Here’s Why 2023 Will Be The Year Of Insurtech Business

Insurtech is set to emerge as one of the scene stealers in 2023. Players are sanguine about the prospects in the New Year. Some of them expressed the firm view that insurtech space could come up really big in the not-so-distant future – at par with the country’s fintech sector.

Customer awareness, particularly about healthcare products in the aftermath of the pandemic, has accelerated the growth of insurtech. Insurance is experiencing what banking and retail experienced a few years ago — an influx of capital, encouraged by massive digital transformation. The style of functioning of banking and retail has since then changed forever.

The insurance space today is in a similar disruption phase. According to Manu Rikhye, partner, Merak Ventures, the growth of insurtech has led to a massive 167% increase in investments in the last few years. Most players derive their confidence from an enabling environment that is being designed by the sectoral regulator.

Much like how the Reserve Bank of India pushed fintech, the Insurance Regulatory and Development Authority of India (IRDAI) is stressing on technology. IRDAI Chairman Debasish Panda is on record saying that the regulator would move to tech-based regulations from rule-based norms. The shift in focus will manifest itself in 2023 and open up many possibilities for startups and small businesses.

IRDAI’s Tech First Approach Opens New Avenues 

IRDAI has envisioned the dematerialisation of all insurance policies, both existing and new, by December 2023. Another game changer is Bima Sugam — the digital platform that the regulator is developing for selling, servicing and claim settlements.

New-age insurance players riding the tech wave are sure to enjoy a cutting edge when the contours of these two sweeping reforms become clearer.

The regulator is in favour of easing entry barriers. The government is also said to be on the same page. Small and medium enterprises will get an impetus if the Centre, as is widely expected, amends the Insurance Act to reduce the INR 100-Cr capital requirement to enter the insurance business.

The year 2023 is likely to see an overhaul of the sector as the government is looking at replicating the successful microfinance model in insurance (at another level, some insurtech players are piggybacking on microfinance institutions to sell their products in rural India).

As the year progresses, insurers, buoyed by the introduction of ‘Use and File’ practice, are expected to launch a plethora of new and customised products.

IRDAI’s reforms are aimed at increasing penetration through better market participation. As a result, many new intermediaries are likely to make their presence known. 

Adarsh Chokhani, founder & CEO of Assurekit, expects the competition to intensify, leading to better structures. From end-consumers’ point of view, this will result in a much easier approach to coverage.

Avinash Ramachandran, the chief operating officer of Assurekit, foresees a flurry of activities behind the scenes and lots of interesting options for consumers by the end of the year. As Coverfox Group CEO Sanjib Jha opined, insurance will become a pull product rather than a push product.

Cutting-Edge Tech To Transform Insurance Business

Digitisation and product customisation were the main highlights of 2022. While big data, artificial intelligence and machine learning have made insurance customised, the introduction of ‘Use and File’ by IRDAI further aided product customisation. As the ‘Use and File’ approach gathers momentum this year, customisation of products will also gather pace.

Balachander Sekhar, cofounder, RenewBuy observed that with more insurance advisors joining the digital distribution bandwagon, every aspect of insurance has become real-time, from buying a policy and claiming settlements to renewing policies. And ambitious insurers will continue to prioritise digital transformation in 2023.

The fruit of fast digitisation has been deeper insurance penetration. Hemant Tathod, chief operating officer of Bimaplan, is optimistic that the growth trajectory in insurance penetration will continue in 2023. In 2022, the penetration was 4.2%, up from 3.45% in 2016.

Investment Opportunities Versus 2023

Rikhye of Merak Ventures thinks the global insurance market will experience seismic shifts in 2023 on account of technological advancements. He also foresees insurance companies switching from price-based competitive strategies to value-driving criteria.

“There are significant opportunities in underwriting, proliferation of distribution for insurtech, automation of insurance processes, and hyper-personalisation that will continue to gain investor attention.”

Some insurance SaaS companies may foray into the global market, enabling easy processes from customer onboarding to underwriting.

Rikhye sees investment opportunities in embedded insurance and bespoke product bundles, while customer claim processing and underwriting becoming more convenient with the use of artificial intelligence and machine learning.