Traditional business models and distribution channels have long dominated the Indian insurance sector. In recent years, the sector has also witnessed new insurers and intermediaries being set up with the intent of leveraging digital infrastructure to increase insurance penetration. With widespread internet usage, there has been a push towards digitalization and the sector regulator – the Insurance Regulatory and Development Authority of India has already put in place an extensive framework to regulate the distribution of insurance through online, telemarketing, and distance marketing modes.
In July 2019, the IRDAI introduced the IRDAI (Regulatory Sandbox) Regulations, 2019 with a view to creating a conducive environment to experiment with innovative fin-tech and insure-tech solutions. Under the sandbox regime, novel proposals such as online automotive claims and collision estimation, health profile-based pricing, wearable fitness trackers, as well as AI-based claims estimation, were approved for testing.
The COVID-19 pandemic has now presented an unprecedented challenge, which necessitates accelerated and full-scale digitization of the industry that will have a lasting impact beyond the current environment.
The IRDAI has acted swiftly to combat the impact of the situation on policyholders with various protective measures. Insurers were instructed in the early stages of the pandemic itself, to design products covering COVID-19 treatment and offer standardized COVID health insurance policies. The IRDAI also committed to processing such product approval applications on a fast track mode.
The regulator whilst recognizing that digitization is the need of the hour has further introduced various measures to ensure continuity of business operations, through alternate modes of digital contact, particularly with respect to policy servicing and claims. All insurers have been mandated to make special efforts to enable policyholders to pay the premium using digital methods, issue policy documents through email and display on their websites, information on alternate arrangements for premium payments, renewal, settlement of claims, and lodging or other service requests.
The COVID-19 crisis has steered insurers to utilize measures such as telemedical underwriting (which involves connecting doctors over the phone with potential insureds to assess their health conditions). The pandemic has clearly shown that insurers need to have alternative measures to collect customer data regarding medical history, demographics, and the expense of treatment. It might be helpful for insurers to undertake detailed data analytics by utilizing digital means and use such analytics for the purpose of underwriting as well as developing better products.
The present situation has also highlighted the need for going online or teleconsultation (by qualified medical practitioners), which reduces risks of insureds contracting the virus during consultation visits. It is expected that future health insurance offerings will factor in this approach.
As the insurance sector moves towards digitization, it becomes more susceptible to cybersecurity and privacy issues. Hence, there is an urgent need for robust cybersecurity infrastructure for digital payments and interactions between the various stakeholders in the insurance sector, while also taking measures to increase awareness.
With greater use of technology, the IRDAI may need to revamp its existing regulatory mechanisms to ensure adequate protection of policyholders and customers. Insurers will also need to update their systems and processes to protect against fraud.
COVID-19 is undoubtedly catalyzing a digital revolution of the Indian insurance space, pushing traditional insurers to explore new ways of doing business. While it is still too early to assess the long-term impact of COVID-19 on the insurance sector, the road ahead inevitably, demands greater innovation, not only in terms of insurance distribution but also with respect to product design, loss assessment, and processing of claims.
The writing on the wall is clear, the future of the post-COVID-19 insurance sector lies in artificial intelligence, internet of things and InsurTech partnerships and how insurers adopt technology in these uncertain times, will be crucial to their future growth.
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
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