How Data-driven Tech is Enabling Innovation across the Insurance Value Chain

Picture yourself driving a car. While pulling into your destination, you hit a lamp post in the parking lot. You quickly take a picture of the damage done to your bumper and upload it on the app of your insurance company. By the time you think of taking the car to the nearest garage, the insurance company confirms that your claim has been approved and the money gets credited to your account. While many such technologies are available for customers already, a fully integrated and automated claim settlement process is still a bit distant in India.

The good news—digitalisation has started transforming various aspects of the insurance industry and the time may not be too far when, after the accident, your insurance company immediately tells you how your careless driving led to an increase in future premium payments and, consequently, the money gets deducted from your account. Phew! Far away, but entirely plausible.

If anything, Covid-19 has only accelerated the pace of digital transformation in the insurance industry. Not only has digital innovation given a huge upside to insurance businesses, but a separate space called ‘InsurTech’—for the seamless delivery of insurance products—has also emerged from tech-driven start-ups. From faster on-boarding and claim settlements to product innovation and diversification, to data-driven price discovery and underwriting, the use of technology is changing the insurance industry landscape.

New ecosystem

Covid-19 has helped fuel a new wave of start-ups in the insurance sector, especially those enabling insurers to leverage data and analytics in various ways. From quote issuance to claim settlement, they act as a digital intermediary between a customer and an insurance company. The trend can also be observed in the recent funding of these new-age companies. For example, Onsurity, a tech start-up that offers healthcare services to start-ups and small and medium enterprises (SMEs), raised $16 million. Bengaluru-based Kenko Health, another health-tech start-up, raised $12 million as part of its Series-A funding round, led by Sequoia Capital India. Another Bengaluru-based employee benefits and InsurTech platform, Pazcare, too recently announced that it has raised $3.5 million as part of its seed round, which was led by BEENEXT. Similarly, Plum, which offers easier and affordable corporate group health plans, raised $15.6 million in its Series-A funding round, led by Tiger Global.

Most of these start-ups are active in the group health insurance space, as Covid-19 has awakened the untapped SME market. “Whenever a new idea catches the fancy [of the market], you have many people flocking to that idea. So yes, currently there is a lot of traction for the idea around group health, especially those being sold to smaller companies who are not at all being targeted. Some of the group health [market] was in the domain of large brokers, and for them it wasn’t very efficient to go down the ladder and cater to companies that have 10-20 employees,” says Shanai Ghosh, Executive Director and CEO, Edelweiss General Insurance.

The reasons for a surge in insurance start-ups can also be attributed to the fact that segments such as health and life are underpenetrated. Moreover, customer preferences are continuously evolving with growing digital adoption. “Technology advancements such as Internet of Things, Big Data analytics, etc., are enabling innovation across the insurance value chain. Globally, nine InsurTech unicorns have emerged, with Policybazaar, Digit and Acko from India entering the exclusive club. In India, funding has seen an increase from a modest base of $11 million in 2016 to $287 million in 2020,” says Prerak Sethi, Co-founder of India InsurTech Association (IIA), a not-for-profit industry organisation building collaboration between start-ups and other insurance industry participants.

Faster claim services

The true test of an insurance company is in how good or bad it is at the time of servicing claims. Realising that it can make or break an insurance company, many insurers have started using artificial intelligence (AI) and machine learning (ML) for a seamless claim settlement experience.

Insurers such as ICICI Lombard, Digit General Insurance and Edelweiss General Insurance have developed an AI-enabled car inspection feature embedded in their mobile apps, which allows customers to buy or renew policies anytime. While some are using it for renewing lapsed policies, some others are also using it for fully automated claim settlements without human intervention.

Munch this: ICICI Lombard’s customers use the insurance provider’s in-app feature to take and upload photographs of their car damage. After the photos are uploaded, an AI tool embedded in the app analyses the photos in the background and generates a list of needed repairable and replaceable parts, along with their associated costs. These are also parallely investigated by the claims team, which also helps in the simultaneous training of their AI models. Most importantly, the app quickly suggests an estimated repair cost using historical data. The tech-enabled process has reduced the turnaround time, but the complete process is not fully automated yet.

“We are currently running our AI/ML models in parallel, till we are sufficiently confident of being able to fully automate the claims process. Considering that there are technicalities in the assessment [process], there are always chances of under or over insurance while settling claims using AI and ML. In future, as we gather enough feedback, [data] and confidence, there is a full potential of end-to-end AI-enabled claim settlement in motor insurance. We are, however, currently offering end-to-end cashless claim settlement in health insurance policies for certain segments,” says Sanjay Datta, Chief of Underwriting and Claims at ICICI Lombard.

Rohan Kumar, CEO and Co-founder of Toffee Insurance, agrees. “Cutting down the time duration of claims is complex and needs to be simplified. But where you used to take 15 days, now it can take seven days. This is the good part, as document submission has become easier; now it only takes time to process the document.” He adds that the sector has seen tremendous improvement over the years. “Simple claims like OPD claims, malaria or dengue covers are easy to process, as in those products assessment is very simple. The money can be paid [straight] as these are fixed-benefit policies. Instant payout will happen in specific policies and not in a blanket way.”

Not falling behind, Digit Insurance has also launched a video assessment for motor own damage claims, which empowers its workshops and customers to do a video survey at a convenient time, without depending on a surveyor to reach the workshop. The company says this has reduced turnaround time for motor claims by half.

Gangadhar S.J., Head-Technology, Digit General Insurance, says, “For health claims, models have been put in place to cull out relevant information from all the documents shared by a customer and to classify them under categories such as discharge summary, doctor’s notes, pharmacy bills, etc. This acts as a catalyst in expediting processes and timely communication with customers, should there be any missing or incorrect documents.”

As AI models have been built for the automation of claims processes to reduce turnaround time (TAT), the one area where fully automated claims are getting processed is flight cancellation insurance. “We did an API integration with the travel portal, where if you buy and cancel on the travel portal, details are immediately passed on to us. We will trigger a link to the customer, and the customer needs to just fill in their bank details, and payment is done instantly,” says Ghosh of Edelweiss.

Product innovation

Another big advantage of technology in the insurance industry is the degree of customisation it allows, depending on the market requirement. For instance, you no more need to buy the cover for an entire mobile phone; instead you can just opt for the screen cover. “We should see more and more innovation around short-term, moment-based covers. There are products that you need for a certain period of time, and you are done with it. For example, flight cancellation, a sports injury cover during a tournament, a home cover while on vacation. It could be as short as one day also,” says Ghosh.

Taking the concept of ‘bite-sized insurances’ further to ‘embedded insurance’, Toffee Insurance sells insurance cover at points of sale. The company has empanelled with insurance companies as their corporate agents, to tailor specific policies for policyholders. It offers bite-sized insurance products like cycle insurance, eyewear insurance and travel insurance, among others.

Data-driven pricing

The Insurance Regulatory and Development Authority of India (IRDAI), which regulates the sector, has also played a vital role in supporting innovation in the industry by introducing a regulatory sandbox .

This is the reason that the concept of pay-as-you-drive and pay-how-you-drive and distance-based auto insurance is becoming a reality for Indian customers. In these policies, premium rates vary based on various parameters, like a customer’s driving pattern. Technology allows insurers to have a more accurate view of how one drives, and helps them offer dynamic premium pricing for policyholders.

“InsurTech has helped customers compare and choose the right kind of products, at the correct price. It has simplified the claims processes, brought in a high degree of transparency in transactions, and simplified the entire process and journey of policy management,” says Raghavendra Rao, Chief Distribution Officer, Future Generali India Insurance.

@teena_kaushal