Page 38 - Insurance Times August 2019

Channel- In-house: Such a distribution channel provides a or percentage of gross revenue from sales. Some early birds
front-end advantage to companies since the employees and have adopted technology in their businesses while the other
internal agents have a better understanding of the product ones are merely following suit.
than an external agent would have. One of the limitations
of internal agents is the lack of penetration into the rural This is leading to the development of same type of
areas and the lack of understanding of the ecosystem and technology and there is no differentiation to become a
cultural norms of consumers at the bottom end of the unique selling point (USP) for insurance companies. The
pyramid. investors are more confident about the FinTechs rather than
the Insurtech startups. This makes the FinTech companies
Channel- Brokers: A broker would have an expertise in grow exponentially faster than the Insurtech startups.
attracting commercial consumers and can also deliver Insurtech has not yet solved the industry problems of
complex products with a wider reach in the commercial unpaid claims, advisor's fee, declining profitability and low
space. The brokers are held back by the limitation in growth customer trust. Also, because of the established IT systems,
rate of commercial products. Also the commissions for the insurance companies are not yet ready to replace them
brokers are highly negotiated due to the advent of virtual by new technological advancements.
selling channels. This puts a cap on the profitability of the
brokers as individuals. Classification in Insurtech Segments

The Insurtech startups till now have largely tried to use
Channel- Bancassurance: Insurance companies scope the technology and digital solutions in the supply side vertical.
clients of the banks in order to cover a wider area of clients Some of the untapped insurance specific verticals are the
that would be interested in integrating insurance products reasons that the insurtech startups have not been able to
in their portfolio. However, the bank tellers might not attract investments to a larger magnitude. According to the
understand the intricacies of the insurance products and are
study conducted by Oliver Wyman, the three segments that
hence the quality of service provided by the bank tellers
can be largely tapped from the insurance industry
might be compromised.
perspective are:
1. The proposition segment, although being a very small
Channel- Referral system: The expansion of consumer base
segment comparatively, shows a wide gap between the
depends solely on the quick reach to and by the customers
most active insurtech startups and the startups with
among themselves. This helps the insurance companies greater potential but lesser activity. The startups which
avoid the sensitivity involved in sharing the databases with are not quite active are perceived to be the ones that
other channels. Such distribution channels are held back depict true innovative solutions on how risk coverage
because of absence of volume obtained by referral systems is presented to the consumers. A quick glance at the
and hence such a distribution channel depends solely on strategic assessment of this segment is shown below:
the consumers with minimal investment.

Insurtech has attracted
negative criticism as
well. In some of the
developed economies
like Australia, Insurtech
has given rise to a
number of fraudulent
practices. This high-
lighted the need for
regulations in the
insurance market.
Insurtechs have also
not proved to reduce
the operating costs
either on absolute basis

38 The Insurance Times, August 2019