October , 2019
Reinventing insurance business through disruptive technologies
16:26 pm

Rajiv Khosla

Business models based on data and analytics have facilitated companies like Google, Uber, Airbnb, and Facebook to enter the S&P 500 index in less than 10 years compared to business houses like Microsoft and HP, which made it to the index in two and three decades, respectively.

Between 1955 (the S&P 500 list was released for the first time) and 1994 (only manufacturing firms considered), there were 347 new firms introduced in the index at the rate of 8.5 firms per year. However, the introduction rate of new firms increased to 14.1 per year between the years 1995 and 2016 (when both manufacturing and service firms were included) and 312 new firms were introduced. It is estimated that at this rate, half of Fortune 500 firms of the year 2016 would be replaced by 2034 and all Fortune 500 companies of the same year would be replaced by new firms in 2051. Market disruptions are not allowing any company to garner profits or increase sales without innovation aimed at lowering prices or offering enormous customer services.

The insurance industry cannot be seen in isolation from this disruption. A look at the following case will enable to understand the future requirements of this industry.

Imagine the world in 2035. An old person living in the outskirts of a city gets sick. Analysing the condition, his robotic personal assistant assembles information about his health data (like blood pressure, pulse and heart rate) stored in his digital watch and the medical data (medical images, lab results, dental records, clinical reports, past x-ray reports) from his mobile phone where the information is stored. This information is disseminated to the concerned hospital as well as to the insurance company from where the elderly person purchased his insurance Further, this digital information is received, stored and disseminated to the respective depart-ments at both these places. After diagnosing the patient with serious health

issues and anticipating brain haemorrhage, the hospital deputes a drone to bring the patient immediately to the hospital. Robot attendants present in the drone, using life-saving equipment, transport the patient to the concerned hospital in no time - the information of which is also sent to the insurer. Here, three different scenarios emerge.

Scenario I where concerned doctors perform surgery in no time and life of the patient is saved. In this case, when the doctors perform the surgery, all medical reports and expenses related bills are sent to the insurance company by the patient’s assistant. The insurer processes this information and verifies it from the concerned hospital. By the time the patient recovers, all his medical expenses are cleared by the insurance company.

Scenario II where concerned doctors perform surgery but life of the patient cannot be saved. Here too, the information is sent to the insurer by the patient’s assistant and the news about his death is remitted to his family members and relatives, who then manage to come to receive the body. Before the body is handed over to them, the insurance claim is settled by the insurer and the insurance return is handed over to the family members.

Scenario III where drone meets an accident due to a technical problem and the patient dies. In this case, the insurance company acquires the black box of the drone from the accident site and analyse the information like speed of the drone, direction, height, load, quarterly service data and maintenance records to assess the nature of accident. On the basis of this information, the insurance company processes the accidental claim and settles it with the company owning the drone. Simultaneously, the insurance company will also process the bills pertaining to the life of the insured from its records. After verifying the facts from its records, the insurance company hands over the claim to the family of the deceased.

These scenarios are enough to explain the fate of insurance com-panies in the next one and half decade or so. Gigantic changes are going to be triggered and the insurance companies need

to withstand these transformations to survive the competition.

What needs to be done

Digitise the processes: At the outset, insurance companies must embed digitisation in all its processes. Internal processes related to underwriting, servicing, billing, claims etc. should be digitised as customers in future will be actively looking forward to lesser process steps and more personalisation. Effective digitisation along with predictive analytics and cognitive computing will augment the prospects of futuristic progression through data capture, analytics, diagnostics and risk management. Also, an endeavour should be made to rope in such technology which can collect, store and analyse data through personal devices. Already BCG and InsureTech have devised certain modules which can help to analyse digital data.

Creating networking partnerships: Insurance companies

must increasingly develop a network with related companies in the value chain keeping in mind the data led iterative approach. Where on one hand, it will help to cut down the costs of the insurer and on the other, additional information related to the insured becomes available. For example, in case of life insurance, developing tie-ups with Dr Chrono, MyFintnessPal, Lifesum will help the insurer to assess the habits and lifestyle of the insured.

Identify new sources of revenue: In order to create value in the eco-system, the insurers need to adopt the latest disruptive business models. Few such models are peer to peer insurance, pay-as-you-use and use of chatbots. The peer to peer model entails electronic networking (certified by an insurance company) of people who agree to cover risks by pooling the amount without any intermediaries. At the end of the agreed period, the persons who had pooled money are refunded their amount (except payment made to the insurance company) thereby enabling them to minimize their costs and attain maximum protection. Similarly, pay-as-you-use and usage and chartering of chatbots can also be used. Conventional insurers must initiate transformation process and take advantage of new technologies.


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