The growth of digitization has changed the way users approach financial planning. With increased digital penetration across sectors, factors such as investor convenience and ease of business have become prerequisites for money management. In such a scenario, market players have actively used technological innovations to improve the landscape of insurance – one of the most important forms of investment. The use of technology to enhance the insurance industry models for better user experience is known as insurtech.
What is insurtech?
‘Insurtech’ is derived from the terms’ insurance’ and ‘technology.’ It leverages technology to bridge the gap between traditional insurance features and consumers’ evolving requirements. The idea behind insurtech is to provide consumers with tools to make their insurance journey efficient, flexible, and secure. Insurtech businesses allow users to choose, customise and claim their insurance policies on platforms such as mobile apps and websites.
By using e-platforms, insurtech makes a marked departure from traditional insurance industry practices such as in-person meetings with agents, filling out several forms, and claiming your insurance manually.
Now, insurance providers and customers can access and share a detailed analysis of policies and underwritings, comparative analysis of different schemes, quicker payment and sign-ups, address fraudulent activities, and customer verification in one place.
Insurtech in India
With a 1.9% global market share in insurance premium values, India is 10th on the global insurance list and is the second-largest emerging insurance market globally.
However, insurance penetration – mainly non-life insurance with only 1% penetration in 2021 – has tremendous scope for further growth in the country.
In this context, insurtech companies play a crucial role. Insurtech businesses in India provide consumers with insurance offers backed by data. This data-driven model gives users access to custom policies that cater to their unique customer behaviour and challenges.
A glance at Indian insurtech growth
The numbers show that the pandemic has only accelerated the growth of insurtech companies in India. As per an Indian Brand Equity Foundation report, India’s insurtech businesses have seen tremendous growth in the last few years. In 2020, Indian insurtech companies raised US$ 304.8 million. Within a year, this value rose to US$ 1.33 billion in 2021.
As per S&P Global Market Intelligence data, India accounts for 35% of the insurtech-focused venture capital invested in the Asia-Pacific (APAC) region. With this, India is the second largest insurance-technology market in APAC after China.
According to India Insurtech Association’s annual report, the growth of the insurtech business model is attributed to the advantages that it guarantees in the way insurance is manufactured, distributed, and claimed.
The report adds that insurtech businesses are growing in India by providing customers access to a marketplace of offerings. Insurtech business stakeholders have also identified areas that need improvement and offered unique solutions. For example, keeping in mind the low health insurance penetration in the small and medium enterprises sector, several insurtech companies have enabled access to digital monthly subscription-based platforms for SMEs.
Indian insurtech companies are also improving insurance distribution penetration by enabling end-to-end digital-assisted insurance distribution. The paperless process brings customers and insurers onto one platform to enhance insurance providers’ efficiency and customer experience.
With the help of big data and artificial intelligence, insurtech businesses can collate information from customers across socio-economic backgrounds. Beyond the customer’s credit history and financial status, they include a more comprehensive look at lifestyle choices. In doing so, insurtech companies can predict plans and policies that suit the customer’s price bracket, risk tolerance, and scope of coverage.