What Difference Digitization Will Make In The Insurance Industry?
<p>The Covid pandemic has accentuated the demand for next generation tools in the insurance sector. Tech-enabled tools like Application tracker, Instant OCR, Mobile App, WhatsApp, Speech Recognition enabled IVR, Digilocker are getting popular in the industry making way for the next generation tools. Together they will take the industry to a different trajectory of growth. Being a data intensive industry, technological advancements will prove to be a boon as manual processes get converted into automated ones. Digitization can help insurance companies reduce process intricacies and unleash untapped potential. Needless to say, costs will get reduced and process efficiencies will go up.<br /><br />There are three things that can account for competitive advantage in the insurance sector – first is customer satisfaction which is a subset of how quickly customers are serviced in the system (this is also measured via Net Promoter Score-NPS in the advanced countries) in other words, ‘cycle time’. The second aspect is cost especially costs associated with the claim settlement process. The third is the ability to scale up based on the market demand. As COVID cases rose, hospitalization was at an all-time high and so were the insurance claims. For the insurance industry claim processing and claim settlement both increased enormously but was the industry prepared?<br /><br />An IBM report states that 95% of insurers rely on third party risk and customer data which is static and only 45% are harnessing real-time dynamic data. The report supports digitization as it states that new products launched on digitized platforms yield 25% more revenue and 33% more premium than the others. Insurance providers who adopted digitization were able to launch new services in the market 14% faster, reaching profitability 20% sooner. Dynamic data centric products generate higher income and are faster to market.<br /><br />Insurance penetration in India is low but the digital revolution in India could provide enormous scope for growth in the insurance industry as smartphones are easily accessible to the masses. Like Fintech resulted in financial inclusion, Insurtech will be transforming the insurance industry. MyCoach an AI enabled training program to train the sales force, Learner’s box a centralized online learning system - a library of digital content, nudge, e-pay link, Tele/Video MER, RPA, Visual IVR are some of the next generation tools being used by the Insurance industry as per Mahesh Puthran, AVP-Digitalization, ICICI Prudential Life Insurance Co. Ltd.<br /><br />At the policy purchase level, hyper personalized marketing communication powered by analytics, automated form filling by bots for the customer data to optimize policy issuing time and lead fulfilment, on boarding, handling customer queries is done through AI, conversational bots and voice based inputs. With regard to policy servicing and claims pay-outs, AI is used for 24x7 customer support, data management platforms are used for integrated and omni-channel servicing and advanced analytics is used for risk mitigation, frauds, underwriting, recommendation engines for next best product (Preetika Shah, Senior VP, Marketing & CRM, HDFC Life).<br /><br />According to industry experts, “blockchain technology can be used for cyber insurance and easing access to medical test data in Insurance”. When information will be centralized (blockchain platform), it would improve the claim processing speed. A win-win situation for the business and the customer. As per Mr. Puthran faceless chat-bots will soon be replaced with personalized digital humanoids with intelligence and sensitivity. These products will reduce manual intervention and reduce cycle time which will result in higher efficiency.<br /><br />As part of my Ph.D. research, I examined the role of knowledge management on the BFSI sector and found that the companies in the Banking and Insurance sector practicing knowledge management experienced cost reduction, reduced cycle time and better customer retention. The results were based on a survey conducted in the Indian manufacturing and service sector with 320 respondents. The findings of the study aptly apply to digitization as well since digitization involves application of technology coupled with knowledge management.<br /><br />As per Dr. Subhash C Khuntia, Chairman – IRDAI, the emerging new age technologies like Predictive Analytics, Machine Learning, Internet of Things, Chatbots, Artificial Intelligence, Telematics, Augmented Reality/Virtual Reality, Blockchain can be of immense use in insurance space as these would enhance personalized customer service, improve efficiency and result in economies of scale specially in a country like India with a large customer base.<br /><br />Insurance Regulator IRDAI is betting high on digitization. Since digitization enables the availability of dynamic data, it could be a game changer for the industry and the new normal for the industry in the years to come. Embracing digitization will help the industry by having contented stakeholders and resilient innovative processes.</p>