How emerging technologies are shaping a ‘phygital’ future of life insurance

Insurtech is changing the way we interact with life insurers. Without visiting a branch, customers can now renew their insurance policy, update beneficiaries, check the status of policies, and submit claims via apps. As compared to traditional means, apps have expedited the customer onboarding as well as the claim settlement process. Therefore, the overall client experience has improved.

India's insurance penetration stood at 4% in the fiscal year 2023, with the majority coming from the life insurance sector. The country’s life insurance market is ranked tenth globally in terms of the value of premium. Poised for a rapid growth, the insurance sector’s premiums are expected to rise at a compound annual growth rate (CAGR) of 7.1% from 2024 to 2028, the highest among G20 nations. In comparison, the global growth rate is expected to be around 2.4%, according to a Swiss Re Institute report.

A robust economy, increased awareness, and an aspirational middle class is driving the growth. In addition, the regulator’s Insurance for All by 2047 vision entails reach to the remotest region and across all customer segments, requiring heightened awareness and a strong technology boost. The regulator has already shifted the focus of the future to digital solutions by the Bima Trinity initiative which includes the digital platform Bima Sugam. This also signals how Insurtech innovations are helping reshape the insurance landscape.

However, despite technological innovations, life insurance is something that needs personal face-to-face interaction. However intuitive and user-friendly interfaces have simplified life insurance buying for consumers. This has laid emphasis on “phygital” solutions where customers can access the benefits of high-tech inputs as well as the assurance that comes with a personal connect.

Innovating with tech

For an insurer, understanding customers' needs has become a necessity to provide relevant products and services; it is no longer seen as a “nice-to-have”. Technology and innovation are now helping insurers analyse customer preferences. By leveraging cutting-edge technology, insurers are building new business models to solve long-standing industry challenges.

AI solutions in particular have started proving to be game-changing for underwriting processes and claim settlement. With advances in data analytics, these solutions can reduce the turnaround time needed for assessing risks, making smart underwriting decisions as well quick settlement of claims. For example, AI can assist insurers in analysing vast amounts of data to provide a more accurate assessment of an applicant’s risk profile. A person with a healthier lifestyle could be offered a lower premium.

Data-driven analytics models are used for improvement in persistency efforts where some parameters can be used to identify customers with a high propensity to continue the policy payments as opposed to others. This helps in identifying the collection effort needed for each customer group and has the further potential to help prepare tailored solutions to various customers.

Innovative yet simple tech solutions also have the potential to solve age-old “problems” associated with insurance purchases. One such example is the storage and handling of policy bonds where customers have had complaints about both the physical copies as well as the purely digital copies. Thus, a policy bond in the form of a smart card is a practical solution for such customers. You may think of it as having your insurance in your pocket. The smart card allows users to view their policy details at any time. It can also be clubbed with a QR code to avail of any policy-related services and to apply for a claim. No paperwork is required because all the information is on a card.

Furthermore, a lot of websites and apps have included financial planning tools and calculators, empowering consumers to make informed decisions about their life insurance needs.

Disruptive solutions in the insurance industry including AI/ML, data analytics, mobile apps and cloud computing that help improve operations, distribution, underwriting, claims settlements, and customer engagement, can eventually reduce cost, helping companies pass on the benefit to the customers. This also aligns with the IRDAI’s aim for universal insurance coverage by 2047.

The road ahead

However, despite all the technological advancements, we have observed that customers still rely on human connection for making critical decisions like which insurance to purchase. Thus, the future appears to be more ‘phygital’, where physical and digital channels will combine to offer customers a seamless user experience. Additionally, it will close any gaps in customer service delivery and cater to customer preferences across the spectrum.

Some examples of these “phygital solutions” are sales and onboarding apps provided to salespeople to help them do a digital need-based analysis and provide best solutions while interacting with customers and subsequently helping onboard customers as well. These solutions, though triggered and facilitated through a physical interaction between the salesperson and the customer, are paperless and provide the benefits of a hassle-free, seamless and faster digital experience.

Going forward, insurers will focus more on convenience, transparency, and efficiency when digitalising their offerings. Online purchasing of policies, AI-driven claims processing, and social media engagement is likely to be extensively used resulting in a more customer-centric and tech-forward life insurance ecosystem. It will lead to higher penetration of life insurance and better protection for households against unforeseen events.

Casparus J H Kromhout

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Casparus J H Kromhout is Managing Director & CEO at Shriram Life Insurance.