Authored by Dhirendra Mahyavanshi
Today, as we stand on the cusp of the new year, it is time for us to gear up for the next normal. A time to ruminate over the year gone by, assimilate our learnings from the challenges that we have faced in 2020, and carve out forward-looking strategies for 2021 and beyond. One of the things that the pandemic has brought into the spotlight is the importance of managing risk through adequate protection.
Generally, people and even businesses, tend to be more reactive rather than proactive when it comes to risk management. However, this is likely to change in the aftermath of the pandemic. People are likely to consciously move towards protections and increasingly demand customized products that adequately meet their nuanced needs. This affords the insurance industry an opportunity to play a more integral role in the life of an individual. Insurers are already adopting a future-forward attitude and creating innovative products and solutions.
Some of these include:
Bite-sized insurance or insurance in a sachet
The need for protection is now becoming ubiquitous. People are demanding insurance cover for a host of risks that were traditionally not covered by insurance companies. These could range from protection against bicycle theft and gym or fitness related injuries to protection against dengue and marathon insurance. At the same time, they would prefer to pay smaller or affordable premiums for these policies.
This birthed bite-sized insurance or insurance in a sachet. Such type of insurance is usually available digitally and is thus, is easy to purchase. This is not only meeting the nuanced needs of the consumers but is also catering to the digitally savvy generation of people.
Switch on – Switch off insurance
In today’s era of customization, it is important to provide products and services that are not only meeting the needs of the customers but also available when they need it the most. Switch on-Switch off insurance enables individuals to pay the premium only at the time they need the insurance cover. For example, in the case of vehicle insurance, a switch on-switch off insurance policy is structured in such a way that the premium is calculated on the basis of when a car is driven. If a car is not on the road then it will not be covered for accident insurance while once it is on the road it will be covered for the accident.
This will reduce the premium paid for the customer based on car usage. Making the policy more value accretive is the option to have multiple vehicles covered under one policy. This way, a single policy can meet the needs of an individual who usually switches between four-wheeler and two-wheeler vehicles.
Insurance with lifestyle benefits
Insurance is not just about receiving a lump-sum payment at the time of an unforeseen exigency. You can now take insurance cover to even protect your lifestyle on an ongoing basis. These are specific ‘lifestyle protection plans’ that can help the insured meet his/her financial liabilities and support a certain lifestyle in case of loss of income due to an insured event. Further, there are also several annuity products available that provide the insured individual a regular income in the retirement years.
Then there is an innovation that is being enabled by technology like data analytics, artificial intelligence (AI), and machine learning (ML). These technologies are helping individuals effectively price insurance policies such that the premium paid for a specific policy reflects the unique risk of the individual. Let’s take the example of a health insurance policy. Wearables can help insurance companies map the lifestyle and fitness levels of an individual. This can better help them determine the risk associated with the particular individual. Consequently, healthy individuals who exercise regularly might have to pay a lower premium compared to an individual who has a high-stress job and does not exercise.
It is important to understand that this is just the tip of the iceberg in terms of product-side innovation in the insurance industry. Technology is enabling insurance companies to embed themselves deeper into the lives of individuals and thus, better understand their unique needs. Further, it is also allowing insurance companies to competitively price their products and make them digitally available to their customers. In 2021, there are two key themes that are likely to become an integral part of the insurer’s playbook. The first is optimally leveraging technology and the second is micro-level customization. While a move towards this is already underway, 2021 is likely to accelerate this transformation.
Dhirendra Mahyavanshi is Co-Founder at Turtlemint -- an InsurTech Company. Views are personal