The macroeconomic, demographic and overarching regulatory setting has dictated the product proposition and benefit offerings in the past. Insurance products were thus a few all-encompassing, complex off-the-shelf offerings, which the insurers would try to customise as either premiumisation-focused structuring or mass appeal-focused propositions for the potential policyholders.
In the past decade, given the maturity continuum of the insurance industry in India, the regulator has been cautious, consistent and reticent. Further, the integration of technology along with impetus on data collection using a data lake/warehouse and data-driven decision-making in the insurance value chain has also been a recent phenomenon that is still evolving. Hence, the conjecture that the regulatory and technology constraints have historically curbed the rate of innovation in product propositions is evident.
Customised Solutions with Integrated Value Propositions
With the awakening of digitally savvy and well-informed consumers, the new wave of personalisation will be driven by the single most important tenet: individualised, lean, lifestyle curated product propositions, with insurers being perceived as a proactive advisor rather than just caveat emptor of the product.
The advent of digitalisation and the explosion of numerous touchpoints in social contours, IoT/smart devices along with organic data collection during customer journey by insurers has led to expectations of enhanced policy underwriting, selection criteria, claims settlement and a seamless customer journey.
In this age of data-driven convenience, customers will be unsatiated if they continue to be offered cookie-cutter insurance products with few standard add-ons rather than product packages curated to meet their individual needs. Moving towards the priorities of customers, along with integrated service offerings including ecosystem value adds (e.g., gym discounts, health coupons, personalised kits, etc.) and incentivising wellness behaviours are also enriching the personalised experience.
Hence the insurer needs to pivot towards an ‘experience and customer first’ approach to retain and attract policyholders. A key enabler to help insurers with this pivot is InsurTech, the intersection of insurance and technology, which is digital solutions for everyone involved in insurance including customers, agents, brokers and employees across the value chain touching areas like marketing, distribution, underwriting and claims management.
Supportive Regulations as a Catalyst for Product Innovation
The regulator is also now slowly acknowledging that while baseline maturity of the insurance sector has been attained, the pathways towards ensuring a ‘fully insured’ India will require innovation that is not only channel-driven but product-driven as well. IRDAI has also reinvigorated its approach from regulation focused to reforms focused with the objective of increasing ease of doing business and insurance penetration. This has provided a major impetus to insurers for innovation.
Regulatory-induced innovation, with the ‘Use and File’ relaxations on product filing, will help insurers by empowering them with the means to drive product innovation and coverage growth. This invariably will lead to an accelerated product development cycle. Further, each insurer will be forced to choose between being market leaders in innovation or becoming a fast follower by being adjacent to innovation. It would also increase competition as the speed of repricing the premium to remain profitable and relevant may increase when looked at in conjunction with the overall risk optimisation and personalised product structuring setting.
Preparing for the Future
Insurers will need to define themselves not as a run-of-the-mill transactional partner, which offers near-standard risk covers and steps in when things go wrong; but as reliable advisors helping customers navigate the nuances and peculiarities of risks one faces in an ever-changing and challenging world.
This represents a challenge and augurs a profound shift in how complex insurance products will be developed, priced, and sold in future. The ultimate litmus test for all the insurers will be keeping customers primed for product innovation with a move away from ‘appeal to mass’ towards ‘appeal to individuals’ and value over volume, which will consequently improve customer loyalty and persistence.
Further, as the buyers are becoming increasingly aware, they are seeking personalised insurance or at least equitability in the premium being charged rather than just being a bucket in the ocean of pooled risk and mutualisation. Therefore, need-based structuring of features and a dynamic risk assessment is becoming increasingly imminent. A framework exists for need-based selling, but this needs to be enhanced in the true sense from a product proposition and adapted to increasingly personalised customer needs.
Adaptive Ways to Reimagine
In near future, the customer’s prerogative will be flexibility and transparency in terms of premium payment along with enhancement, transfer, extension, and adjustment of coverage as per one’s needs. Case in point being bite-size products, bundling, episodic cover, including and covering pre-existing diseases, ad-hoc coverage, universal life offerings, riders driving product proposition, ladder/flexible protection products, generational view of whole life business for estate planning, etc. are some of the typical problem statements that InsurTechs are looking to solve.
To know more, read the CII KPMG report on Personalisation and Transformation: Enabling ‘Insurance for All’