The insurance industry in India is riding a new wave of disruption driven by insurance technology (insurtech) startups. From digital distribution to data analytics, these young companies are bringing innovative solutions to long-standing challenges and inefficiencies in the traditional insurance sector. The insurtech revolution promises to expand insurance coverage, improve customer experience, and introduce new products and services in the world’s second most populous market.
The Legacy Insurance Sector in India
The insurance industry in India has long been dominated by state-owned companies like Life Insurance Corporation (LIC) and General Insurance Corporation (GIC). Established in 1956, LIC held a virtual monopoly over the life insurance segment until the market was opened up to private players in 2000. Similarly, non-life insurance was primarily offered by four PSU insurers until privatization in 2007.
While these public insurers expanded coverage across the country, the industry suffered from inefficiencies like cumbersome paperwork, lack of transparency, and delays in claim settlement. Insurance penetration, measured as a percentage of GDP, stagnated around 3-4% for decades – well below the global average.
The entry of private insurers like ICICI Prudential, HDFC Life, and Bajaj Allianz infused competition into the market. But challenges like low awareness, limited access in rural areas, and legacy processes continued to plague the industry. The traditional distribution model of agent-driven sales also had limitations in reach and bandwidth.
This set the stage for disruption by insurtech startups looking to reimagine insurance processes and business models.
The Emergence of Insurtechs
In recent years, India has seen a mushrooming of innovative insurtech startups aiming to serve various parts of the insurance value chain. As per Tracxn, over 110 insurtech companies have been founded in India since 2014, attracting over $205 million in funding. These startups are bringing new energy, technology and business models to tackle long-standing industry challenges.
Digitizing Distribution
A major focus area for Indian insurtechs has been digitizing the customer acquisition and distribution process. Startups like PolicyBazaar, InsuranceDekho and Coverfox have built digital insurance marketplaces for price comparison and purchase of policies online. This gives customers access to hundreds of life and non-life insurance products in one place, saving time and effort. Integrated with payment gateways, they provide an end-to-end paperless purchase experience.
Other startups like RenewBuy enable customers to renew lapsed policies with a few clicks, eliminating tedious paperwork. InsuredMine connects rural customers to various insurance schemes through its online platform.
Data Analytics for Improved Underwriting
Traditional underwriting processes rely heavily on manual paperwork, medical exams and physical inspections. This leads to delays and higher costs. Indian insurtechs are leveraging vast sources of digital data, machine learning algorithms and predictive analytics to make underwriting faster, dynamic and more accurate.
Startups like Stashfin use alternative data sources to build credit profiles of underserved segments who lack documented income and credit histories. This helps extend affordable insurance to millions excluded by traditional models. Other examples areINTEGERs and Artivatic.ai who apply AI to automate analysis of medical records, satellite images, etc. for improved risk insights and pricing.
Innovative Insurtech Products and Services
Armed with technology and data, Indian insurtechs are crafting innovative products and value-added services across life, health and P&C insurance. For example, InsuranceDekho offers “bite-sized” coverage like dengue insurance for as low as ₹99 premiums, targeted at students and millennials.
Startups like EasyPolicy, Riskcovry and Pokkt Insurance allow customers to customize policies based on their unique needs. Clover Health Insurance provides cashless OPD and unlimited teleconsultations along with hospitalization covers, while Agatsa offers wearable-device based group health plans for corporates. MProfit software enables micro-insurance and parametric products for rural segments.
There are also insurtechs focusing on the claims management process and improving customer experience. Companies like Kognetics and LegalFlare use ML and image analytics for faster motor insurance claim settlements.
Strategic Partnerships
Insurtechs have been open to synergistic partnerships with incumbents to jointly drive innovation and new solutions. For instance, Startupbootcamp InsurTech Mumbai runs accelerator programs with corporate support from ICICI Lombard, HDFC Life, Munich Re and others. Traditional insurers are also acquiring stakes in startups to augment their digital capabilities – ICICI invested in PolicyBazaar and Coverfox, HDFC Life in Click2Insure.
Insurtech Funding and Growth Trajectory
Insurtech startups in India have attracted over $205 million in funding between 2014 and H1 2019, as per Tracxn. PolicyBazaar raised a Series F round of $52 million in 2018 led by Softbank, taking its total funding to $366 million and valuation to over $1 billion. Coverfox raised $22 million in Series C funding in 2017. Other well-funded startups include Digit Insurance, RenewBuy, Acko General Insurance and Toffee Insurance.
Rising internet and smartphone penetration fueling digital payments growth is likely to drive adoption of digital insurance distribution and purchases. The insurtech segment in India is projected to grow at a CAGR of 14% to touch $60 billion in premiums by 2025. PolicyBazaar alone has sold over 10 million policies and serves 80 million visitors annually on its platform.
To further capitalize on this growth, traditional insurance giants like Bajaj Allianz are also launching their own insurtech ventures. Regulators are supporting innovation through sandboxes – IRDAI’s I-Lab allows insurtechs to test products. Collaborations between corporates and startups will be the way forward to truly transform customer experience.
Key Challenges Ahead
While the insurtech revolution has tremendous potential, some challenges need to be addressed:
- Building Trust: Insurtechs must establish credibility and gain consumer confidence in new digital models. Issues like data privacy and security need robust governance.
- Profitability at Scale: Many insurtechs have focused on growth over profits. Proving unit economics as they scale remains a key priority.
- Distribution Inclusiveness: Digital offerings may fail to reach low-income segments not online. Omnichannel presence incorporating agents and offline touchpoints is vital.
- Regulatory Compliance: Insurtechs have to ensure compliance as regulations evolve, while regulators need to find balance between protecting consumers and enabling innovation.
- Integration Complexity: Integrating insurtech solutions with legacy systems can be complicated for incumbent insurers, potentially delaying deployments.
Conclusion
Insurtech innovation is set to rapidly transform insurance in India by enabling digital distribution, data-driven underwriting, innovative products and improved efficiency. Inclusive partnerships between insurtech startups and incumbents can overcome the challenges ahead and accelerate modernization across the massive but underpenetrated Indian insurance market. Embracing insurtech has the potential to make insurance accessible and affordable for all Indians, supporting economic growth and financial inclusion.
References
- Swiss Re Institute. “India insurance: Shaping risk for the future” Sigma Report. 2019
- Tracxn Research. “Insurance Technology Sector Report India – 2019.”
- “Indian insurtech market stands to grow at 14% CAGR by 2025 to reach $60 billion.” The Economic Times. May 2019
- “Insurtech in India – Ready for the Big League?” EY Report. 2018
- “PolicyBazaar New TV Campaign: Starts With Dhoni, Ends at the UN General Assembly.” Brand Equity. Jan 2020