The exploding popularity of smart phones and Internet has become a core part of life for many consumers across the globe and in India. This megatrend, which has already disrupted several sectors, is set to have a huge impact on Insurance sector in India. It is estimated that three in every four insurance policies sold by 2020 would be influenced by digital channels during either the pre-purchase stage, purchase or renewal stages, according to a new report by Boston Consulting Group (BCG) and Google India. This report, titled Digital@Insurance-20X By 2020, asserts that not only will insurance sales from online channels grow 20x from today by 2020, but overall Internet influenced sales would be INR 300-400k crore. Digital disruption is expected to impact insurance significantly and, whether considered an opportunity or a threat, insurers need to be creative to leverage this opportunity immediately.
The influence of Digital is already 'big' and is getting 'bigger', exponentially in terms of user growth and time taken. This connected online population of over two billion users forms a brand new market that cuts across borders. India is no different, and has one of the largest digital user populations. Technology adoption curves are also becoming highly accelerated, and Internet influence can no longer be ignored, it is now at the very core and is a necessity.
The old ways of selling insurance are, over time becoming less sustainable. Traditional business models are being challenged by the emergence of trends such as lesser relevance of physical footprint, mobile internet, analytics, social platforms and disruptive players. "As insurers seek new avenues to grow profitably, they have a unique opportunity to embrace and benefit from the digital wave, which also addresses many key issues that plague the offline world today. We estimate that digital adoption could result in potential savings of 15-20% of total costs in the case of life insurance and 20-30% in the case of non life, thereby showing the path towards profitability for the industry", said Alpesh Shah, a BCG Senior Partner and Director also the author of the report.
"While online purchases represent a small component of Insurance activity in India today, the overall influence of Internet on Insurance product purchase in India is already 6x and growing rapidly. Insurance companies in India are still lagging behind the consumers and have not invested enough to create digital assets to engage the mature consumers online. Our studies have shown that 2 out of 3 users researching for a financial product ended up changing their mind about the brand or the product during their pre-purchase period. Internet allows companies to leverage the pull-based proposition around Insurance products, because customers are looking for the products online as suggested by the exponential growth in Insurance related search queries on Google.” said, Vikas Agnihotri, Industry Director, BFSI, Travel Google India.
Insurers globally have commenced their digital journey, and are reaping benefits by harnessing digital across the value chain. By drawing on specific initiatives undertaken by players across the insurance value chain that have disrupted the industry, the report provides real examples of digital efforts that have resulted in considerable gains.
In Insurance, online term life plans and travel insurance have already picked up substantially in the last few years. Though better pricing is a key reason for buying online, convenience and increased transparency are critical factors as well. The inefficiency of digital assets has led to emergence of online insurance aggregators that have seen a 4x growth in the value of life insurance premiums and a 7x growth in the value of health insurance. Motor insurance sales that were relatively small in 2011-12 have also gone up four times within the last year itself. Insurers need to realize that just like many other industries, they will need to undergo extensive changes in the way business will be carried out in the digital age.
The report leverages insights from wide array of BCG India and global initiatives, including BCG's Centre for Consumer and Customer Insights (CCCI) and captures insights gleaned from Google commissioned research and proprietary data. The report not only highlights significant opportunities for growth through digital adoption, but also proposes a clear agenda for insurers in India to act now.
It requires insurers to be agile enough to cope with rapid changes and newer challengers. Initiatives suggested to existing players include setting up digital goal posts, rewiring for a digital mindset to build the right set of capabilities, partnering smart and accelerating their digital efforts. Insights from the report can guide companies and provide practical solutions, as they develop strategies and engage in discussions on their path of digital transformation.
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