ICICI Lombard: Pioneer in Insurtech industry

Insurtech: Industry analysis

The insurance industry is about risk management and putting a cost to that risk. We can manage these risks better by monitoring and identifying early signs of potential risks. Insurtech refers to using data, AI, blockchain, ML and other emerging technologies to help identify these risks more efficiently and build a profitable business model.

Some of the critical applications of Insurtech are –

1. Verification of customer's Identity as a part of the e-KYC procedure.
2. Additionally, it aids in handling claims by producing standard claim documents
3. Formulation of smart contracts
4. Fraud detection and risk reduction
5. Making payments  

Insurtech holds two-fold benefits- 

• Technology empowers customers by allowing customization, providing ease of access and convenience.
• Whereas, insurtech allows insurers to save time and money, simplify underwriting, automate claims, reduce errors, etc.

Trends in the insurance industry –

• As a result of India's recent fast internet penetration, there has been a significant increase in digital adoption in the insurance industry.
• Insurance penetration in India stands at 4.2%in FY21 (from 3.76% in FY20) - non-life insurance penetration at 1% an life insurance penetration at 3.2%.
• The life insurance industry marked a premium of INR 5.73 tn, recording a growth of ~12% in FY20 over the previous year.
• Among the non-life insurance premiums, Motor insurance accounted for 34.1% share, followed by health insurance at 29.5%.
• Government schemes and initiatives such as PMFBY have pushed the growth in crop insurance standing at 27% in 2018.

Open Insurance and Future of the Insurtech Industry

• A set of guidelines called the Open Insurance Initiative (OPIN) encourages using APIs to make data and specific services accessible to outside parties.
• Its main objectives are to assist insurers, agents, and clients in conducting business in new ways, to hasten the creation of mobile and web solutions and allow adoption of new emerging tech.
• APIs serve as standard connectors that software engineers can utilize to connect certain technologies and applications, enabling their use across various business models, markets, and firm sizes.

Insurtech- Industry developments

Insurtech, where the majority of technical innovations are being developed, has three aspects. These are the platform's sales, operations, or marketplace aspects. To increase insurance penetration among MSME and retail consumers looking to invest, the sales side of insurtech is receiving significant investments. The process' main goal is to streamline the sales process by improving processes and making adjustments to the platform's UI/UX. Internet-based insurance firms like Acko and Digit mostly follow this route.

Some other companies in the market are trying to improve the operations side of the business. They are focusing on trying to make the claims process easier than ever. They are also trying to automate the process of Quote generation. Many independent startups have started accommodating capabilities to read up data related to bio-metric indicators, location, lifestyle etc. to generate the claims estimate and premium estimate. All the major insurance providers are building up their tech-stack to take full advantage of it’s potential.

The third and most intriguing aspect of insurtech is how recently-evolved businesses like policybazaar.com have developed. These businesses function as a market or platform where other insurance providers can sell their goods rather than offering insurance as a standalone good. These platforms are conducting retail commerce in the exact same way that Amazon does. These platforms offer data, insights, leads, and visibility for the products of insurance providers. 

The new web-based insurtech players, who are completely dependent on the online operations are highly focused on the online sales distribution channel for selling its products so that they can directly sell it to the consumers. This helps in keeping the cost low and help in reaching to more people. The penetraion of insurance sector has truly been increased due to the emergence of these new insurance providers specially to the retail insurance consumers. However this might have helped the companies in securing the volumes, which helps them in generating more funding options. But the main profitability comes from corporate customers, which in this case is not performing as good. The conversion rate for corporate customers to the new web-based insurtech companies are very low. The main reasons this happens are:

1. Corporate Decission Making Units(DMUs) are very reluctant of buying the insurance online.
2. They prefer 1:1 dealing with insurance provider 
3. They demand heavily customised deal for their employees as a customer
4. They prefer more well established and branded companies with best claim history

This is the reason why the corporate deals in the insurance industry is dominated by legacy companies like ICICI Lombard and HDFC ERGO. 

Comapny in Focus: ICICI Lombard

ICICI Lombard is an insurance company that was established in 2001 in India. It is responsible for managing investments, general insurance, reinsurance, and claims management. The company's Gross Written Premium (GWP) was 143.20 billion as of FY 2021. The business uses its website and intermediaries to provide policy insurance and renewal. It is spread across 286 branches and 840 virtual offices in India.

It has three pillars of service

·   Dependable: For than 20 years, ICICI Lombard has consistently launched industry-leading methods, and would continue doing so even when things get rough, thereby abide by their motto of "Nibhaye Vaade."

·   Approachable: It is available 24*7 through their call centre, chat option, or directly at their 286 branches.

·   Transparent: They provide the power of clarity and are transparent in their services.

ICICI Lombard offers multiple product and service offerings:Car Insurance

Two-Wheeler Insurance

Weather insurance

Health Insurance

Home Insurance

Health Booster

International Travel Insurance

Overseas Student Travel Insurance

ICICI Lombard Complete Health Insurance

Motor Insurance

Personal Accident Insurance

Marine Insurance

NRI Insurance Services

Business Insurance

Third-Party Insurance

Crop Insurance

Rural Insurance

Cyber Insurance

Focus and Objectives:

1) Robust Risk Management:

a. Pricing: Use of Analytics in pricing and segmentation

b. Reserving: Robust reserve management through actuarial techniques

c. Quality Reinsurer: Conservative level of catastrophe (CAT) protection

d. Fraud Control: Use of fraud analytics and claims triaging

2) Multi-Channel Distribution:

a. Agents/Brokers

b. Direct Sales Force

c. Banks/FIs

d. Website and Call Centre branches

3)    Customer Centricity: -

a. Claims Management: - Gain customer trust through speed and quality of service delivery by doctors, hospitals, and surveyors by mitigating risk.

b. Customer Engagement: - Initiatives to connect with customers and obtain insights on product and service ideas through various tools like DoTheDifficuilt, Welcome call, and Net promoter score.

4)     Technology as an Enabler: -

a. Customer services & access: - Self-sufficient & easy to access solution by self-inspection, mobile wallet, value-added services, and policy purchase & service.

b. Lean operation: - Adopting technology tools to drive operational efficiency and cost leadership by automated payment, improving productivity, and out-of-office policy issuance.

Initiative ICICI Lombard is currently working on-

Development of software for executing end-to-end automated insurance lifecycle: Currently taking tech-based company's help to enable sales from

Are new-age start-ups a threat to the company?

1. ·  The new start-ups in the insurance sector who are predominantly working on increasing the penetration of the insurance business have been operating in a separate segment than that of ICICI Lombard, and they are services providers, and ICICI Lombard is an Insurance giver.
2. The new market segment these companies are operating in the retail customers market (especially in Tier 2-3 cities) or corporate houses with 20-40 employees and commodity-based insurance like mobile phone insurance. ICICI Lombard does not look at this market as a prospect and considers that these companies are filling up the small holes in the existing market.

Markets where ICICI Lombard is losing on growth?

• The current insurance penetration in India is around 2-3%, including the Tier-1 cities
• ICICI Lombard has consistently lost out on growth opportunities in Tier 2 & 3 cities.
• There is a conscious approach from the company not to expand in T2 and T3 cities

As quickly as Tier 1 cities as they are loss-making propositions as per past data.

• This is due to the high proportion of fraudulent activities and false claims in the

Market. ICICI Lombard has been struggling to keep the Combined Ratio low in these markets due to a lower increase in income and higher expenses for the market.

• The Combined ratio of the Tier 1 market is significantly lower than Tier 2,3 cities
• The health insurance business in these cities is especially very bad

Any missed opportunities?

• Since the portfolio of ICICI Lombard is huge, there is a whole process of Enterprise risk Planning involved in every decision made regarding changes in product, service or process. Agility in the business structure is missing.
• A late entrant in many markets to pursue online sales channels. The current strategy is to position ICICI Lombard as a solution company rather than a sales company.

ICICI Lombard - Innovation and Technological Adoption 

ICICI Lombard is a pioneer in the Insurtech industry. It has a rich history of investing in technologies and their adoption to streamline processes for customers and itself.

• Built and currently launched the in-house bot called Myra for automating the complete process of Quote Generation
• The company is beta-testing a Corporate Portal to bring transparency to the system to help people see what exists in their portfolio, what premiums they are paying, services they have eligible for, and what products they have used in the last few years
• One of the very few companies in the market that has already partnered with drone companies that are yet to get regulatory clearances for future use cases
• In the advanced stage of implementing the  user driving type-based vehicle insurance 
• The company has invested in Tech Accelerator Program called Nova, which helps the company to find startups and develop capabilities for the future scope of business

NOVA Insurtech Accelerator invested in Wellthy Therapeutics as part of their Incubator/Accelerator on January 1, 2017.

Wellthy Therapeutics: - The goal of Wellthy is to promote health equity through digital care around the world. We address complex global issues, including unequal access to care, poor patient outcomes, and socioeconomic care hurdles. We offer patient companion and concierge services that use behavioral science principles to produce scalable clinical and commercial results. Our platform enables our partners to design and own next-generation digital products through a single, commercially, and clinically verified front end on a regulatory-compliant back end. They are the leading operating system for digital care solutions by giving patient companions and value-based models. They provide solutions:

1. Build on our platform: - Using a straightforward Do-it-With-Me (DIWM) architecture and our front-end tools that have been commercially and clinically validated on top of our regulatory-compliant back-end, we enable you to create your digital solution.
2. Re-Tool Your Existing Application: - To safeguard your present investment and increase ROI, we integrate our operating system with your front-end application and redesign patient involvement, connection, and results.

References:

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4. Insurance and Technology: Top 13 Insurtech Innovations | AltexSoft
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6. Peer-to-Peer (P2P) Insurance (investopedia.com)
7. Embedded Insurance: a $3 Trillion market opportunity, that could also help close the protection gap
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