The Changing Face of Indian Insurance

112 Pages·2017·2.24 MB·English

The Changing Face of
Indian Insurance
Bigger, Better, Faster
The Boston Consulting Group (BCG) is a global management consulting firm and the world’s
leading advisor on business strategy. We partner with clients from the private, public, and not-for-
profit sectors in all regions to identify their highest-value opportunities, address their most critical
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to 85 offices in 48 countries. For more information, please visit bcg.com.
Established in 1927, FICCI is the largest and oldest apex business organization in India. FICCI has
contributed to the growth of the industry by encouraging debate, articulating the private sector’s
views and influencing policy. A non-government, not-for-profit organization, FICCI is the voice of
India’s business and industry. FICCI draws its membership from the corporate sector, both private
and public, including SMEs and MNCs; FICCI enjoys an indirect membership of over 2,50,000
companies from various regional chambers of commerce.
The Changing Face of
Indian Insurance
Bigger, Better, Faster
March 2017
CONTENTS
4 FOREWORD
5 THE CHANGING FACE OF INDIAN INSURANCE
14 MEGA TRENDS IN INDIAN INSURANCE INDUSTRY
17 INDIAN GENERAL INSURANCE—GEARING UP FOR NEW AGE TRENDS
20 INDIAN LIFE INSURANCE—THE JOURNEY SO FAR AND THE WAY AHEAD
22 DIGITAL REVOLUTION IN THE GENERAL INSURANCE INDUSTRY
25 INDIAN INSURANCE IN 2020—TARGETING THE UNDER-SERVED
28 ENABLING THE GROWTH OF THE INDIAN INSURANCE INDUSTRY
31 ACTUALIZING THE OPPORTUNITY AT THE BOTTOM OF THE PYRAMID
34 DIGITIZATION—A GAME CHANGER FOR THE INDIAN INSURANCE INDUSTRY
36 LIFE INSURANCE FOR EVERYONE
39 RISKY TIMES FOR THE RISK TRANSFER BUSINESS
42 INSURANCE—AN IMPORTANT STEP TOWARDS SECURITY OF PROPERTY
OWNERSHIP IN INDIA
46 MOTOR INSURANCE 2.0
48 DIGITALIZATION AND ITS IMPRINT ON THE INSURANCE INDUSTRY
2 The Changing Face of Indian Insurance
51 INSURANCE SECTOR—THE ROAD AHEAD
53 TRANSFORMATION OF INDIAN INSURANCE INDUSTRY
56 CUSTOMER IS KING AS INSURANCE GOES DIGITAL
59 INDIAN INSURANCE SECTOR—THE NEW CHANGE AGENTS
63 COMPETING IN THE AGE OF ARTIFICIAL INTELLIGENCE
70 DRIVING CUSTOMER CENTRICITY IN THE DIGITAL WORLD
73 INSURANCE IN THE BIONIC WORLD
77 DIGITIZING CUSTOMER JOURNEYS AND THE NEW INSURANCE IT MODEL
82 DELIVERING TRANSFORMATIVE CUSTOMER EXPERIENCE THROUGH
DIGITIZATION IN INSURANCE
85 USING BIG DATA AND ANALYTICS ACROSS THE INSURANCE VALUE CHAIN
90 USING ADVANCED ANALYTICS TO IMPROVE OPERATIONAL DECISIONS
97 BUILDING A DIGITAL TECHNOLOGY FOUNDATION IN INSURANCE
99 THE REAL DEAL ON M&A, SYNERGIES, AND VALUE
106 CREATING VALUE IN INSURANCE M&A
The Boston Consulting Group • Ficci 3
FOREWORD
We are pleased to present this joint publication from Federation of Indian Chambers of Commerce and
Industry (FICCI) and The Boston Consulting Group (BCG) on “The Changing Face of Indian Insurance:
Bigger, Better, Faster”.
In our publication last year, “The Changing Face of Indian Insurance: In Pursuit of Profitable and Sustainable
Growth”, we had shared a 14-point action agenda for the Indian insurers to drive sustainable and profitable growth.
This year, we have focused on the industry agenda with a specific nuance of the impact of all digital related trends on
the comprehensive agenda, and to see how the insurers need to adapt to the same to get bigger, better and faster.
The global insurance industry is being challenged by these megatrends to rethink the ways of working, insurers are
forced to adapt in an agile manner, become leaner and more efficient. Big data and digital are common mega-
trends that are causing disruption and driving transformations across all industries and are finding their way to the
core of any insurers’ strategy. We have kept a large focus on the related topics.
This year’s publication is a collaboration between FICCI, BCG and the industry. A number of industry leaders have
contributed to the publication with their own perspectives. We are delighted to present this unique collection of
perspectives on most pressing topics.
We are thankful to all the authors of the perspectives, along with FICCI and BCG teams for their contributions.
Mr. Amitabh Chaudhry Mr. G Srinivasan Mr. Alpesh Shah
Chairman, FICCI’s Insurance Co-Chair, FICCI’s Insurance Senior Partner and
and Pensions Committee & and Pensions Committee & Managing Director
Managing Director & CEO, HDFC Chairman & Managing The Boston Consulting Group
Standard Life Insurance Director, New India
Company Limited Assurance Company
4 The Changing Face of Indian Insurance
THE CHANGING FACE OF
INDIAN INSURANCE
By Alpesh Shah, Aniruddha Marathe (BCG)
Mr. Ajay Kumar is a successful lawyer minded of the drive and he opens the insur-
who lives with his wife and two ance manager mobile app that shows all dif-
children (12 and 14) in a swanky bungalow ferent insurance policies purchased by him.
in Hazratgunj, Lucknow. It is a nice Satur- As he looks at the application dashboard, he
day morning and Ajay jumps into his car to realizes how different his insurance experi-
go for a quick game of squash with his ence is today compared to the year 2015
friend, since his family is travelling. His car when he took his first steps in finance and
welcomes him as he gets in and adjusts the insurance planning for his family. There is a
settings to his preferences. He glances at prompt offering him a brilliant pension plan.
the dashboard indicator, which informs him He clicks on the link and is connected for a
that his car insurance has shifted from video chat with his bank RM. He likes the
home insurer, which handles insurance of pension plan demonstrated by the RM. He is
his car while it is parked at home, to his amazed to see how the pension plan was cus-
driving insurer. As he accelerates onto the tomized for his own saving pattern and how
main road, the dashboard warns him that similar other customers of the bank had cho-
his risk rating could worsen if he continues sen a similar plan.
accelerating heavily and braking suddenly.
Ajay makes a note to himself to be less The car insurance dashboard shows a
heavy footed on the accelerator. Ajay takes ‘thumbs up’. He has earned 5,000 points
pride in proactive management of his over the past quarter, which he could re-
financials, including insurance. He reminds deem at the garage. He earned them be-
himself to do a full review of all his insur- cause he had practiced the right technique
ance policies on his return. to apply acceleration and brakes as suggest-
ed by the app (unlike this morning, thank
It is 9 a.m. when Ajay gets back from his God for sensors) – something he wonders
game. As he starts having breakfast, he is re- why he did not do before. However, he is
The Boston Consulting Group • Ficci 5
disappointed that he could not earn the end-end services meeting customer needs
fourth star in the health-buddy program and not just products
linked to his health insurance. The virtual
chat assistant tells him that missing the Technology advances are transforming differ-
gym and squash sessions and scheduled ent industries at an ever-increasing pace. In-
health check-ups had cost him the extra surance industry will not be isolated. These
star. Before closing the app, he quickly advances will be a lot more potent as they
checks the appointment with a home main- will have widespread applications across dif-
tenance agency, a partner service of his ferent aspects of the insurance business in-
home insurance policy. cluding sales, underwriting, claims and cus-
tomer service.
Does this sound like science fiction? Not real-
ly. This story is likely to be a reality by the And if this were not enough, the rapidly
year 2020, and in India. Just to highlight a few evolving macro-economic landscape – lower
key elements that are highlighted by the ex- interest rates, evolving customer behavior,
ample: impact of digital adoption, changing competi-
tive landscape and the dynamic regulatory
• Insurance will be dynamic and will cover situation will keep the C-suite busy in devel-
end-to-end customer journeys oping and adapting strategies to leverage the
opportunities and stave off the challenges.
• Insurance will be highly customized and Basis the above context, we have identified
relevant to each customer individually 12 strategic priorities for insurers that could
help in preparing for the insurance of the fu-
• Interactions will be “phygital” – a mix of ture (Refer Exhibit 1).
physical and digital, though increasingly
becoming more and more digital 1. Distribution of the future – ‘Phygital’
interactions across channels:
• Insurers will partner with multiple
different service providers to offer So far, insurers had predominantly focused
EXHIBIT1 : 12 Strategic Priorities for the Indian Insurers
1 2 3
Customer Ecosystems and
Distribution of the future: Serving the underserved
partnerships a reality—
facing 'Phygital' interactions and uninsured: addressing
leveraging broader
priorities across channels white spaces
ecosystems
4 Process 5 6 7 8
Customer Data and InsurTechs
Priorities digitization Products and
engagement analytics will will accelerate
severely 2.0— 1.0—digital Pricing 2.0—new, be king—will industry
customer tailored and
driven by will enable separate transformation—
journeys will integrated end-to-
digital be digitized customer end winners from learn from &
centricity also-rans collaborate
end to end
9 10 11 12
Creating the
People 2.0.2.0 – Ride the wave of Value creation in
technology and
Functional Creating a winning data architecture regulatory a changing
organization model shifts—be agile shareholder
Priorities required to
while addressing and ahead of the world—IPOs,
deliver the 'digital
millennials' needs game M&A
insurer'
Source:BCG analysis.
6 The Changing Face of Indian Insurance
on leveraging digital for direct to customer are under served, for example, the HNWI
interactions. In the immediate future, insur- and mass market from a life insurance per-
ers will drive digital enablement and sophis- spective, and the SME and mass market
tication across all the distribution channels: segments from a non-life insurance per-
spective.
• Bionic agency: At present, the solicitation
process is heavy on physical face-to-face Let’s talk about the mass market customers
interactions. Going beyond just sales, in detail. Insurers have traditionally found it
some of the potential elements of a difficult to target low-income customer seg-
bionic agency are enablement of agency ments or semi-urban, rural customer seg-
force through mobile apps, agent interac- ments viably. Regulatory requirements as
tions with the customers through digitally well as government schemes such as PMJBY
video tools, streaming demos and real or PMFBY have surely nudged insurers to tar-
time sales support from insurers. get such segments but they have barely
scratched the surface. The headroom for
• Open architecture banca partners: After growth has always been there but lack of
many years of inactivity, open architec- awareness among customers and low viabili-
ture bancassurance will become a reality. ty of distribution infrastructure did not trans-
While insurers have established strong late the headroom into an addressable op-
physical distribution channels through portunity. The stars are now aligning and a
bancassurance or other corporate number of drivers are set to change this pic-
partners, multi-channel integration across ture. Ecosystems and partnerships will en-
digital platforms including websites, apps able insurers to embed insurance offering in
is yet to achieve full maturity. The customer journeys. Aadhaar linked biometric
challenge is acute especially with brick- authentication will ease the burden of fulfill-
and-mortar heavy partners such as PSU ing KYC requirements. Digital distribution, in-
banks. In open architecture bancassur- tegration with ecosystems and partners will
ance, insurers that will effectively inte- make insurance bite-sized and affordable.
grate with digital channels of the partners Demonetization and PMJDY have bolstered
and leverage partners’ customer data for financial savings and a good part of it will
customized offers will stand to gain a find its way to insurance products. Banca
greater share of the pie. partners, which are aggressively targeting
fee-income, will increase branch activation
• Direct digital interaction with customers: and use data and analytics to find the right
In the last few years, online insurance targets. By any estimation, the ‘opportunity’
aggregators, email and social marketing, is large and it will play out only gradually.
search engine marketing and website + This will allow insurers to find their sweet
tele-assist based direct sales have estab- spots, fine tune their business models and
lished themselves as key digital marketing target significant growth for years to come.
and distribution channels. Growth
witnessed in these channels leaves no 3. Ecosystems and partnerships a reali-
doubt about their potential. By leveraging ty—leveraging the broader ecosys-
analytics and advances in technology and tems:
digital infrastructure, direct digital
interactions and marketing to the To create ‘sustainable’ differentiation, in-
customers will become highly personal- surers will need to think of new business
ized, more engaging and automated using models that are hard to replicate and that
natural language processing. engulf the customer across broad needs ful-
filled by a suite of services. For example,
2. Serving the underserved and unin- creation of health ecosystem vs. health in-
sured: addressing white spaces: surance, mobility ecosystem vs. motor insur-
ance, retirement ecosystem vs. pension
There are many customer segments that plan, child care and development ecosys-
The Boston Consulting Group • Ficci 7
tem vs. health insurance and so on. Ecosys- also started using the same. The time has
tems are a set of businesses, which address come to commit to this unconditionally.
customer needs in a comprehensive and in-
tegrated manner. • Digital document storage: Whether it is
de-materialized policy documents or
For example, a health ecosystem will entail claim documents, insurers have the
wellness providers, health food providers, fit- opportunity to eliminate paper from
ness centers, primary clinics, diagnostic cen- most, if not all processes. However, to
ters, secondary or tertiary hospitals, payers take full advantage, it will be imperative
such as insurers / corporate / government, to have data architecture that allows
pharmacies, disease management services capture of semi-structured and unstruc-
linked together by an ecosystem aggregator. tured data. Third party digital lockers are
Ecosystems will help not only in gaining now a reality where users can allow
share of wallet but also in achieving custom- insurers to access paper records issued by
er ‘lock-in’ with more hooks and hence high other third parties such as government or
exit barriers. Insurers will have to either take medical records.
the lead and create such ecosystems or par-
ticipate in existing ones. Since ecosystems • Digital consent: Insurers in future will
business model is radically different from tra- increasingly use third party data for
ditional insurance business model, it will re- tailored offerings, underwriting and
quire insurers to take large strategic bets, customer service. Digitally signed consent
heavily invest in product design, operations through a modern private data-sharing
and technology and source customers framework will allow insurers to securely
through multiple touch-points across the eco- access specific data allowed by users. It
system. will also enable separation of data and
consent flow reducing the chance of
4. Process digitization 2.0—customer frauds.
journeys will be digitized end-to-end:
• Digital payments: Accelerating transition
The global trend of digitizing the core in- to cashless economy and adoption of UPI
surance processes of sales, claims settle- interface will significantly enable process
ment as well as back-office operations is digitization and eliminate manual
also gaining roots in India. A number of in- elements of payment collections.
surers have launched processes and apps
for distribution partners and customers. • New technological advances: Internet of
Apart from productivity gains, digitization Things (IoT) including wearables and
also helps improve process quality through telematics devices, Artificial Intelligence
standardization, process risk controls and (AI) including chat-bots and machine
lower manual involvement. learning, and Robotics will significantly
increase automation leading to greater
For process digitization 2.0, insurers will productivity.
leverage the rapidly developing digital infra-
structure in the country as well as the latest 5. Customer engagement 1.0—Digital
technological advances. The next advance in will enable customer centricity:
process digitization will be driven by the fol-
lowing five key elements: Insurance as a product category faces a key
challenge of limited customer touch-points
• Aadhaar based biometric authentication: and low customer engagement despite the
Recent entrants in banking and Telecom consultative nature of the product and sig-
have already leveraged Aadhaar based nificant financial implications for the cus-
authentication to roll out fully paperless tomers. BCG experience shows that insurers
customer on-boarding process with high have on an average of 0.3-0.4 customer con-
quality KYC compliance. Insurers have tacts per year. Add to that, the Indian situa-
8 The Changing Face of Indian Insurance