Page 31 - Insurance Times June 2023

customer engagements. To achieve this, insurance Digitalization to transform the insurance
providers have to establish partnerships with Insurtech
value chain
companies as well.
The insurance industry is often seen as having a bad
Insurance professionals should be prepared to deal with
reputation for being behind the advancements in technology.
unforeseeable serious catastrophic environmental
One of the key trends, which can be witnessed, is the gradual
events. These events are becoming more severe, and
deployment of technology across the industry value chain.
they are happening more frequently. The possibility of
For instance, HDFC Ergo tied-up with IBM for deploying
harmonization between regulators around the world.
artificial intelligence (AI)-based solutions in its customer
Creating a standard for insurance practices will impact
relations as well as product development processes. Similarly,
prices and policies. Companies have to stay up to date
ICICI Lombard is deploying AI-based models in motor and
on world events to prepare for this challenge.
health insurance for claims processing and fraud detection.
Despite underwriting losses, the sector is expected to The same insurer also deployed drones for crop insurance
report marginal return on equity (3 to 4.5 per cent) assessment in the Indian state of Gujarat. Others have to
largely supported by investment income which is highly follow suit. Today, we live in a digital world, where technology
regulated by the Insurance Regulatory and Development is embedded in our daily lives and work. The insurance industry
Authority of India (IRDAI). is also rapidly adapting to these seamless virtual operations.
With the adoption of AI, RPA, cloud computing, Internet of
The domestic life insurance industry has seen pressure
Things, and blockchain, digitalization is set to transform the
on its profitability in the short-term as the corona virus
insurance value chain.
pandemic has cast doubt on the certainty related to
morbidity and mortality in the country. In the short-term,
Currently, about 68% insurance companies are either in the
the profitability of the insurance industry is expected to
process of testing or adopting AI. By 2025, the insurance
be an area of concern given the increase in mortality
industry has the potential to automate 25% of its processes
and morbidity rates induced by the pandemic.
(especially manual processes like claim processing,
The pandemic has posed multiple challenges for the underwriting, customer service, and policy administration)
Indian life insurers. The onset of the pandemic saw a using AI and machine learning. Certain use cases for RPA
sharp fall in equity prices, while interest rates also (Robotic Process Automation) include claim settlement, fraud
declined. Insurers have exposure to equities in unit-linked detection, real-time data analytics, customer experience,
and participating businesses. Thus interest rate and product personalization. On combining RPA with AI tools,
movements impact their liabilities and guarantees based bots can help collect data from internal and external sites,
schemes. While, a credit risk can impact their investments extract information, analyze customer history and further
made incorporates. identify and verify fraudulent claims.
If social inflation is not checked, insurers' reserves could
India is the second-largest insurance technology market in
be proven inadequate. Under-reserved liability insurance
Asia-Pacific, accounting for 35% of the US$ 3.66 billion
business has historically been the largest cause of
insurtech-focused venture investments made in the country.
insurance company impairment, so insurers are justifiably
There will be a growing use of technology and digital mediums
wary of any external trend with the potential to challenge
to create new opportunities, not just to acquire customers,
reserve adequacy.
but also in helping customer lifecycle management. Not every
The sharp movements in markets, coupled with any asset
new technology needs to be used to make the industry grow.
liability mismatches that insurers may have, can impact
However, insurer may find ways to use knowledge of drones,
the solvency position. the Internet of Things (IoT), and other recent advancements
in technology.
There's no challenge too big to handle, so work out a viable
solution to overcome any obstacle that comes your way. Be Being knowledgeable of these developments will help
sure to look out for these challenges by preparing solutions companies talk to clients, and their clients will feel more at
to keep your business moving throughout the next year. ease working with someone who understands their concerns.

28 June 2023 The Insurance Times