driving innovation in the insurance industry.pptx

7/27/2019 Driving Innovation in the Insurance Industry.pptx

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Innovation in the

Insurance Industry


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History

The insurance sector is a colossal one and

is growing at a speedy rate of 15-20%.

Together with banking services, insurance

services add about 7% to the countrys

GDP. A well-developed and evolvedinsurance sector is a boon for economic

development as it provides long- term

funds for infrastructure development at

the same time strengthening the risk

taking ability of the country.


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Before we begin the analysis of Indian insurance

industry, let us clear some basics on insurance.


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In the words of a layman,

insurance means managing risk.

For instance, in life insurance segment, theinsurance company tries to manage mortality

(death) rates among the wide array of clients.


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The insurance company works in a manner by collecting

premiums from policy holders, investing the money (usually inlow risk investments), and then reimbursing this same moneyonce the person passes away or the policy matures. Thegreater the probability for a person to have a shorter life spanthan the average mark, the higher premium that person has

to pay. The case is the same for all other types of insurance,including automobile, health and property.

Ownership of insurance companies is of two types:

Shareholder ownership

Policyholder ownership


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Types of Insurance

Life Insurance - Insurance guaranteeing a

specific sum of money to a designatedbeneficiary upon the death of the insured, or tothe insured if he or she lives beyond a certainage.

Health Insurance - Insurance against expensesincurred due to illness of the insured.

Liability Insurance - This insures property suchas automobiles, property and

professional/business mishaps.


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Challenges facing Insurance Industry

Threat of New Entrants: The insurance industry has been budding with newentrants every other day. Therefore the companies should carve out nicheareas such that the threat of new entrants might not be a hindrance. Thereis also a chance that the big players might squeeze the small new entrants.

Power of Suppliers: Those who are supplying the capital are not that big athreat. For instance, if someone as a very talented insurance underwriter ispresently working for a small insurance company, there exists a chance that

any big player willing to enter the insurance industry might entice thatperson off.

Power of Buyers: No individual is a big threat to the insurance industry andbig corporate houses have a lot more negotiating capability with theinsurance companies. Big corporate clients like airlines and pharmaceuticalcompanies pay millions of dollars every year in premiums.

Availability of Substitutes: There exist a lot of substitutes in the insuranceindustry. Majorly, the large insurance companies provide similar kinds ofservices - be it auto, home, commercial, health or life insurance.


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Despite the challenges

The growth of the insurance sector in India has been

phenomenal. The insurance industry has undergone a

massive change over the last few years and the

metamorphosis has been noteworthy.

Th i d i


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There are numerous private and government insurancecompanies in India that have become synonymous with the terminsurance over the years. Offering a diversified product portfolioand excellent services the many insurance companies in Indiahave managed to make their way into almost every Indian

household. Over the past decade, there has been increase in premiums,

players and outreach. The number of insurers has also increasedmaking it mandatory for the regulatory authorities to put inplace a revised regulatory framework

The Insurance industry, like many other industries has alsobecome competitive with number of insurers attracting investorswith numerous product innovations.

A combination of these factors along with strong economicgrowth in the last few years has positioned India as a regionalinsurance hub and now India aspires to be an internationalfinancial center.

The pace of growth of this industry is fast. But in an endeavor toexpand beyond the current growth levels there needs to be apersistent effort to sustain what has already been achieved.


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Okay, So


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Why does innovation matter?

Because it is one of the few ways in which anenterprise can build its capabilities, stay fresh,

and become a market leader.


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How strong is the insurance sector

when it comes innovation?

Overall, not bad. Banks sell insurance, and

insurance companies sell savings and

investment products (e.g. general insurance,

health insurance, life insurance, protection,savings, investments, at-retirement, or

pensions) to which industry insiders attach

importance.


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In the insurance sector, what are and/or

have been the barriers to innovation?

Market conditions : Innovation thrives when there is a lot of competition and/orwhen there are new entrants to a market. Neither condition really applies toinsurance.

Regulation : In the Life & Pensions sector in particular, regulation and compliancedominate the business agenda and seem to have become substitutes for strategy.

They also suck in a lot of scarce resources and affect the appetite for projects thatactually make a difference.

Corporate Cultures : Innovation is most likely to add value when it is viewed as acorporate competence; when it as an integral part of the culture; and when seniorpeople are measured on it. (Few Annual Reports by insurance companies refer toInnovation and its importance).

Group think :Every industry sector has its group think what Peter Druckercalled, The Theory of the Business. Markets and consumers benefit when this isregularly challenged. For the reasons given previously, group think in insuranceparticularly in the Protection sector has not been strongly challenged. One aspectof this is the over-focus on product innovation mentioned earlier, so below weoutline some other approaches to innovation that should be considered.


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Going forward, where is innovation

likely to add most value?

i. Applying insights from the new discipline ofbehavioural financeto propositions and services.

ii. Smarter use of information based on actual consumer behaviourrather than static proxies such as postcode, chronological age, or

gender. (Consider Tesco offers to Club Card members, or Amazonsuse of predictive algorithms; the health-related data that the likesof Toumaz technologies collect; or location based services).

iii. Partnering with organisations that have complementaryperspectives such as the charities (higher EQ), or mobile phonecompanies (strong in m-commerce).

iv. The growth of unmet needs based on changing consumerbehaviour and demographics more single parents, morecomplicated family structures, more singletons, more electivesurgery.


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The Bottom Line

The good news is that we now know quite a

lot about innovation and how to combine it

with process. Once the insurance sector

attaches as much importance to imagination

as it does to experience; and once it actually

measures itself on innovation; well see

changes for the better.


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Innovations

APPLICATION OF INFORMATION


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APPLICATION OF INFORMATION

TECHNOLOGY IN INSURANCE SECTOR

There is a evolutionary change in the technology that has revolutionized theentire insurance sector. Insurance industry is a data-rich industry, and thus,

there is a need to use the data for trend analysis and personalization.

With increased competition among insurers, service has become a key

issue. Moreover, customers are getting increasingly sophisticated and tech-

savvy. People today dont want to accept the current value propositions,

they want personalized interactions and they look for more and more

features and add ones and better service


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Contd..

The insurance companies today must meet theneed of the hour for more and more personalizedapproach for handling the customer. Todaymanaging the customer intelligently is very

critical for the insurer especially in the verycompetitive environment. Companies need toapply different set of rules and treatmentstrategies to different customer segments.

However, to personalize interactions, insurers arerequired to capture customer information in anintegrated system.


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Contd..

With the explosion of Website and greater access to direct productor policy information, there is a need to developing bettertechniques to give customers a truly personalized experience.Personalization helps organizations to reach their customers withmore impact and to generate new revenue through cross sellingand up selling activities. To ensure that the customers are receivingpersonalized information, many organizations are incorporatingknowledge database-repositories of content that typically include asearch engine and lets the customers locate the all document andinformation related to their queries of request for services.Customers can hereby use the knowledge database to mange theirproducts or the company information and invoices, claim records,and histories of the service inquiry. These products also may beable to learn from the customers previous knowledge databaseand to use their information when determining the relevance to thecustomers search request.


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Customer Innovation

There has been a fundamental shift in consumer spendingpatterns, as restraint has become the new mantra.

Increasingly, researchers find consumer social attitudes andbehaviors have been irrevocably altered by the financial crisis.Insurance companies are seeing decreased premiums from

customers who are switching policies to find lower cost/morevalue. Brand loyalty is becoming a casualty of cost-comparisons.

Leading insurers are proactively responding, recognizing a newdynamic of interaction between customers, mobile computing andonline networks, re-constructing the marketplace with newsolutions

Insurance companies must decide how they can best use thisopportunity to first advertise and then to actively engage with theircustomers.


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Product Innovation

Product innovation, a key focus, includes both the productand how it is developed. Technology innovations such as

Web 2.0 allow customers to participate in productinnovation by co-creating products. This approach usestechnology to link partners, suppliers, and customers to co-create targeted, richer products quicker than traditionalmethods.

While new products have been slow to market the last tenyears, this co-creation or co-development approach andthe emerging new products and services are poised todisrupt market dynamics. Products with built-in customerinput and value will challenge product price wars andredefine customer relationships


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Service/Claims Innovation

Service is the moment of truth for insurance companies. Customer preferences arechanging and new access options are expanding beyond website self-service toease-of-access with any device.

With a growing mobile market, consumers want innovative ways to shop for and managetheir insurance. Insurance companies are expanding the online experience usingmobile Internet devices with mobile apps that:

Quote; Pay bills;

Report claims;

Find repair-shops with Google maps;

Provide ID card access; and

Offer daily repair monitoring.

Today, service is about insurance companies being able to provide 24 X 7 X 365 access, allbased on customer preference.

Esurance, a direct-to-consumer auto insurer, is another example of innovation ininsurance. The company expanded their online services by offering self-serviceclaims. Esurances solution provides a revolutionary claims experience throughreflexive, conditional questioning, real-time triaging, assignment and scheduling

repairs.


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Business Model Innovation

Insurance companies are reinventing their business models bytransforming/optimizing existing business capabilities to create a newbusiness model. Consider the example of one leading insurance companywhich launched a new auto brand that is 100 percent Internet-based. The

companys virtual operation is uniquely positioned to serve themobile/portable, Generation Y or Net-Generation insured. Customerdemand is highlighted by significant growth on the order of more than1000 new customers per month since the companys launch.

The operation captures, prepares and processes insurance from quotethrough claims, repair and renewals to transact ALL insurance needs

electronically, much like banking. The results are impressive: The companyreports double-digit new business conversions, as well as business growth,decreased expense ratio and claims costs, better-than-average customerservice and repair quality exceeding expectations. This virtual insurancecompany has created an innovative, relevant, modern operation byembracing trends and customer expectations to deliver top-tier value andservice.


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CONCLUSION

Due to the Innovation in the insurance industry :-

There is a probability of a spurt in employment opportunities.

A number of web-sites are coming up on insurance, a fewfinancial magazines exclusively devoted to insurance and also a

few training institutes are being set up. Many of the universities and management institutes have

already started or are contemplating new courses ininsurance.

Insurance has today become a mainstay of any marketeconomy since it offers plenty of scope for garnering largesums of money for long periods of time. A well-regulatedinsurance industry which moves with the times by offering itscustomers tailor-made products to satisfy their financial needsis, therefore, essential if we desire to progress towards a

worry-free future.


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Warren Buffet states: Befearful when others are greedyand be greedy when others arefearful. Now is the time to be

greedy greedy for innovation.

"A lot of the innovation in theyears ahead will be driven by

competition" . "If you want tocapture business from yourcompetitor, you're going tohave to be more innovative,you're going to have to

consider what your customerswant, be able to implementsystems to offer it, then price itaccordingly."


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driving innovation in the insurance industry.pptx

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