The Insurance Industry in the US and Europe has very well defined standards with limited functionality and usability of its operational model to adapt to changing customer demands and technological innovation. Many providers servicing these markets are doing so with antiquated distribution models, limited product/service options, aging workforces, and monolithic systems. Innovation has been difficult to incubate, as the inertia (or lack thereof) of the prevailing models ultimately constrain design thinking.
Where do we go from here as an Industry? Carriers, consultants and technologists are looking at the problem in these markets, to be sure. However, they are not looking solely at their solutioning for answers. More and more, players in the West are looking to the Indian insurance market for answers. Why? The answers are many, and logical.
The Insurance consumer base across subsectors is nascent and growing.
India’s general insurance market is continuing to grow. Once INR 1.6 trillion in 2017 (US$24.1bn), it is slated to grow to INR 2.9 trillion (US$40.1bn) by 2021. The growth of non-Life (e.g. motor, personal accident & health, and property insurance) products accounted for almost 80% share in 2017. That said, market penetration is still less than 2% at those timelines. A growing middle-class consumer base, increasing risk management awareness and regulatory landscape means innovation will continue to come to this market.
The Indian Insurance market is not weighted down by larger legacy technology.
US and European consumers are becoming more and more comfortable managing their lives and purchases on personal devices. Carriers in the US and Europe have realized that these devices will be the primary conduit to educate, engage, sell and manage insurance on a go-forward basis, and Insurers have started to leverage the opportunities afforded by devices like Google Homes and Amazon Echo, however, their progress is slow. In contrast, the Indian marketplace has relied on these devices for technological growth from the outset, and personal consumer and social apps have permeated all demographics. Taking advantage of this new technology could lead to temporary competitive advantage and re-branding opportunities for the Indian market. Given that the Indian insurance investment and innovation are occurring almost exclusively in this paradigm has the entire world focused on what the future here brings.
Necessity is often the mother of invention.
Finally, in the US and Europe, reliable legacy technologies and associated aging workforces interested in maintaining the status quo have stymied internally driven industry innovation. The combination of India’s well-established technology innovation ecosystem and its exploding insurance market requires solutions to scalably meet the demands of the market. With the government supporting digital innovation through investment in personal device proliferation and core platforms (e.g. payments), it is believed in the West that India will be the hotbed for substantial change and innovation in the Industry.
What types of innovation can we expect?
I think you need a transitional sentence here — something like: Innovation in the Indian market is occurring across product lines and …Some of the major innovations that the insurance sector has been through in the recent past include the following:
Microinsurance. I want coverage now, but only now…Creating a “bracket” insurance product is an exciting proposition. It can come in a few different forms:
Time-based: My family and I are going on vacation for three weeks. I want travel insurance to cover us for medical insurance during that time as I will be out of the country and off-plan.
Usage-based: I want to pay for how much I use my motorcycle, not for an entire policy period. Why should I pay the same for 50 km per six months as a person who travels 8000 km? A product that tracks the ‘usage’ of an asset is much more useful to the customers.
Event-based: I am planning to go bungee jumping. It is a 15-minute exercise, but highly dangerous. I want personal accidental death and dismemberment coverage for the event and only the event.
Data-based: Leverage AI and machine learning to create insights beyond customer demographics and psychographics, affording increasingly relevant Insurance product and service treatments.
Purchase modes and methods. Changing the way in which insurance is purchased. Going beyond the traditional mode and method (e.g. device-based payments) to alternative payment opportunities. Examples are hottest in the area of partner integrated offerings, for instance, the “escrow” of property Insurance into the overall mortgage payment at the time of purchase, revisited at regular intervals.
There is a lot to be excited about.
The threat and opportunity of innovation are very real to providers in the US and Europe. With limited track records of success, an increased focus is on how the Indian market will handle the new Insurance economy. The presence of these providers in the market, coupled with the uniqueness of the market itself, will prove to be the innovation market of choice.
1Study by data and analytics company GlobalData.