How technology impacts life insurance

Hype around what's possible in digital does injustice to what's possible in real

Over the last year, I have seen companies of every stripe claim to be in the business of technology. We have all become ‘tech’ companies is a common refrain. Surely, someone is still in the business of meeting customer’s needs. Technology is disrupting many established business models and I don’t delude myself into thinking it won’t change my business. But I believe the hype of what’s possible in the digital world sometimes does injustice to the real impact of what’s plausible.

All that glitters isn’t digital

Life insurance has been considered to be a ripe case for disruption through technology. The well entrenched players battled legacy issues, reserving burdens from older books of business and weren’t known for their customer centricity. But the better run life insurers have actually thrived in the changing digital world.

There are two reasons why this has happened. First, not every insurtech or fintech player fully understood where the life insurance model was ‘broken’ in the first place to disrupt it. It is a reality that most insurtechs have either wound down or found ways to collaborate with existing insurers. Just being ‘mobile first’ or ‘AI first’ isn’t enough to solve deep seated industry problems. One needs to know the trade. Second, the insurers have built assets over the years which include a strong customer base, a trusted brand and a history of consistent performance and these are fairly strong moats that can give companies breathing space to adopt newer technology and stay ahead of the curve. And, this is what has happened among the better run life insurance companies. I believe we seem to have reached a better outcome as an industry because of this. Fintechs are looking to collaborate than disrupt, while the existing insurers have embraced the use of technology.

Will there be more of the same?

This exchange of ideas and collaboration will make a significant impact on the life insurance business in the year ahead. For the longest time, life insurers have had three problems to solve. First, knowing a customer well to underwrite the risk accurately at the selling stage, while making the journey smooth and frictionless. Second, making the ‘moments of truth’ at the claims stage work as promised. Third, using data to track the assumptions on which one assesses the risks and correct their course accordingly. 

There are opportunities to address these three problems through a mix of analytics, digital technology and deep learning tools. A lot of progress has been made over the last two years in these areas. This will get accelerated in the coming year. 

The entire customer on-boarding process will become frictionless as life insurers equip their sales teams with smartphones or tablets with multiple customer journeys mapped. KYC is already digitised with the use of Aadhaar for authentication. Risk underwriting will further speed-up with availability of surrogate income data from bureaus and partner ecosystems like Banks, Non Banking Financial Corporations or Micro Finance Institutions. I see the regulatory encouragement on wearables leading to health data being available thereby obviating the need for medical tests. The customers will continue to search and compare online before deciding on the customer journeys that suit them. The potential customers of life insurance already have a digital footprint which will only get deeper. Digitally evolved life insurers will find ways to tap into this footprint with customer consent to make the policy issuance process straight through.

Since all customer interactions are captured digitally, our ability to run data analytics on it has gone up tremendously. Earlier the role of the MIS teams used to be that of doing descriptive and diagnostic analysis. This has now changed to predictive and prescriptive analysis. Machine Learning has a big role to play here. This is an ‘easy to understand’ but ‘difficult to learn’ game. Both quality and quantity of data have a role to play. The advances in data science will impact life insurance business significantly.

Of platforms and ecosystems

I see life insurers working on creating partner ecosytems that allow customers to transact and derive value beyond their insurance needs. These could include accessing credit, healthcare services, personal finance, wellness, etc. In turn, this ecosystem will continue to provide data and insights to life insurers that will materially help their businesses. The key is to connect the dots, create an ecosystem and build a platform that brings these entities together. Life insurers might not start calling themselves technology companies anytime soon but they are quite ready to disrupt themselves from within.

The author is MD & CEO, HDFC Life