Disruption literally means an interruption or problem that impedes or blocks an event, activity or process. Without a remedy or to surmount the disruption there is no way forward. There has been a usual negative connotation attached to this word but with the book “The innovator’s dilemma” written, the word disruption was started using positively in business community as any roadblock or challenge faced by a business provides numerous opportunities and gives birth to path-breaking inventions which can in turn prove to be blessing in a disguise.
Thus disruption in a business sense for any industry will mean the smart approach and out of the box innovation and thinking which not only make things easier for the particular company but set a new normal and become a trend setter for the whole industry and the sector not in isolation but completely.
It is said that, insurance as an industry has been reluctant in embracing new technology and sudden changes and is more inclined to work on the orthodox approach and traditional ways of conducting business. This is always combined with the old perennial problems the sector faces in terms of product innovation, pricing, distribution etc. But with the emergence of technology and changing consumer behavior bringing a change in the old approach is not an option, if any company doesn’t change it may become extinct.
Insurance industry in India has come up a long way in the last decade from the erstwhile tariff based structure to liberalization and opening up of the sector to multinational foreign players to the emergence of new age InsurTech based digital insurers. In the motor insurance segment a new wave of disruption is knocking rapidly at the doors, which is the content of the current article.
Traditionally motor insurance in India was governed by All India motor tariff which provided detailed guidelines on the wordings, rates, structure, policy documents their form and everything. Then slowly the rating part was done away with and insurers were permitted to provide discounts although they were still using the tariff as a base to calculate premiums for all sort of vehicles whether two wheeler, private car or commercial vehicle.
This has been like the routine process where nothing has changed much and all general insurers whether public or private followed the same. Lately we heard of some off-beat processes and with the entry of digital insurers this more or less started becoming a norm. We discuss two of such points below which has disrupted the auto insurance industry in real sense and had taken it on a ride.
Claim settlement and customer satisfaction in this process is perhaps the biggest challenge that insurance companies have traditionally faced. In the last few years, insurers have started adopting new ways using internet and technology to break the barriers and settle claims quickly, many times on the basis of a photograph. The customer for approval of minor repairs claim now no longer need to go through the super lengthy paperwork, he can just fill a few details over the web portal and upload a few photographs to get the approval of his claim in minutes.
This was not the case with many insurers a few years ago but with the disruption broken and the trend set more and more insurance companies are trying to implement such tech based solutions for claim settlement otherwise they will lag behind. Similar systems are being increasingly used by insurers for easy renewal and inspection of vehicles while renewing the policy.
Telematics based Pay as you go motor insurance
Telematics based pricing of auto insurance products is now common in many insurance markets. But in the recent past we have seen TATA AIG launching the full-fledged version of Pay as you go usage based motor insurance product and the suit will surely be followed by other insurers soon in the market.
Although this type of product is much successfully running in developed insurance markets, getting this launched in an auto savvy country like India is a clear sign of disruption which will be a trend setter in coming time for sure. The policy wordings and the whole structure of this usage based auto insurance products varies substantially from what has been in the tariff for long time.
Telematics based devices named as auto safe device in case of TATA AIG, is installed in the cars or any vehicle for that matter to keep a track on many parameters including but not limited to driver behavior, usage patterns like speed, braking frequency, kilometers driven, location co-ordinates etc.
The device sends real time data to the insurance company by the help of machine learning and artificial intelligence and which is then analyzed at the insurer’s end to achieve perfect pricing as per risk posed. This approach help to make a more transparent, justifiable and equitable pricing of motor insurance premiums.
This device which is installed in the vehicle and other technology set ups need to be erected by the insurer may seem a costly affair for the company initially but with the trend set in the market and more fine tuning of premium achieved in this direction will disrupt the auto insurance sector and this will become the new normal. Telematics based auto insurance along with use of other technologies is the future of auto insurance sector in India for sure.