remain to be explored. Moreover, there are several lessons to be learned from the impact of the pandemic thus far and how it will inform the way carriers should move forward in 2021 and beyond.
Infrastructure as the foundation of work
Over the last nine months, people have been separated from one another more than ever before. The separation of families from loved ones, customers from providers, and coworkers from one another became the new norm. But the resiliency of the human spirit was catalyzed by the stability and diversity of tools made available by the global infrastructure. Zoom family reunions and multiple home (and school) workstations became the new norm. The insurance industry was no different. Similar tools were deployed to success with the help of adopting ‘phygital’ ways and the innovations brought in by startups. Brokers and advisors continued to meet with insureds and prospects. Wholesalers and underwriters were there (though no longer in person) to provide guidance to the distribution force on product updates and pricing considerations. Claims practitioners continued to provide successful support to those in need from first notice of loss through to adjudication.
Shifting demands for existing products at new levels and new products
The impact of the pandemic made certain products more valuable in the consumer’s eye than ever before. Voluntary benefits that augment one’s health insurance have seen an uptick in interest from consumers. Disability, hospital indemnity, critical illness, and long-term care are already seeing increased consumer interest along with income protection products such as fixed annuities and sophisticated life insurance products. Further, demand for usage-based products will continue to increase. This should go beyond the existing examples (auto insurance by the mile, life insurance tied to wearables) to other areas of interest.
Pandemic coverage is seeing interest as well. The juxtaposition of the pandemic insurance coverage Wimbledon purchased ($142M in coverage against $31.7M in premiums) versus the loss experienced by the NCAA for the cancellation of the Men’s Basketball Tournament (as much as $275M in losses) is just one example that illustrates how pandemic coverage could make a huge difference in an organization’s bottom line. The concept can also be applied to the consumer market. Event-based coverages for acts like pandemics could provide “life interruption” insurance where riders could be applied to existing coverage (e.g. critical illness coverage at diagnosis).
Increased need for digital carrier capabilities
The pandemic has illustrated the “digital divide” between consumer market capabilities and those for consumers in insurance (regardless of product line). While there is an abundance of point of sale capabilities, not much is available to consumers after the product is bound without the direct engagement of the agent/broker or carrier. Yesterday’s informational portals and call center scripts are no longer enough to satisfy today’s insurance consumers. The pandemic has illustrated the need to provide increased capabilities to the consumer, specifically around billing, service (financial and non-financial) transactions, and claims functions. We can expect to see significant improvements in these areas: portals and mobile apps with increased transactional capabilities and functions (e.g. chatbots, co-browsing) is the beginning of this evolution. Carriers need to double down on their investments in their customer experience and digital strategy.
Incumbents to collaborate with startups
Traditional insurance incumbents need to increase their digital carrier capabilities, customize their products and work with leaner teams to bring about the developments at a much faster rate. They need to focus and develop abilities to think forward and evolve in the digital times. The startup ecosystem is heading its way into digitizing and revolutionizing buying insurance, providing the customer with a myriad of options simply by a click on their smartphones. Incumbents can partner with these startups to benefit and bring about the changes rapidly while the startups can benefit by getting access to the incumbent’s large customer base. Working together will help both startups and incumbents to play to their strengths and evolve with the need of the time.
Customization of products and services
In India, there are only two touchpoints when it comes to the insurance product in India- when the insurance product is bought and when it is claimed. There is a dire need to introduce more methods and ways to customize the product according to the requirement and to make better connections and relationships with their customers while making the insurance buying and claiming a seamless experience.
So, what does this mean for Insurtech?
The opportunity for the insurtechs is larger than ever. Firms need to come up with innovations that go beyond the digitization of documents. Infrastructure firms will be looking to improve on their conferencing capabilities, incorporating additional capabilities (e.g. survey tools, e-whiteboards) and becoming far more integrated into carrier stakeholders’ everyday working lives. Traditional carriers, monoline insurers of various sizes, new companies, and startups will work to fill new consumer demands. These opportunities will not come easily, and will likely require a trial and error approach. The most agile companies will have the best chance to create new products and services that will meet and exceed consumer demands. There is, and will continue to be, an appetite to increase the digital capabilities of broker and agent networks and integrate them with carrier capabilities. These can be done at the line of business and/or functional level.
These innovations can come from several sources in the insurance ecosystem: carriers, traditional professional services and technology providers, etc. Carriers have shown that innovation is unlikely to be sourced solely in-house. It will be the partnership between the incumbents and the startups to fill the void and provide much of the heavy lifting, in creating customized products, making the entire process entirely seamless, proving concepts in the marketplace that can be scaled to meet the aforementioned demands and others to come.
Matthew O’Mara is Insurance Advisor and Co-Founder, Spraoi (Afthonia Lab mentor). Views expressed are the author’s own.