Cutting The Cover Fit To Size

It’s 2030. Naveen just got into his car and turned on his personal digital assistant. The virtual companion is adept at charting the best route to hais office and share it with his insurer. The insurance company vets it immediately and proposes a different route that reduces the likelihood of accidents and auto damage, calculates adjustment to his monthly premium, and informs him instantly.

His life insurance policy is priced on a “pay-as-you-live” basis, which will increase 2 per cent as Naveen decides to drive the car instead of the auto-driver doing the job. The premium increase is auto-debited from his account before he drives away.

In case Naveen bangs his car while parking, the vehicle’s internal diagnostics determine the extent of the damage and prompts him to take pictures of the damaged area of the car on his digital assistant. It instantaneously informs Naveen about the damage, confirms that the claim has been approved and reports that the insurer has dispatched a mobile response drone to the lot for inspection.

That was adapted from an article, Insurance 2030: The Impact of AI on the Future of Insurance, by McKinsey Global. The article traces the evolving dynamics in the insurance sector. “While this scenario may seem beyond the horizon, such integrated user stories will emerge across all lines of insurance with increasing frequency over the next decade,” it says.

Subhrajit Mukhopadhyay, Executive Director, Edelweiss Tokio Life Insurance, says, “In the past two decades since privatisation, the sector has undergone massive changes. In the next one-two decades, we will see the pace of change quickening, with technology and digital intelligence acting as the catalysts of that transformation.”

According to Mukhopadhyay, the life insurance sector will become a predominantly digital ecosystem. Therefore, the nature of customer and distribution experience will become far superior to what it is today. The role of online platforms in interacting with customers will grow dramatically, with individual insurers seeking to build a buying experience at par with e-commerce platforms.

Personalisation will be an essential element of the product proposition. Data-driven insights and risk-based pricing will play a prominent role in the next 5-10 years, coupled with personalised recommendations. The ecosystem is expected to evolve in line with this growing trend in the future.

Despite higher presence of technology in our lives human interface will continue to play an important role in insurance advisory. It will be pivotal in building trust and creating customer delight. Over the years, protection and goal-based financial planning have been increasingly occupying customer mind space. This has created a relatively improved understanding of insurance solutions.

Need-based analysis is a crucial element insurance because it determines customers’ financial preparedness. Conversely, an inadequate need analysis can threaten customers’ financial immunity. This is likely to evolve with the analysis of protection requirements being propelled by artificial intelligence, machine learning and human interface.

“Over the next decade, we will see customer behaviour maturing. Life insurers will also play a more proactive role, instead of a reactive one, in driving customer behaviour,” says Mukhopadhyay.

Connected devices like mobiles, vehicles and health watches will play an increasingly important role in determining the prices of your covers. These gadgets will be better designed to pass on relevant data to insurers, enabling them to offer customised products at the right price and reduce claims rejection. Pay-as-you-use policies are likely to emerge as a major trend for insurance.