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Physical distribution of insurance cannot be whisked away in India

LiveMint logoLiveMint 25-08-2017 Shaikh Zoaib Saleem

Reliance General Insurance has recently announced plans to get listed. While a company going public is in the interest of increased transparency, this news gains all the more importance in a sector like insurance as consumers would be able to benefit from the increased scrutiny that pubically listed companies come under. This is also happening at a time when the insurance sector in the country is increasingly witnessing the impact of technology on sales as well as services. In an interview with Mint Money, Rakesh Jain, chief executive officer, Reliance General Insurance elaborated on how these aspects could impact the consumers. Edited excerpts:

You have announced plans of the company going public. When is that expected to happen? 

We are not in a position to comment on the timeline, as it will be contingent on several factors such as receipt of regulatory approvals, market conditions, and demand.

How does an insurance company going public help its customers? 

In addition to more visibility, going public will also bring in more transparency to the company due to the additional disclosure requirements prescribed by Securities and Exchange Board of India (Sebi) for listed companies. This will ultimately benefit all the stakeholders of the company, including its customers.

That makes one wonder, why is going public necessary to improve transparency, particularly in a sector like insurance, where trust is so important? Should insurance companies not improve transparency even when they are not listed?

While every company should strive towards ensuring maximum transparency, going public makes companies subject to additional regulatory requirements and also answerable to a new set of stakeholders, which are the public shareholders. Generally, different stakeholders have different interests. Shareholders generally have a more direct interest in a company than most other stakeholders and hence, the impetus listing may provide towards transparency is perhaps difficult to compare.

What is the one major issue that the general insurance industry is struggling with? 

The appalling lack of adequate awareness with respect to insurance products is a big issue plaguing the Indian insurance sector. This has a ripple effect that has resulted in an under-penetrated insurance market. However, new government schemes like Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) have boosted the penetration scenario significantly. 

In India, it is common to see many cars plying on our roads without mandatory covers. If we take a look at the health insurance sector, the numbers are even worse. So the insurance industry is plagued with not only low awareness levels but also poor compliance implementation.

Can use of technology result in mutual benefit for insurers and consumers? Can it help reduce premiums in health insurance? 

Social and technological trends, which have shaped customer needs and expectations, are a source of opportunity for tech-savvy insurers. Using technology and data to enhance operations and business functions can also deliver business outcomes that impact consumer-level changes. 

For instance, wearables help in measuring bio-markers like body temperature, and blood pressure and capture a lot of data about customers’ health. These data streams can be used to profile risks in a better manner, proactively manage health and mitigate lifestyle-related risks well in advance. If risk is identified properly, premiums can also be adjusted accordingly. 

How do you see fintech impacting the general insurance sector? 

Traditionally, insurance used to lag banking in terms of technology adoption. But with insure-tech, insurance companies have come of age. Insurers are increasingly using technology to deliver sales and services to younger consumers in a simplified and seamless manner. Moreover, the adoption of technologies has also simplified the otherwise complicated insurance products and services; thereby helping customers in making smart choices. The world is changing at a fast pace and understanding ever-evolving customer needs is imperative in serving effectively and efficiently. This can be done with the implementation of technologies like mobility, video streaming facilities, internet of things, big data, artificial intelligence and machine learning. 

High incurred claims ratio is an issue the industry talks about frequently. At the same time, consumers are price sensitive. What can be the middle ground?

The insurance industry suffers from losses incurred due to fraudulent claims. Such claims bleed the industry and inhibit the intention of insurers to reduce prices. However, if these frauds are reduced, the benefits can be passed on to rest of the customers. Additionally, differential pricing can solve this problem, as usage-based data can be dynamically used to re-rate risks. In this way, deserving customers can enjoy benefits that are linked to asset usage and maintenance. Insurers can then compete amongst themselves to provide the best insurance to customers who have a demonstrable history. 

If fraudulent claims inhibit reduction of prices, are these frauds common? Do they make a big chunk of total claims? What are the kinds of frauds that are most common in general insurance? How are these being detected and addressed? 

Frauds are generally embedded with claims in order to gain from insurance. Exaggeration of claim amount is common too. Faking accidents and thefts are also common in motor claims. Generally, a number of ambulance chasers (lawyers who specialize in cases seeking damages for personal injury) exist in third-party claims. Companies are investing in customer profiling and advanced analytics to map fraud patterns and avoid undue advantages through insurance. The use of law against fraudsters is also becoming prevalent with insurers.

A new insurance company is aiming to be ‘digital’ only. What is your view on the increasing impact of digital distribution networks? Can digital really challenge traditional distribution and service channels? 

Digital is undoubtedly playing an important role in many customer interactions and agents’ efforts. Channels, changing role of agents, and use of aggregators are important areas for insurance distribution when it comes to digitization. Various channels for delivering insurance products are being digitized, thereby increasing efficiency and reducing turnaround time. Advisory services related to risks and claims, which are increasingly being sought by customers, are being delivered through digital platforms.

However, we must not forget that insurance remains largely a push product and physical distribution modes in a country like ours cannot be completely whisked away today. A digital insurer may be someone new, but the market today is more suited for a blended or ‘phygital’ approach. While the availability of internet has improved, risk-protection products like insurance cannot be all sold digitally. Digital distribution is best for tailor-made products suited for savvy customers. This is the reason why traditional distribution and service channels are likely to be around.

What innovations can be expected in the health insurance space? 

Health insurance is moving from therapeutic care to preventive care. With the large infusion of data, it has become possible for insurers to advice customers of possible health risks and guide them for leading a healthier lifestyle. Enablers like smart foods and special diet programs are enhancing the effectiveness of the preventive healthcare process. Connectivity and mobility programs have made seamless flow of data a reality and ensured that a wide network of connected hospitals adds to customer convenience. With more and more technologies being introduced in the health care sector, insurers are able to reduce risks and improve healthcare services.

How can technology help in easing claims processes in motor insurance? 

The introduction of technology can work wonders in easing up the claims process and adding precision to the overall procedure. There are different ways in which this can be done. Usage based programs can automatically monitor how car insurance customers drive and insurers can determine the premium amounts basis this information. If the car needs repair, insurance companies can know beforehand and claims processing will just be a formality. Risks may be predicted through predictive analysis with the use of big data analytics and therefore can be mitigated before the situation exacerbates.

IoT, mobility platforms and video streaming facilities will help insurers in reducing claim settlement turn around time, reducing paperwork and in expediting the overall delivery process. Additionally, these technologies are likely to improve transparency as they enable insurers in keeping their customers informed about the status of their claims at each and every stage.

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