InsurTech: Disrupting Traditional Insurance Models in India

Discover how InsurTechs in India are revolutionising the insurance industry by introducing innovative products, improving customer engagement, and streamlining operations.

The Indian insurance industry is going through a tectonic shift. And, this has to do with technology. 

InsurTech (short for Insurance Technology) companies, considerably younger and more agile than traditional insurers, are introducing major changes to the status quo. 

These companies are transforming insurance products, reshaping customer interactions, and evolving business models to meet today’s needs.

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How are InsurTech companies different from Traditional Insurers?

Essentially, InsurTech companies use technology in innovative ways to transform insurance processes. 

They make advancements in critical insurance business functions like underwriting, claims processing, customer service, sales, and policy management, among others. 

They often create new business models or disrupt traditional practices with tech, offering new types of insurance products and more personalised services.

These companies focus on improving efficiency, reducing costs, and enhancing the customer experience through tech. They provide solutions that address customer pain points with digital tools, like seamless online experiences.

In contrast, traditional insurers or agencies that use digital platforms but don’t change their core practices are not usually classified as InsurTech. InsurTech companies are defined by their use of technology to significantly improve or revolutionise the insurance industry.

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The Rise of InsurTech in India

India's insurance industry has seen steady growth recently, thanks to changes in regulations, greater awareness, and new technologies.

InsurTech companies have also witnessed decent growth. They are benefiting from more people using smartphones, increased, affordable access to the internet, and a middle class that wants personalised and convenient insurance offerings.

These companies are also using advanced software systems, artificial intelligence (AI), machine learning (ML), and big data to improve their processes, reduce costs, and offer tailored insurance products. And, these start-ups are reaching not just big cities but also underserved and rural areas through digital platforms.

A report by the Indian Brand Equity Foundation (IBEF) says the Indian insurance market is expected to hit USD 222 billion by 2026. We believe that InsurTech firms will form a significant portion in this growing market by making insurance more accessible and enhancing how companies interact with customers at various touchpoints.

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Transforming Insurance Products

InsurTech companies in India have introduced several new and innovative insurance products that make insurance more flexible, affordable, and user-friendly compared to traditional products. These include:

• Personalised Policies: Unlike traditional one-size-fits-all policies, InsurTechs use AI and data analytics to customise policies based on individual needs and behaviours. This results in more accurate risk assessments and personalised premium rates, making insurance more tailored and relevant to each customer.
  
  
• Microinsurance: Traditional insurance policies are often expensive and cover broad areas. In contrast, various InsurTechs offer microinsurance, which provides small-scale, low-premium coverage for specific risks like health insurance for gig workers or crop insurance for farmers.
  
  
• Short-Coverage Products: Instead of annual, more long term policies, customers can buy short-term coverage, such as vehicle or travel insurance for just a few days, all through digital platforms.
  
  
• Usage-Based Insurance (UBI): Traditional motor insurance typically charges a flat premium, regardless of how much or how safely you drive. With UBI, InsurTechs use telematics and IoT devices to track driving behaviour and usage, allowing insurers to charge based on actual usage, rewarding safe driving habits with lower premiums.
  
  
• Embedded Insurance: Traditionally, buying insurance has been a standalone process. Now, InsurTechs offer embedded insurance, which is bundled seamlessly with other services or products. For instance, travel insurance can be added when booking a flight, or gadget insurance is included when purchasing a smartphone. This makes the process much more convenient for customers.
  
  
• Health-Based Insurance: These policies encourage healthy living by offering rewards or discounts to policyholders who maintain healthy habits. This is a step beyond traditional health insurance, which typically does not account for the policyholder’s day-to-day lifestyle. Many of these products are linked with fitness trackers and apps to monitor health data and incentivize healthy behaviours.
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Transforming Insurance Customer Experience (CX)

Insurance has long struggled with customer engagement because it is often seen as a “push” product rather than a “pull” product. InsurTech start-ups are trying to address this by focusing on better customer interactions.

For example, PolicyBazaar has revolutionised insurance purchasing by offering detailed comparisons, customer reviews, and ratings, making it easier to select the right plan. This transparency and access to information online have increased customer satisfaction and trust. (Though PolicyBazaar doesn’t issue and back policies itself, it is an InsurTech company because it uses technology to simplify the insurance buying process.)

Moreover, Gen AI-powered assistants are transforming insurer-customer interactions with human-like, contextual responses and 24/7 availability. They offer quick, efficient answers, a significant upgrade from the old, rigid chatbots.

These advanced chatbots can independently manage tasks like sales, policy servicing, billing, renewals, and cancellations, being able to engage independently with leads and policyholders on popular platforms like WhatsApp. 

These AI systems can also handle data seamlessly—whether it’s collecting KYC documents from a policyholder during onboarding or sharing brochures about an insurance plan with a lead.

All of this not only enhances customer satisfaction but also attracts (pulls) more potential customers and improves policy retention, building stronger trust and goodwill in the market.

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Transforming Operations Across Insurance Business Functions

InsurTech companies are utilising technology to improve operational efficiency in the insurance industry. 

By using AI, automation, and blockchain, costs are reduced, and processes like policy underwriting, issuance, and claims processing are completed faster.

For example, AI and machine learning (ML) make risk evaluation and pricing more efficient than relying on manual assessments. This speeds up policy issuance and reduces the chance of errors and human bias in risk assessments, which can lead to financial problems, reputational issues, or fraud.

Blockchain technology is being used by insurers to automate claims verification and processing through smart contracts, which trigger the claims process once pre-defined conditions are met. This ensures faster and more efficient processing. 

The transparent and immutable nature of blockchain prevents tampering and fraud by creating an unchangeable record of all transactions. This improves trust and reduces errors. As all documentation is stored on the blockchain and accessible in real-time, claims can be settled much faster, enhancing customer satisfaction and retention​.

In conclusion, InsurTechs in India are on the brink of transforming the insurance industry. By disrupting traditional models and introducing innovative products, these companies are creating a more inclusive and efficient insurance ecosystem. They're improving customer engagement and streamlining operations through technology. 

As advancements continue, InsurTechs will play a pivotal role in shaping the future of insurance, making it more accessible, efficient, and customer-friendly.

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