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India InsurTech Thought Leadership

INSURTECH – Lots of Space and Lots to achieve.

There is no denial of the fact that Insurtech companies play a very important role in the development of the insurance sector in India. They are at the forefront of the digital transformation in the insurance industry. Insurance carriers who are burdened with legacy systems and inefficient operations can partner with Insurtechs to enhance their customer experience and streamline processes, thereby increasing their overall efficiency and becoming a digital-ready insurance carrier.

Funding for Insurtech companies has been on the rise since 2013, although globally, the funding for Insurtech's has decreased from $15.80 billion in 2021 to $7.98 billion in 2022 as per Gallagher Re. Whereas, Indian Insurtechs have continued to receive funding at a comparatively steady rate; in 2022, investment levels will still be double that of 2020 according to a report by BCG & India Insurtech Association.

Moreover, Insurtech companies have brought about a significant inroad in helping insurers in the distribution of their products. However, there are many areas in which they encounter challenges to achieve their intended purposes. Below are some of the critical areas where Insurtech companies face challenges in India.

Integration with legacy systems:

The first and foremost difficulty faced by the Insurtech companies is to integrate their technologies with the existing legacy systems of the insurance companies. This process can be complex and time consuming especially where the legacy systems are outdated. Hence, seamless integration becomes important in establishing a long-term relationship between Insurtechs and established insurers. This step is crucial as insurance carriers are estimated to spend at least 70% of their IT budget towards maintaining outdated legacy systems, according to Datos Insights.

Data Security

The vast amount of data Insurtech companies handle raises the question of data privacy and security. Any breach or misuse of data not only erodes the trust with the insurance carriers but also subjects the Insurtech company to regulatory scrutiny. Data safety and privacy needs to be constantly monitored and addressed by Insurtech companies. As a result of this many Insurtech companies have become SOC 2 compliant to ensure data safety.

Talent Acquisition & Domain Expertise 

Insurtech companies need employees who have adequate domain expertise for developing insurance products while considering the expectations of the market. For Insurtech companies, hiring qualified individuals from the insurance sector continues to be a struggle as there is a significant employee turnover ratio. Hence, this puts pressure on Insurtech companies to put in place a backup plan to maintain the timeline for development and delivery.

Additionally, effort must be undertaken to continuously train and update the knowledge of Insurtech employees to understand the ever-changing market and regulatory requirements. This will add immense value to Insurtech companies to stay ahead of the competition.

Overemphasisis on Technology

Some Insurtech companies place more emphasis on technology without understanding the intricacies of the insurance industry. This will result in the development of a product that lacks practicality and may fail to address the specific needs of the market. The technology should be simple and easy to understand. Insurtech companies aiming to differentiate their model from the traditional ones need to understand that such changes in the cultural shift should be as less disruptive as possible and ensure seamless transition within their organization and their users.

Enabling Innovation In Insurance

Many Insurtech companies operate internationally. Hence, they are in a position to develop newer and innovative products in a newer market with different regulatory guidelines. This may need a deeper understanding of the specific market and regulations. They should develop solutions catering to specific market segments, including micro-insurance products, tailor-made policies etc. Similarly, insurance regulators across globes have introduced regulatory sandboxes to encourage innovation in the insurance sector. This helps the Insurtech companies to test and deploy new technologies and business models.

Product Differentiation

With the market opened, many Insurtech companies have come into existence. The market is crowded with Insurtech companies, though everyone believes that there is a space for everybody. But the need to differentiate becomes extremely important. The product should embrace all the latest requirements. The focus must be on making insurance more inclusive to address the needs of the underinsured and uninsured segments of the population. By leveraging technology and alternative data sources, Insurtech companies must aim to make insurance more accessible for a broader range of customers.

Expectations of the Insurers

Many insurance carriers expect their sporadic and specific requirements to be built into the insurance product. Both parties need to clearly understand that exceptions should not become a rule. The integrity of the product should not be compromised by workaround solutions.

Customer Service

There is no doubt that technology is essential for innovation, but Insurtech companies need to balance technology with a human approach in areas like customer service and claims processing. If the companies rely more on automation and develop products without any empathy for the end customers, it will result in customer dissatisfaction.

The insurance landscape is dynamic, and the growing tech-savvy population in India is ever-demanding. These numerous challenges create the perfect opportunity for Insurtechs to think beyond a cookie-cutter approach to the problems of the insurance industry and provide solutions to policyholders and insurance carriers, which drives them to be pioneers in a digital era. Insurtech companies, as an integral part of the insurance industry, should endeavor to overcome these challenges through strategic planning and adaptation of market dynamics.

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.

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