Indian insurers collaborate with InsurTechs to launch innovative products and there are also some technology-focused licensed insurers while the regulator welcomes innovation through its regulatory sandbox. Yet the Indian insurance industry has not (fully) embraced technology and InsurTechs are still at a nascent stage. Consulting actuary Sumit Ramani shares his views on how things could improve.
The Indian insurance industry has seen encouraging developments in the recent past, especially with regard to InsurTechs. In the aftermath of the coronavirus pandemic, the industry should adopt and adapt to technology in a much bigger way.
Consulting actuary Sumit Ramani thinks that actuaries can be the best bet for bridging the gap between InsurTechs and insurers.
“There are many reasons for the low collaboration between InsurTechs and insurers but the most prominent one is that the InsurTechs have a limited understanding of the insurance business,” Mr Ramani said. “Most InsurTechs are driven by techies who are trying to solve an insurance problem that possibly doesn’t even exist.”
Focus on making insurers more effective
“It is important to understand that the current version of the insurance model is not a broken one. Yes, it is inefficient, and that is exactly where the focus of InsurTechs should be; to add efficiencies. But you can’t make a process efficient without understanding it.
“InsurTechs have the solutions to many of the technical problems of legacy insurers, however communicating the solution in the language that (re)insurers understand is important and that doesn’t happen.”
Often InsurTechs may not be able to find the right (re)insurers or the right stakeholders in a given organisation. Moreover, not every organisation has an appetite to experiment with InsurTechs and not all stakeholders want to explore InsurTech opportunities.
Collaboration is important
Mr Ramani said, “Collaboration between InsurTechs and the (re)insurers is important. Collaboration has several connotations in the InsurTech context. It could be in any part of the value chain starting right from the distribution and encompassing products, underwriting, administration and claims management.
“Collaboration could also mean incubation, investment and co-creation. While incubation is at the idea stage and investment happens after InsurTechs have demonstrated value and/or solid progress and co-creation is the best bet for both (re)insurers and InsurTechs,” he said.
Technology-focused licensed insurers, however, cannot be classified as InsurTechs, because an insurer cannot focus on specific parts of the value chain – the insurers deal with every bit of it including the regulations.
Actuaries are best placed to bridge the gap
Mr Ramani said, “An actuary knows where each dollar of the insurance company comes from and where every cent is spent. We understand the insurance business better than any other insurance professional. Actuaries collaborate with almost all the functions and hence know the problem areas really well.
“Lastly, actuaries are trained to quantify the impact of the proposed arrangement and communicate the solution in a layman’s language. And yes, we naturally think of regulations which often feature at the very end of InsurTechs’ checklist.”
Relationship is symbiotic
InsurTechs are here to stay and they are not a threat to incumbents but “potential collaborators who can help incumbents become more efficient especially when incumbents don’t have the in-house technological capability and/or the appetite to experiment,” said Mr Ramani.
For InsurTechs to thrive it is important that they get their ideas validated right in the beginning and focus on the solutions that can potentially make a dent. (Re)insurers, of course, need to be more open to the innovation and if possible set aside a budget and identify resources with the right mind-set to work with InsurTechs. A