The InsurTech segment has been attracting lots of funding in recent years, both in India and overseas. In India, it has grown to a whopping $287 million. In 2020 from $11 million in 2016, according to a report by India InsurTech Association. Even Grand View Research believes that the global market should grow at a CAGR of 48.8% from 2021-2028.
India is also virgin territory with insurance saturation only at 4.2% in 2021 compared to the global average of 7.4%, according to Swiss Re’s Sigma World Insurance Report. In fact, around 75% of all businesses are underinsured, and nearly 40% of SMEs have zero coverage. When faced with any obstacle, most are exposed directly to phenomenal cash outflow, with no coverage to back them. This is definitely an area for InsurTechs to focus on.
Success and the Roadblocks
InsurTechs being AI-led firms, help modernise legacy processes to make companies sleek, cost-efficient by improving user experience, via smartphone apps and chatbots. In fact, they offer customers a unique self-planned, self-managed insurance approach. By putting technology first, InsurTechs empower users by putting insurance just a click and tap of a button away. Such streamlined features have an accrual effect on SMEs’ expenditure, since they save on not having to hire backend employees for customer service. Also since quality customer service is assured, there are chances of repeat customers—another win for SMEs.
There are many challenges ahead also, since InsurTechs are primarily focussed on distribution. However, they have to expand operations to all areas of the insurance funnel, namely, insurance underwriting, servicing claims and regulatory concerns. How they tackle this hurdle could spell the difference could make all the difference.
Just like FinTechs, InsurTechs need to partner with their former competitors. Winning support of established insurers is critical to their survival. They will have to also understand why insurance penetration is low; users are put off by insurance related cumbersome processes. Industry players have to bridge this gap by drawing in individual and SME buyers with simple, automated channels and presenting them with a seamless claims process. And, repetitive elaboration of other benefits, such as savings for SMEs, may also be necessary to draw them in.
Relevance of Insurance
To learned buyers, adequate savings and correct insurance coverage equals financial freedom and security. They get insured topurchase peace of mind via this security instrument as protection against financial ruin in tough times. This is because they have passed on their financial burden to insurers.
They pay premiums because when untoward situations arise such as hospitalisation due to COVID-19 infection,—one that can wipe out ones’ entire savings—an adequate coverage is the only real defence. This is a key message to be reiterated to potential buyers.
Technology, especially InsurTech, is upgrading the sector
InsurTechs take a novel approach by offering seamless connectivity to buyers, a pain-point till now. By partnering with them, insurers can offer the same. This partnership will lead to smart-tech solutions, comprising ML and Data Analytics-led innovations, thus solving many customer issues. With InsurTechs forever enhancing their capabilities, such as offering the latest Application Programming Interface platform, services are only bound to improve and become more instant—just what users need.
The future is here
While InsurTechs had gradually made inroads into the insurance space, they have taken it over with exponential growth. As of now, the US, the UK and Germany boast of incubating most of the InsurTechs, whereas the Asia-Pacific region accounts for 14%. That’s not a discouraging number—it reveals the immense market potential.
Beyond the figures, the future of InsurTech is headed in a more instant, personalised and risk-driven direction. Individuals will feel empowered to drive decisions on their own, a key factor. Simultaneously, SMEs will see growth on the back of better insurance plans that are customised to their particular needs, cost savings and automated, quality backend services.
The views expressed above are those of Layak Singh, the founder and CEO of Artivatic.AI. TheSMEIndia.com does not necessarily endorse it and will not be held liable for any direct or indirect damage made to any individual or organisation.