The Indian insurance market is thriving with a projected 2024 market size of $210Bn USD with a CAGR of 5.3% through 2030 [Sitata, 2024]. While the Insurance Regulatory and Development Authority of India (IRDAI) has an ambitious vision of “insurance for all” and ensuring the right products are made available to the right customers, the business insurance vertical has a long way to go in this regard leaving a wanting ecosystem at significant risk.
The business insurance vertical represents roughly 35%, or $73.5(P) Bn USD, of the total market and faces many challenges that if not faced head on pose significant risks both financially and on socioeconomic levels. Some of the most notable root causes behind these challenges within the ecosystem of businesses and service providers and carriers alike are:
Complexity at Scale: Today, there are over 800 products available in India’s business insurance marketplace yet little in the way of purposeful education or right-fit policy selection means making it incredibly and increasingly difficult for both customers and insurers to purchase and administer making it commonplace for the right customer to receive the wrong policies.
Insufficient Protection: Traditional policies might not address the unique risks faced by your business. A sari shop owner might get basic property insurance, but it wouldn't cover losses due to theft of expensive silk fabrics during Diwali rush. Similarly, a bakery owner might have basic property insurance but lack coverage for food spoilage due to a power outage.
Unfair Premiums: Low-risk businesses end up paying for unnecessary coverages, increasing their financial burden. Cloud kitchen owner having traditional fire insurance might have to pay extra premium same as that of a normal restaurant. Likewise, a home-based interior designer might be forced to pay for property coverage for a physical office space which doesn’t exist.
Lack of Risk Education: Generic insurance plans leave Indian business owners unaware of potential risks. A local jeweller or restaurant owner might not know about the importance of cyber liability insurance to protect customer data in case of a cyberattack. A freelance web developer working from co-working space is not aware of liability under business interruption insurance.
The Revolution Business Insurance Needs
Data-driven coverage leverages multi-source data to create accurate risk profiles and personalized insurance products. These innovative approaches educate customers about risks previously ignored, leading to a more comprehensive understanding of their requirements.
This approach is transforming by providing:
Enhanced Risk Assessment: Utilizing enterprise data and AI, insurers can analyze a broader range of factors, including market trends, economic indicators, and even weather patterns, to predict and assess risks more accurately.
Personalized Coverage: With detailed data insights, brokers/agents can tailor policies to meet the specific needs of each business, offering more relevant and cost-effective coverage options.
Improved Quote Processing: Robotic Process Automation streamlines the quote creation process, reducing the time and effort required for risk assessment, thus enhancing customer satisfaction and retention.
Redefining Insurance
Imagine an intelligent, data-driven application that moves away from the traditional one-size-fits-all insurance models. Instead, it employs a sophisticated questionnaire system that adapts to each business's unique profile in real-time. This dynamic approach begins with three pivotal questions: the primary risk, the desired coverage limits, and the specific occupation of the business.
Unlike traditional forms, this application asks smart questions. It learns about the business, its work style, and specific challenges. The goal is to understand the business deeply and suggest custom coverage.
It creates a multi-dimensional understanding of each business, far beyond what traditional questionnaires can achieve. It is like having a personal insurance advisor. Businesses get better protection, learn about hidden risks, and save money.
Case Study
The High Cost of Underinsurance
A Pharma company, a mid-sized drug manufacturer, found itself in a crisis after a severe thunderstorm caused considerable damage to its production facility. The flooding and subsequent power outage resulted in substantial losses due to property damage and business interruption. The company had prudently insured itself against these risks, but a critical gap in coverage proved to be immensely costly.
While company had protected its physical assets and business continuity, it had overlooked the importance of product liability coverage. Due to the absence of a backup generator, temperature-sensitive drugs were damaged.
Despite stringent quality control measures, the company was inundated with product liability claims. These allegations, whether founded or not, had a devastating impact on company’s reputation and finances. Legal fees, settlements, and the cost of recalling potentially affected batches of medication drained the company's resources.
This case underscores the necessity of a comprehensive insurance strategy. While property damage and business interruption coverage are essential, product liability is equally crucial for manufacturers.
How an Intelligent Application Could Have Helped Pharma company
Had the pharma company utilized the intelligent insurance application; the outcome could have been significantly different. The system's ability to delve deep into the company's risk profile would have identified product liability as a critical exposure.
By asking specific questions about the nature of the company's products, manufacturing processes, and potential customer interactions, the application could have highlighted the importance of product liability coverage. The system could have even quantified the potential fiscal impact of a product recall or liability claim, emphasizing the need for adequate protection.
With this insight, the pharma company could have opted for comprehensive insurance coverage, including product liability, safeguarding its financial health.
The future of Indian business insurance lies in the ability to harness data-driven insights to offer more accurate, personalized, and responsive coverage solutions.
About Advanze
Advanze is the partner-first digital transformation company helping modern P/C insurance carriers gain competitive advantage faster through deep but narrow expertise in core platforms and elevating enterprise profitability through tech-enabled extreme efficiencies. Advanze capabilities include Artificial Intelligence, Automation, Duck Creek, Enterprise Data Management and Custom Software Development.
Author: Amol Gupta, Co-founder & Managing Director, Advanze.
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of IIA and IIA does not assume any responsibility or liability for the same.