By Vikul Goyal, CEO, Bimaplan
India is undergoing a digital revolution, propelled in part by the Covid 19 pandemic. Today we have more than 600 million active internet users, and businesses across sectors are reinventing themselves to leverage this growing consumer pie. The insurance sector too has been swept up by this tide of digitisation. Insurtechs are using technological breakthroughs like AI, IoT, big data, and APIs to offer fast and seamless insurance coverage to a large number of people through embedded insurance. This is creating unique opportunities for businesses to deliver enhanced value to their customers and unlock new revenue streams.
At present, India’s insurance market is valued at $131 billion and it is rapidly expanding at a CAGR of 17 per cent. Increasing digital penetration in India is driving innovation and growth in the insurance sector. Emerging Insurtechs will play a significant role in the development of the insurance industry, which is expected to reach $222 billion by 2026.
Key Approaches to Integrating Insurance
Broadly, related, linked, and bundled are the most common strategies for embedding insurance. In bundled, the insurance coverage already comes as a value-add with the product, so the customer need not opt in. For example, if an NBFC adds complementary credit life insurance with every loan to safeguard the families of its customers, this would be bundled. Linked is when insurance is offered as an add-on to the product at the point of sale. Say, when someone purchases a mobile phone and gets the option to add a warranty at checkout. In related embedding, insurance is offered at any point in the customer’s life cycle without it being a part of the transaction. For instance, an online medical store recommending health insurance but not offering it in the current transaction is a form of related embedding.
Insurtechs help businesses understand which of these strategies would be most effective in achieving their goals.
Tech Solutions to Drive Integration/Driving Integration Through Technology
Taking into account their overall goals and depending on the bandwidth and capacity of their tech teams, businesses can choose from different solutions to integrate insurance.
API kit – or Application Programming Interface – is the go-to technology for a flexible UI/UX and instant policy issuance. API integration is a one-time effort that enables multiple product configuration capabilities for the business.
A partner portal is recommended for companies with limited tech and ops bandwidth. It enables bulk policy issuance with a single file upload, for any plan and insurer of choice.
SFTP – or Secure File Transfer Protocol – is a convenient tool for businesses to issue policies without getting onto another website. They can just drop the data in SFTP, from where it’s picked up by the insurtech for policy issuance.
The Case for Embedded Insurance
Embedded insurance is a win-win for all, offering numerous benefits to businesses as well as customers.
Adding insurance to their products provides an easy cross-sell opportunity to businesses, unlocking new revenue streams. It also augments the value proposition of their products. This value-add boosts customer loyalty and retention. Enhancing their offering in this way is also a simple hack to acquire new customers.
On the other hand, customers gain access to relevant insurance plans at lower premiums when they need them the most. Besides, the end-to-end digital process ensures easy, paperless onboarding and instant policy issuance.
There’s a gradual but steady emergence of new consumer segments led by MSMEs, women, and people living in Tier-II and rural areas. The latter is projected to contribute as much as 70 per cent of the total consumption by 2030. But insurance adoption among these segments remains low due to various reasons, such as low awareness, inaccessibility of relevant products, and high premiums. Insurtechs are addressing these problems using technology.
For starters, insurtechs help businesses integrate the right kind of insurance with their products to cover a broad customer base. As a case in point, people living in remote areas often consult with doctors through e-clinics. When the e-clinics integrate health insurance with their service, they are able to provide coverage to those who need it the most but have no access otherwise.
Moreover, integrating insurance through embedded techniques makes the premiums affordable since the operational cost is significantly reduced.
In this way, insurtechs, using technologies like API integration, can help businesses tap into emerging consumer segments.
Around 400 million people in India, or roughly 30 per cent of the population, are currently without insurance – which is both a testimony to the challenges of insurance adoption so far, and an enormous opportunity waiting to be tapped into. By accelerating distribution through plug-and-play technology platforms, insurtechs are making insurance accessible to the currently underserved population. Embedding technology lowers operational costs by up to 25 per cent, and this benefit is transferred to consumers in the form of affordable premiums. The end-to-end digital process enables distribution of innovative insurance offerings, streamlines onboarding, and issues policy instantly, bringing about notable improvements in the customer experience.
As per the GlobalData and IRDAI Annual Report 2020-21, life insurance in India is expected to grow to $150.6 B and non-life insurance to $41.8 B in terms of gross written premium by 2026. Embedded insurance will play a major role in this growth by reimagining the insurance ecosystem through digital innovation, equipping businesses with the tools to unlock new revenue streams and tap into hitherto unexplored consumer segments.