With widespread internet connectivity in the country, the Indian insurance industry is, primed for technology-led companies with digital platforms and innovative new custom products. In an interview, Chirag Buch, Managing Partner, SE2 India told Aparajita Gupta about the nuances of the insuretech industry and how it is shaping up in India.
How is insuretech disrupting the insurance industry? Are Indians ready to take such disruption?
Public sector insurance companies have dominated the insurance sector in India for long. Today, although there are over 55 insurance companies in India, their business models and distribution channels remain traditional, and there remains a large section of the population who are uninsured.
According to India Brand Equity Foundation (IBEF), overall insurance penetration in India was just 3.7 per cent in 2017. There are, however, many non-traditional disruptions underway; last year, Amazon, Flipkart, and Paytm were all in the news for seeking Insurance Regulatory and Developmental Authority of India’s (IRDAI) approval to sell insurance. There is a broad consensus that simplified products sold via digital platforms that allow consumers to buy insurance seamlessly present a great opportunity to penetrate and grow the under-penetrated insurance sector in India finally.
With the level of internet connectivity penetration in the country, the insurance industry is, therefore, primed for technology-led companies with digital platforms and innovative new custom products. However, the winners will need to break away from just selling a product to evolving into a trusted part of their customers’ life journey and solve for the low customer engagement that consumers have with their insurance providers.
This is where insuretech firms come in, they are working on leveraging broader innovative technology trends and solutions to disrupt the industry and change how risk is priced, or insurance products are underwritten or how it is sold. Insuretechs have a great role to play as we drive shift in insurance more towards digital and direct channels with better leverage of engagement, data and AI. India plays a pivotal role in this with its talent and innovation echo system. The other benefit is that it brings in transparency in the system and avoids mis-selling of insurance; something that the industry has been struggling for long periods of time.
In what ways is insuretech future-proof and incremental in nature?
In today’s digital environment, life insurers and annuity providers must be able to bring new and innovative products to market frequently and rapidly. As the needs of consumers evolve, insurers must keep up with their increasing demands and lifestyle changes, and become a more integral part of their lives with higher customer engagement. The industry will be going through a continued evolution as products get more standardised and simplified. There will be shifts in distribution structure with more plan based and fee based products rather than current commission based products. There will be more benefit bundling required across product lines to solve for end customer needs. This will require an open, flexible and futuristic technology echo system architecture.
Insuretech is often viewed as being a collection of smaller, customer-centric startups that push larger traditional insurers to rethink the customer experience they provide and to transform their business models. While this is true, the broader story is one of partnerships and eco-systems in the form of innovation labs, long-term collaboration, idea accelerators, and sponsorships. From the use of AI and chatbots to digital marketing, Insuretechs are driving the development of innovative customer-centric products. They are reimagining the selling and servicing of insurance and taking advantage of broader technology trends such as big data, machine learning, AI and wearable devices, to name a few.
SE2, a U.S. Life and Annuities focused InsureTech firm recently opened offices in India (Gurgaon and Pune) to support its mission to transform the way life insurance is sold and serviced by building a completely digital end-to-end life insurance platform. They recently announced a new state of the art platform that leverages APIs from their core SE2 Aurum digital platform and seamlessly connects with the next generation front office and customer engagement solution from Life.io. Thereby, providing traditional US insurance carriers with an innovative solution to leapfrog into the digital era and successfully broaden and deepen customer engagement.
What is SE2's vision to simplify insuretech for the ease of understanding by global insurance players?
Insuretech as a concept is relatively new not only in India, but globally too. The insurance companies globally are following a legacy mindset and the processes are more focused inwards than outwards.
Traditional insurance companies realise and fear that a third of their business could be at risk to nimble insuretech competitors that have a superior customer focus and modern technologies, and are using data and analytics to develop greater customer insights that equip them to better address the younger demographics, the micro-segments and the lower face value middle markets.
SE2, an Eldridge Industries business, is a leader in technology-driven third-party administration services for the US life and annuity insurance industry. SE2 has a proven track record in delivering platform led transformations for the life and annuity insurance industry.
Why is insuretech a catalyst in the insurance industry growth?
While the US is the largest single insurance market currently, China is the second largest and growing at a much faster pace and will overtake the US by 2030. In fact, as per Allianz Research, a whopping one-third of all additional premiums will be written in the China (Middle Kingdom), compared to just 14 per cent in the US. In fact 60 per cent of the future growth in insurance premiums will come from Asia.
Further their calculations suggest that three quarters of future growth will come from the leading 10 markets, with China, the US and India being the top three. But today insurance penetration levels are low and premium growth anemic in India.
We believe it will be the disruption driven by insuretechs that will finally drive growth and penetration of insurance in India. Leveraging digital technologies, developing innovative, simple and on demand products and driving customer engagement levels will be the catalysts for growth.
How fast is insuretech being adopted within the industry?
Insuretech companies are forcing the redesign of the insurance industry landscape by applying technology innovation to processes along the entire value chain.
Venture investors have recognised the scale of the opportunity being addressed and are allocating larger sums to invest in rapidly growing insuretech solution providers.
At the same time, incumbent insurance companies have joined the scramble to back companies that are developing and integrating new technologies in ways that could either threaten – or enhance – incumbent business models.
The result has been a dramatic growth in investments: insuretech companies raised over $8.5 billion over the last five years, in 600 deals. The capital invested in insuretech startups and scale-ups reached $3.18 Billion worldwide in 2018, almost double the $1.65 Billion invested in 2017, according to data from the FinTech Global database.
SE2, which is on a mission to provide the life insurance industry with an insurance in a box cloud solution along with Eldridge Industries is continually scanning and building an eco-system of insuretech firms to invest in. SE2 just earlier this year took a majority stake in one such insuretech - Life.io, which is a state-of-the-art digital platform to educate, engage and reward policyholders at every stage of the customer journey.