Exclusive: ‘India’s insurance revolution’ – Swati Sanyal Tarafdar, in “The Insurtech Magazine”
COVID-19 has encouraged the Indian health insurtech segment to grow up. Product innovation and an emabling push from government is increasing reach and affordability, reports Swati Sanyal Tarafdar
Jay Bakshi runs his own digital marketing communications agency, Digiqom Solutions, from Gurugram in northern India. The organisation employs around 15 people, who were already functioning remotely when COVID-19 struck and the country went into lockdown.
During March and April 2020, Bakshi worried about how he could protect his staff and maintain his business. Around that time, one of his advisors suggested buying affordable COVID-specific health insurance.
“Traditionally, health insurances were long-term and expensive. But the group insurance I got for my team was not only affordable, the process of getting it was also quick and easy. Amidst all the uncertainty the pandemic threw at us, it ensured some cover in terms of treatment and medical costs,” explains Bakshi.
He was among the first employers in the country to secure COVID insurance protection for employees and the product design was an important selling point.
“The price of an individual policy might have deterred members of my staff from getting one for themselves. But, as a corporate group, I could access a better package and I was willing to make that investment,” he explains.
Among the few positive changes the pandemic forced on India’s population, embracing the utility of health insurances – in fact, insurance in general – has emerged as one.
Back in 2013 a study showed that awareness, let alone uptake, of health insurance was very poor – only around one in six families had even heard of it. And yet, with only one per cent of India’s gross domestic product (GDP) being spent on financing public healthcare at the time, treatments were expensive and put further stress on the vast majority of Indians’ household income. The same study showed that, in 40 per cent of cases, hospitalisation forced people to borrow heavily or sell assets to cover expenses. More recent research published in the International Journal of Community Medicine and Public Health (IJCMPH) in 2019, revealed that, among a sample of 550 people in two south Indian districts of Karnataka, 16 per cent were still completely ignorant of health insurance. Meanwhile, 21 per cent were aware but did not have cover.
Of those who had health insurance, only 25.57 per cent utilised it, the rest saying the process was too complicated (42%), or they were offered only partial coverage (24%), but most cited the non-availability of empanelled hospitals, diseases not being covered, or simply not knowing how to go about accessing insurance or claiming against it. There were also large differences in health insurance coverage between Indian states.
Realising the importance of providing adequate coverage, the Insurance Regulatory and Development Authority of India (IRDAI) promoted several low-cost or free insurance schemes for those at the bottom of the pyramid. In 2018, the Indian Government started the Ayushman Bharat scheme to provide free access to secondary and tertiary healthcare for those needing specialised treatment and hospitalisation. Jointly funded by the federal and state governments, this scheme was targeted to cover 40 per cent of the Indian population; but this still left a massive section excluded. The IRDAI chairman admitted: “Out-of-pocket expenditure on health in India is as high as 64 per cent… while health insurance is as low as 0.29 per cent of GDP. Ayushman Bharat has provided health insurance to the households below the poverty line. But, the middle class remains largely uncovered.”
Now demand is skyrocketing. So what’s changed? In a word: COVID.
“Most people didn’t think about insurance. They didn’t want to spend money on that. Also, per capita income is low, so most people didn’t have the liquidity. What COVID-19 did was change this behaviour and mindset,” says Rohan Kumar, co-founder and CEO of Toffee Insurance, an insurtech startup in India that designs and offers microinsurance packages.
“For most consumers, it’s still a push product,” Kumar adds, “but with a heightened sense of mortality, increased chances for hospitalisation and associated costs, and the lack of COVID infrastructure, the need for having some sort of protection has been amplified.”
Toffee’s focus audience is customers below 35 years of age with a family income of more than INR 50-60,000 per month – so, predominantly, the Indian middle class that hadn’t bothered about healthcare insurance products in the past. Through its innovative, customer-centric, contextual microinsurance products, Toffee had successfully sold bite-sized insurance policies to more than 1,15,000 Indians, over 80 per cent of whom were first-time buyers, even before the pandemic hit.
It’s the product, stupid!
Startups like Toffee Insurance are taking a fresh look at India’s insurance scene and disrupting it through sharper product designs, relevant pricing, and a stronger focus on customer necessity.
Says Kumar: “Everyone was trying to solve the distribution aspect rather than solve the product problem. So, your offline audience, which is probably a 90 per cent chunk of the population, continued to be left out.”
Toffee identified three fundamental issues with the Indian insurance sector. Firstly, the distribution problem is actually a product problem because there was no innovation and the old-school products were extremely difficult to understand. Secondly, these legacy products were all-encompassing and had unnecessary features, which meant they were covering a large variety of risk profiles and were therefore expensive. And, finally, there was limited access to distribution channels.
So, Toffee worked with insurers to create products that covered single events that occur with the highest frequency, and sharpened their distribution.
“We focussed on typical conditions for which most people get hospitalised, including diseases like dengue fever, malaria and chikungunya.
“We developed a product for those who ride a bicycle to work. We offer coverage for people who are on the road most of the time – like Uber drivers and food delivery staff. The products became very easy to understand, product prices reduced drastically, people were able to relate to it, and it all became very easy,” Kumar explains.
In August 2020, it rolled out The Toffee Plan, a bundled monthly subscription policy covering health, life and household, which also included hospitalisation expenses arising from pandemics, as well as their consequential impact, such as being unable to work because of quarantine.
Direct-to-consumer innovation is one response to the problem of underinsurance. But there’s a parallel technology trend emerging, too: the tech layers provided by another set of insurtechs that help incumbents to adapt and quicken their pace.
MetaMorphoSys Technologies helps traditional insurance providers with product configuration so that they can launch innovative products fast, and perform quick underwriting, customer acquisition and claim resolution.
Amit Naik, CEO and co-founder, says MetaMorphoSys sees itself as a legacy transformation company. “The incumbents are invested in monolithic, old legacy platforms. They have invested so much money in these and it’s a nightmare to change them,” he says. MetaMorphoSys allows them to continue to power the business, but to all intents and purposes what’s clients, customers and employees interact with is his platform.
“We’ll show them the butterfly – my platform,” says Naik, “which sits on top of this legacy so that they can launch innovative products, innovate in underwriting, do quick claims processing. Whether it’s a group claim, individual claim, life claim, health claim, the claim adjudicator sees the entire data on one page, it can be auto approved, it comes with a decision, and all the adjudicator has to do is to check the data and OK it because there’s so much intelligence built into this system. What took a week now happens in 30 to 35 minutes.”
This laying of old and new enable fast processing of data and integration of systems, as well as validations that enable identification of fraudulent claims.
Naik agrees that COVID-19 has accelerated digital transformation among insurance companies. The biggest change, he thinks, has been the shift from on-premise to an on-demand software-as-a-service (SaaS) model.
“Insurance companies were so scared, initially, about the regulator, about data privacy and data security issues; they were scared about how they’d manage, whether they’d lose control. But, pushed by COVID-19, now they are willing to put everything in the Cloud. And it is giving them a cost leverage and a speed benefit. And the end customer gains out of this whole situation.”
Naik, however, emphasises that what actually made a difference for MetaMorphoSys was its approach, using component-based platforms and ready-to-go intellectual property.
“We gave a set of 150 claim rules and the anomalies to a Hong Kong-based insurance company we are working with. The code alone is of no use but with this intellectual property – the rules, data and insights – insurance companies should be able to leverage the best practices. That’s what makes the difference,” he explains.
Looking To The Future
In the fiscal year ending March 2020, India’s life insurance companies recorded 11.36 per cent growth in their collective premium income. Since then, catalysed by the pandemic, the insurance industry, especially the healthcare segment, has seen a further boost. The IRDAI is yet to publish its data, but industry experts think there are reasons to rejoice.
Kumar says: “Across all our health insurance partners, demand has gone up by around 30 per cent in the past eight months, and for some of them it’s as high as 70 per cent. That’s a big jump and I think it’s going to stay this way all the time customers perceive an uncertainty in the health and medical environment and this heightened sense of mortality.”
For years, for those with steady, well-paid jobs, the end of a financial year meant taking out insurance policies because it helped to offset some of the tax burden. For the rest of the year, there would be little understanding or interaction with the policies. The new-age insurtech startups are changing this behaviour through post-sale customer engagement and social media, as competition increases.
Naik, however, suggests that the industry will see a lot of consolidation in the coming years, as startups continue to mushroom.
He says: “There’s greater awareness and penetration has increased. But, I think, over a period of time, you will see that very few companies will be able to sustain themselves. A lot of consolidation will happen.”
For the time being, however, the new insurtechs are defining new products, new systems. And they are also showing the way to go in terms of customer engagement and relevance.
This, in turn, is enabling individuals and entrepreneurs like Bakshi to afford a health insurance cover not only for himself but for his extended families, too.