‘Digital’ De-mystifiedOpportunities for Indian Insurance

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Foreword

1 Key Customer Digital Trends

1.1 Retail Segment Digital Trends

1.2 SME Segment Digital Trends

Box Item: Government actions resulting in Digital push

2 Market Opportunities for Insurance

2.1 International Trends in Digital Customer Propositions

2.2 Every day Insurer

2.3 Size of the Digital Opportunity in India- Enhanced revenues and

efficient operations

3 Operating Model Imperatives for Insurance Companies

3.1 Key Operating Differentiators of Digitally successful firms

3.2 Digital interventions along the Value Chain

Contents3

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ForewordThe digital boom in India has affected almost all retail focused industries. Starting with transportation and retail, it has now even spread to niche segments such as salons and tiffin services. All these industries are driven by the need to build direct bridges with the end consumer through the smart phone in order to survive in an era where the customer is using the phone as the primary medium of communication with the rest of the world.

The trend in India has been fast paced driven partly due to the large base of phone users and partly due to lesser weight of legacy systems (for eg. radio cabs). This made Indian consumers increasingly depend on their smart phones for reasons beyond just communication or entertainment. While initially, digital spread was limited to metro and Tier 1 cities, recent data has begun to show signs of breaking that barrier, and growth into semi-urban towns and villages. In this, government efforts to increase use of digital across the country have also begin to pay dividends for greater penetration.

The imperatives for the insurance industry can be looked at in two ways. On one hand we see a threat-that of insurers losing any connect that they have with their consumer if they do not begin interacting with the customer through the digital medium. On the other hand we also see an opportunity for insurers to establish a direct connect with more customers than they have had till now without the use of traditional channels. In addition, is the opportunity for cost reduction of anywhere between 15%-20% of their opex base.

While the response of insurers to the digital trends has been varied till now, it can, at best, be termed as inadequate. A handful of insurers

have taken up the challenge of connecting with customers directly through mobile apps. Social media, as a coherent strategy to understand customer preferences is almost wholly missing. The most that most insurers have managed are online and mobile based solutions for tactical transactions -policy purchase or renewals. A holistic approach to connect with the customers and graduate towards a more ‘daily-risk’ management relationship is still not considered.

At the back end, technology-of the disruptive kind-is necessary to put in place an agile company that is ready to quickly adapt to a new trend. While there has been some movement in Indian insurance companies, the extent is often limited to tactical process improvements in policy issuance or claims rather than fundamentally changing the way to doing business in a more efficient and (digital) customer centric manner.

It is true that insurers start out with a disadvantage when it comes to customer connect-their relationship is traditionally linked to a one-a-year connect during the time of policy purchase or renewal (as against that of a bank which has almost daily transactions with the customer). In addition, it is linked to negative events and consequences. However, the industry needs to

realize that by not going beyond a transactional approach of engaging the customer, it could lose the plot completely to a new player (like the e-retail or the phone companies).

Our report this year focusses on the digital trends in the Indian insurance industry in India. In order to do so, we first show how digital is re-shaping the daily lives of retail and SME segments in India, followed by how the business opportunities that these trends open up for them. In the final section, the report goes on to detail how insurance companies would need to change their operations along their entire value chain in order to successfully tap into these opportunities.

Roopen RoyPresident, Indian Chamber of Commerce

Samir BaliManaging DirectorFinancial ServicesAccenture India

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1. Key Customer Digital Trends

Growth in digital penetration in India is a well-known and visible phenomenon. However, the exact extent and nature of this phenomenon is little understood. Everyone remotely connected (or unconnected) to the Digital phenomenon has an independent view on the size of this inflection point. Add to this, the absence of single source of public data for the entire digital footprint of Indian customers makes approximations necessary.

Our first section of this report aims to provide an objective view of the trends prevalent in the Indian consumer segments of Retail and SME. Subsequently, we make an attempt at quantifying the size of the Digital footprint in these segments in India and the nature of this footprint.

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1.1 Retail Segment Digital TrendsThe Indian ecommerce industry has evolved significantly in the last 5-7 years with digitization lending a disruptive edge to many businesses and impacting the ecosystems around which such businesses operated. Notably amongst these have been travel, e-tailing including fashion, apparel and electronics, classifieds and financial services.

Ecommerce in India has grown exponentially from a little under $2 bn in 20071 to $20 bn by 20152. However, it gets dwarfed in comparison with the developed economies like China and USA which are estimated to be over $250 bn. Nevertheless, taking into account the recent growth and favorable factors and enablers that the country has to offer, future growth in ecommerce appears sustainable and impressive. Detailed below are some of the key trends and factors that are expected to impact this growth.

Large favorable demography for a Digital push

India is the second most populous country in the world with a population of ~1.25 bn but more importantly, it is home to the youngest population in the world. 75% of India’s online population is under the age of 35 years as compared to other BRIC nations like Brazil (60%), China (59%) and Russia (56%)3.

In India, however, the digital push has been largely limited to the urban region with India’s top 10 cities providing access to a digital

community with 50% of the GDP and more than 70% of organized retail (Figure 1).

(2011Census)

GDP(USDBn)

Internet Internetusers

Internetusers(2015)

India 1237.0 1842 17% 213 256

1 Delhi 21.8 167 37% 8.1 9.7

2 Mumbai 20.7 209 58% 12.0 14.4

3 Kolkata 14.6 150 30% 4.4 5.3

4 Chennai 8.9 66 51% 4.5 5.4

5 Bangalore 8.7 83 44% 3.8 4.6

6 Hyderabad 7.7 74 61% 4.7 5.6

7 Ahmedabad 6.4 64 44% 2.8 3.4

8 Pune 5.0 48 54% 2.7 3.2

9 Surat 4.6 40 52% 2.4 2.9

10 Jaipur 3.1 24 52% 1.6 1.9

Top 10 Cities 101.5 925 46% 47.0 56.4

Top 20 Cities 122.4 1060 47% 57.1 68.5

20% CAGR

Delhi

Kolkata

Pune

Bangalore Chennai

Hyderabad

Ahmedabad

Surat

Jaipur

Mumbai

8.1m

1.6m

2.8m

2.4m

12.0m 2.7m

4.7m

3.8m 4.5m

4.4m

Figure 1: Current levels of Concentration of Digital Footprint in urban areas

8.1mDelhi

4.4mKolkata

2.8mAhmedabad

2.4mSurat

12mMumbai

2.7mPune

4.7mHyderabad

4.5mChennai

3.8mBangalore

1.6mJaipur

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1 ASSOCHAM2 Fast and furious, e-commerce, Motilal Oswal3 Comscore

56%

40% 38%

26%

15% 12%

Home Cybercafe On the go O�ce Friends /relatives

School /College

26%

57%70%

22%

8%

Home Cybercafe On the go O�ce Friends /relatives

School /College

12.8 13.112.0 11.6 11.6

10.79.7

13.7

10.4 10.8

15-24 25-34 35-44 45-54 55+

Males Females

Internet usage, in minutes per day by age/gender

Access to internet in urban environments

Access to internet in rural environments

29%

71%

Female Male

Internet users by gender

Figure 2: Key Retail Digital trends

Figure 3: Modes of Entertainment in Indian Retail segment

The Indian demography being a complex diaspora, has been witnessing interesting digital trends across different age barriers, genders, and socio-economic classes. Notable among these are increase in users over the age of 50 years adopting mobile broadband either to pursue a hobby late in life, migratory users from low income backgrounds able to stay connected with their families or rising internet usage driven by socio and image conscious aspirations. Analysis of such trends, (as shown in Figure 2)are being exploited by businesses to design new customer offerings with focused and educated efforts.

Mobile First

The smartphone mobile broadband revolution in India began in key metropolitan areas, and continues to be dominant in these places. While metros offer a wide choice of recreational facilities, in contrast, smaller cities and towns have fewer entertainment options such as digital theatres, large retail chains and shopping malls. Consumers in smaller cities and towns are rapidly embracing smartphones and mobile internet to bridge the gap and bring new, affordable entertainment. For many, mobile technology represents an easy to carry and less expensive alternative to other personal technology devices. Figure 3 represents average time spent by the internet users with the media.

This is also important for industries that have a low reach in the consumer segment or lack awareness, as it can offer need based products to the consumers and provide multiple touch points and engage with them.

Average dailyuse of interneton PC/tablet

304

Min

utes

204

151

118

Average dailyuse of interneton mobile

Average dailyuse of socialmedia on anydevice

Average dailytelevisionviewing time

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Deep penetration of Digital solutions

Doing businesses the traditional way involving physical market place is becoming increasingly difficult due to lack of differentiation in offerings, high real estate cost, data collation and security and geographic limitations. This is where the digital market place scores over the current brick and mortar way of doing business. For some of the leading Indian online shopping retailers, over 50% of mobile traffic comes from Tier II & III cities, showing that their its core audience is in the smaller cities.

One of the most significant advantages of digital industry is its reach. Mobile penetration in India currently stands at 70% making it the third largest market for active

Social Networking

Online Retail Travel Telecom Sports Matrimonial Professional Development

Top Sites

Users Top Sites

Users Top Sites

Users Top Sites

Users Top Sites

Users Top Sites

Users Top Sites

Users

80 2830108 80 28172

20 M

1.6 M

8.5 M

11 M

15M

25 M

18 M

5 M

10 M

8 M

13 M

3 M

5 M

1 M

0.5 M

100 M

50 M

195 M

141 M

121 M33 M

Facebook has more than 100 Mil users in India alone. Almost 86% of the internet users access Social Networking sites.

21% buy Consumer electronics and another 21% buy media products, 11% go online to buy apparels.

29% of all travel booked online is for Flights, 20% for train travel, 18% for accommodation & 12% is for holiday packages.

70%-80% of online traffic to Telco websites is for bill payments and pre paid recharge.

In 2013, 250 million people watched IPL–175 on TV and 2.5 on mobile. Online viewership increased from 48 Mil in 2012 to 72.5 Mil in 2013

Matrimonial websites attract around 28 Milusers in a year

Websites such as LinkedIn, Monster and Naukri are the major Professional development websites

mobile internet users. Key enablers for this growth are low cost of internet and cheaper entry level feature phones and smart phones. Current penetration of smartphones stands at 30%6 amongst mobile phone. The number of smartphone users is expected to reach 2 billion by 2016 according to eMarketer. But smartphone sales in India grew by over 100% year-on-year, with over 40 million units shipped to the country. India is expected to house the second highest number of smartphone users by 20167 on account of increasing popularity of social media, gaming, entertainment, purchases and data streaming.

The popularity will increase on account of improvement in telecom infrastructure, lower data cost and onset of 3G/4G services. Smartphone users are an important

cog of the digital market place because more than 90% of them use smartphones for searching local content and researching products and over 50% of them use smartphones to make purchases8. The graphics below represents a brief snapshot of major usage of Indian online population.

Figure 4: Internet usage Pattern in Indian Retail Segment

4 Global Web Index, Q4 2014, Based on a survey of internet users aged 16-64, March 20155 India Stat, Internet Live Stats, Stat Counter, IAMAI6 India Continues As One Of The Fastest Growing Smartphone Markets In Asia Pacific In 1Q 2014, IDC7 Marketer research8 Google’s Our Mobile Planet report

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Emerging technologies enabling increasing adoption

There have been significant technological advances in the telecom industry which has resulted in revolutionizing the entire value change of telecom domain.

The cost of handsets-be it a basic phone, a feature phone or a smart phone, has reduced significantly. Increasing competition and price wars between the domestic and international mobile manufactures have spoilt the customers for choice. In fact, today the cost of buying a desktop or a laptop is often higher than buying a high end smartphone or even a tablet if the end use is limited to browsing, content viewing and social media. The usage pattern for the devices too has evolved from being primarily for making calls to a more evolved use of video streaming, instant messaging and data sharing. This is evident from the growth of the companies like Youtube, Facebook, WhatsApp, Instagram and Twitter.

Businesses are designing special mobile based applications to tap the target market with special focus on friendly graphical user interface. Though low on penetration, the popularity of smart phones and tablets is eminent from the fact that they account for 70% share

of web traffic (page views). Many companies offer special discounts and offers for app-based users to increase their digital footprint. Multiple Indian online shopping retailers have begun to migrated to a mobile app-only model The root causes for this being that 95% of internet traffic comes through mobile and that 70% of sales are generated through smartphones9.

Companies are taking additional efforts to improve digital literacy to ensure customers feel comfortable while transacting online and creating awareness against online frauds and fishing. Multi-layered secured transaction models have evolved which has brought the reluctant anxious consumers into the mainstream. One of the most impactful event is the emergence of Mobile wallet as an alternative to the traditional payment methods in the country. The number of active m-wallet users in the country last year surpassed the total number of credit cards issued by banks. Mobile wallet offers multiple advantages like ease of transfer, flexibility of use and most important safety. Apart from the acceptance by the urban users, this can truly change the way rural users adapt to mobile internet because of the lack of penetration of other established means of financial transactions and the ease of handling such transactions.

9 Company statements, Media reports

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Data capture and Analytics

The above mentioned enablers will force the businesses across industries to evolve and adapt to newer business models built around digitization and accordingly develop robust systems with checks and balances in place. One of the largest advantages of focusing on a digitization supported business is the ease of data capture on customers, their preferences and needs. A quick analysis of the customer history can help companies suggest customized value added offerings to the consumers and generate customer loyalty.

The opportunities and possibilities are unlimited and across industries. For example, while auto insurance is based on the age of driver, emerging data capturing techniques (telematics) and analytics can help insurance companies track the travel hours clocked by a particular driver and accordingly underwrite the insurance with appropriate premium. In fact, recruiters traditionally were dependent on personal interactions and references to understand the personality traits of the candidates. Today, many recruiters use the social footprint as part of the pre-screening of prospective candidates during the recruitment process.

Figure 5: Building Analytics layers in an existing Technology environment

Legacy layer

Core company system (Life and non-life) for service delivery

New gen. sales layer

Integrated Multi-channels to stregthen relationships with customers

Digital layer

Digital components for a better customer insight customer experience and new streamlining processes

Legacy layer

New gen.sales layer

DigitalLayer

Clients Prospect clientsthrough multiplechannels

Community

SocialNetwork

MobilityWebCustomerService

Broker Bancaassurance

ReteAgenziale

ContactCenter

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1.2 SME Segment Digital Trends

SME Contribution to Indian Economy

Outpacing the industrial sector growth rate, India’s SME sector has been one of the major growth drivers of the Indian economy contributing 45% to the industrial output. SMEs contribute heavily to the GDP and employment in India. In fact, India’s strong resilience to the financial crisis of 2008 and commendable growth rate compared to the global economy in general thereafter is attributed to the strong SME base. While the big corporates cut down on their investments, it was the SME

segment that stepped up and contributed heavily to the GDP. Quite aptly, the much needed thrust has been provided to this segment in the Union Budget.

Internet has played a very important role in the growth of SMEs across the globe and this is directly impacted by the retail penetration of internet. Thus, as seen in the above section, as the retail penetration is growing exponentially, impact of internet on the SMEs will be much more pronounced in the years to come and we will witness more SMEs joining the mobility bandwagon. A great opportunity beckons for this sector to transform their business model leveraging technology.

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The SME Digital Opportunity

India houses a strong MSME base of 51 Million. Four major factors that augment the strong SME base and provide for a great digital opportunity are-

•Increasing penetration–Affordable phones and tablets and high adoption levels and expected universal adoption by 2020

•Thriving Ecosystem–Increasing focus on mobile applications and pay per use based cloud services augurs well for the SMEs business model

•Digital customer trends–Rising digital penetration and exponential rate of adoption by the retail segment

•Government Initiatives-Strong government focus on e-governance, digital India and push for digital infrastructure, digital services delivery and digital literacy.

Technology helps SMEs address two major pain points– It helps them grow and it helps them achieve operational efficiency. Thus it is a key differentiator. SMEs are different from big corporates in terms of their spending on technology. SMEs typically face funding issues and hence face cash crunch. Thus there are inherent differences in the digital solutions that the SMEs adopt when compared to what the big corporates use.

Figure 6: Internet connectivity of Indian SMEs Source: Internet’s Role in the Performance of India’s Small and Medium Enterprise,(Nathan, FICCI) JULY 2013

Feature Phone~450K

BroadbandConnections56% of SMEs

Smartphone O.S90% onAndroid O.S

Android Phone93% Growth Rate

Internet CablePhones70% Nokia

Devices2.5 per SME

Laptops~7.7 Mn

Internet-capable phones ~4.3 Mn

~850 K

Smart Phone~4.4 Mn

Tablets~3.3 Mn

Mobile Phones~8.7 Mn

Internetenabled SMEs* ~7.7 Mn

(69% of SMEs)

The key areas where SMEs are investing in Technology are:

•Marketing–Social networking platforms, CRM tools and SEO techniques help SMEs in enhancing their online visibility and targeting customers.

•Accounting–SME business typically involves credit sales and hence needs to be appropriately accounted. Invoicing, payment collection, account maintenance, working cycle management are some of the issues that the SME has to deal with apart from handling the core business. Electronic accounting solutions like Tally help SMEs manage their accounting needs with ease.

•Cloud services–Cloud services augurs well for the SME community especially because of its inherent pay per use nature and emergence of SaaS (Software as a Service).

* Reflects digital penetration of organised Small and Medium enterprises only (Total 11 Mn), excludes micro enterprises

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SME digital penetration

India’s digital SME population is connecting to internet to access emails, conduct internet banking and ecommerce. Figure 7 shows the usage percentage of major categories for SMEs

We see how the digital acceptance rate has grown exponentially over the last few years in the Indian Retail and the SME segments.

E-mail1 Internet Banking1

Information & Insights1

Social Media1

E-Commerce1 Foreign Trade1

95% of the SMEs have access to emails.

Most of SMEs deal with 2-3 banks at the same time. SBI, ICICI, AXIS are the large banks operating in SME space.

Information on trends in domestic and International market and conducting Competitors intelligence

46% of the SMEs are engaged in Social Media Activities such as engaging in B2B forums.

B2B-S$ 420 Mn B2B market place for SMEs growing at 61% YoY. 80% of the market captured by Indiamart.com and tradeindia.com.

23% of the SMEs are engaged in Foreign Trade Activities

ERP2 Payment Gateways

43% of the SMEs have ERP installed. Of that, SAP and Oracle together have 80% market share. players are Microsoft, IFS, Infor Global Solutions, Ramco and Tally.

Of the total SMEs using payment gateways, 60-70% of merchants use CCAvenue. Bank Payment gateways are primarily used by large players as qualification criteria is higher.

95% 77% >58% 46% 27% 23% 43% -

SMEs in India, End of 2013 for major usage categories (in %)

Figure 7: Internet usage pattern in Indian SMEs

Moving ahead, a favorable demography and the rapidly changing consumer lifestyle is expected to increase the pace of this acceptance. Almost all businesses need to realize the potential of this changing landscape and make concerted efforts in redefining their business strategy and processes to align with the new digital customer.

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Box Item: Government actions resulting in Digital pushThe Government of India has attached a large significance to build and improve the digital literacy of the Indian populace. An enhanced E-governance environment in the country has helped launched the Digital India program aimed at transforming India into digitally empowered society and knowledge economy. This program entails an outlay of over $20 bn1 and help India prepare for a knowledge based transformation and delivering good governance to citizens by a synchronized and coordinated engagement of both the Central and the State Government. Digital India has three core components–digital infrastructure, digital services delivery and digital literacy.completely to a new player (like the e-retail or the phone companies).

This umbrella program is built around the following initiatives which combine many of the existing and new government schemes2–

• Broadband Highways-National optical fiber network (NOFN) connectivity to all the 2.5 lakh gram panchayats in the country

• Universal Access to Mobile connectivity-Ensuring mobile access in around 44,000 uncovered villages in the country

• Public Internet Access-Expand the coverage of common services center (CSC) from 1.35 lakhs to 1.5 lakhs, i.e. one per panchayat

• e-Governance-Improve process and service delivery through business process re-engineering, integration of services and platforms,

electronic databases, IT based public grievance redressal to resolve persistent problems

• e-Kranti-Electronic delivery of services, including

- Education–Broadband connectivity, Digital Literacy Program

- Health–Online medical records and consultation

- Agriculture–Real time price information, mobile banking

- Financial inclusion–mobile banking and micro ATM program, inclusion of post offices

• Global Information-Online hosting of data and proactive engagement through social media and web based platforms like MyGov

• Electronics Manufacturing-target net zero imports by 2020 for electronic items

• IT Training for Jobs-Train one crore students from small towns and villages for IT sector

• Early Harvest Programmes-Deploy Aadhaar Enabled Biometric Attendance System to enable online recording of attendance and its viewing by the concerned stakeholders

Further, the Government has also unveiled its Smart Cities Vision 2022 and committed to develop 100 smart cities in the country which are built on high performance digitally driven robust infrastructure network. The market for smart cities globally has been growing steadily with focus on sustainability and development.

1 http://www.cmai.asia/digitalindia/index.php accessed on 16 June 20152 Government presentations on Digital India (http://deity.gov.in/)

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2. Market Opportunities for Insurance

Digitalization presents a growing opportunity to improve market share and profitability for the insurers. It also urges insurers to apply digital technologies in new ways and offer tangible value to customers. After having elucidated the extent of digitization in the country in the previous section, we now present the possible opportunities of digitalization for insurers & customers and digital trends in Insurance industry worldwide.

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2.1 International Trends in Digital Customer PropositionsConversations with more than 140 CXO level insurance executives over the last year clearly point towards digital transformation featuring high on their agenda for the next five years. Digital transformation of insurance industry worldwide is being impacted by four major levers

•An increasingly empowered customer buying process

•Greater digitalization in distribution of insurance products

•Value chain transformation for increasing efficiency

•Potential for business growth in terms of revenues and costs

The following sections detail each of the above four levers.

Discover

Consider

Evaluate

Purchase

Use

An empowered buying process by Insurance customersAs discussed in the previous sections, today’s customers are digitally enabled and so more empowered. This power stems from easy access to a range of competitor products, ability to easily compare these products and ability to voice their opinions and concerns through consumer forums and social media. This makes today’s customers much more difficult to win over without a clear differentiating proposition and an operating model that delivers to expectations. Competition in the market and digital technologies are increasing expectations by the day as customers are demanding cheaper, faster and more customized products. If winning over the customer is the first challenge for the insurer, retaining him/her is an equally challenging task.

Figure 8: Traditional Customer journey

19Figure 9: The Accenture Dynamic Customer Experience Model

According to Accenture Digital Innovation Survey 2014, 84% executives feel that digitalization is changing customer expectations.

Traditional Insurance Customer Journey

Traditionally, a customer would discover policies available through various channels like agents, brokers, banca and insurance offices. The policies would then be considered for fit with requirements and evaluated for price to arrive at purchase choice. Once the traditional insurance customer chose the policy he/she would largely continue to use same insurance provider (baring a negative experience) and would rarely revisit other options available in the market.

Empowered by digital media, today’s customer is continuously revisiting choices. A purchase decision once made is almost never final. Many customers consider switching to

Expectation

Promise

Reality

DeliveryEvaluate

Purchase

UseConsider

Discover

a new policy or insurer near every renewal. The changing information environment also allows the customer to now re-compare and chose a product more suited to the needs. In the Global Consumer Pulse Research conducted by Accenture in 2014, this change in the dynamics of insurance customers was clearly observed. Only 26% life insurance customers and 19% non-life insurance customers perceive switching to be a hassle. Only 22% insurance customers feel loyal to their insurer. 34% life and 39% non-life insurance customers have switched partially or completely in the last 6-12 months.

Insurers need to recognize that customers are not buying insurance the way they did in the past. They need to adopt a new customer connect model that’s more relevant

to customers’ digital behavior. Today’s customer is continuously discovering and considering products available in the market based on expectations from the product and the promises made by the insurer. He/she is making purchase decisions or continuing usage decisions based on the reality and actual value delivery done by the insurer.

To summarize, the path to purchase used to be linear. Now, the customer journey is dynamic, continuous and accessible. Dynamic, because decision paths are multi-directional and at different speeds. Continuous, because evaluation, not purchase, is central; promise is now as important as delivery. Accessible, because influence of “open” content is pervasive and difficult to control.

84%

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Digitalization in distribution of insurance products

According to Accenture Digital Innovation Survey 2014, 59% believe that they will be challenged in the existing distribution space due to increasing Digitalization.

Almost 60% executives feel that new technologies will radically change traditional practices and agree that digital technologies will transform the way they interact with their channels. In the traditional insurance setup, insurers reached customers through agents, brokers, banca and (in only few cases) directly. Digitalization is providing an enormous opportunity to reach the customer directly without any of these middle men. The digital insurer can use online, mobile apps etc. to create this direct connect.

Where digital transformation is expected to impact all the distribution players, insurers are expected to gain the maximum. In this aspect insurance companies have globally begun to create the largest impact on distribution models.

Also, customers are increasingly using more than one channel to research products that fit their requirements. While they may use digital sources to gather information, many customers still prefer to make the actual purchase through a distributor. Therefore, it is important for the insurer to make sure the distributors themselves are digitally equipped to serve

62% 59% 57%

47%

26%20%

12%

InsuranceCompanies

Online Serviceproviders

Pricecomparators

Banks Independentbrokers and

agents

Retailers Car dealers

the customers appropriately. The insurer needs to build a holistic distribution network with symmetric information and support across all channels. Insurance industry’s organizational silos, multiple distribution channels and legacy technology considerations make the task at hand challenging and time taking. Digitalization across the network also presents the insurers with a new opportunity to adopt cost-effective distribution network by determining which customer segment can be reached through which channel mix effectively.

Figure 10: % Companies expected to gain the biggest increase in share of distribution in the next 3 years

59%

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Digitalization along the value chain of insurance

According to Accenture Digital Innovation Survey 2014, 75% executives expect major transformation of the insurance operating value chain within the next 5 years

Having realized the importance of digitalization, companies think a radical change of the insurance value chain is key to success in the digital world. Companies have already started strengthening their digital foot-print along all the links of the value chain. According to the Accenture Digital Innovation Survey, 82% executives expect insurers to make acquisitions to better position themselves within in

Figure 11: % Companies having plans for non-insurance products

66%63%

56%53% 53%

41% 41%

LoyaltyRewards

Home services

Lifestyle based

services

Motoring needs

Opening upsupply chain to

customers

Range of location

based offers and discounts

Other financialservices

75%

the digital world. 43% have made or are planning acquisitions of start-ups or innovative players. This not only opens up opportunities for Insurers but also for a whole digital ecosystem. Many insurers have added, or are considering adding, a wide range of non-insurance products to their customer offerings in an effort to develop customer intimacy and ultimately position themselves as lifestyle partners.

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Digital initiatives generating additional growth

Digital transformation is not only redefining the market but also promising value to the investors. Our estimations based on the Accenture Consumer Driven Innovation Survey, 2014 survey results indicate that digital transformation can increase the insurer’s sales by 10-15%. Sustained combined ratio can be expected to improve by 4-6%.

More results from the survey show that life insurers are expecting an annualized 7% revenue growth whereas the non-life insurers are expecting an annualized 5% revenue growth through their digital initiatives over the next 3-5 years. Innovation is being seen as a key driver of market-share growth. Existing players that are innovating can look for growth than even new entrants. 24% of insurers expect innovation to increase market share by up to 10 percentage points. At the same time, one-third of respondent companies expect usage-based auto insurance to account for >6% of premium income in 3 years’ time. It is interesting to see that almost 29% of respondents expect premium growth to come from expanding their customer base using digital channels rather than only upselling existing products to their existing customers.

Becoming a digital insurer can significantly improve finances by activating new value creation levers. Increase in sales revenue could be achieved through three levers: generating e-sales, improving sales of traditional channels and creating a new brand. E-sales could be generated by targeting new customers due to the new digital value proposition, by optimizing online subscription funnel through analytics and by developing offers/ additional services as described for everyday insurer. Sales from traditional channels also could be increased by capturing new leads, cross-selling, up-selling and increased cross channel transformation. Creating a new brand is another way to increase sales revenues. The insurer may choose to create a new brand or chose to define a new range for the existing brand.

Increased profitability could be achieved through increase in gross technical margin and reduction in costs. Gross technical margin can be expected to grow through improved pricing and promotional methods, managing risks and frauds and developing loyalty to retain customers. Further to this, costs could be reduced through end-to-end digitized processes, self-care and optimizing customer processing channel & distributor commissions.

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Table1: Levers to increase sales revenue

Table 2: Levers to increase profitability

Lever

Digital sales

Traditional sales lead increase

Traditional sales Cross sell

Traditional sales Conversion

Lever

Select risks/ detect fraud

Improve commercial pricing and promotion

Improve retention and loyalty

Enhance customer channels andcommissions

Implement self-service

Digitize processes

Make costs variable

Examples of initiatives

•Optimizing sales process: search-engine visibility•Social media: monitoring company image and proactive responses•Online sales optimization: multi-variant testing, analysis of online journey•Multi-channel customer experience: Internet, mobile and call center.•Design a 360° view of the customer in real time•Sales and aftersales services online, enrich online relationship with the

customers•Digital product and service offering

•Online-channels design to generate leads•Targeting customers and prospects: static and predictive scoring• Industrialized approach reducing response time for digital quotes• “Next product to buy”-pop up suggestion based on past behavior

•Needs-based diagnostic tool•Sales-efficiency tool delivering improved sales methodology

• “One-stop shop”: digital signature at the point of sale•Better sales preparation using artificial intelligence

Examples of initiatives

•Precise segmentation of prospects: making best use of external data plus data on consumer behavior on every channel (including telematics)

•Real-time analysis of contracts at risk and predictive analysis of when claims occur during underwriting process

•Manage promotions based on success rate and customer value• Integrate a large volume of external data in pricing criteria•Adapt online pricing in real time based on competitors’ best offer

•Multi-channel capability to fight churn•Use of predictive churn scores based on customer events

•Salesforce commissioning revamp based on channel of origin•Customer routing to the appropriate channel based on preferences and value

•Move most time-consuming operations out of agencies/branches•Monitor claims status online

•Review processes to automate administrative tasks burdening salesforce• Implement digital straight-through processing•Automate processes and make them paperless; implement collaborative tools

with support functions

• Identify IT functions to be obtained as a service via the cloud, thus linking cost to usage (variable costs)

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2.2 Every day Insurer Di

gita

l ena

bler

sEv

eryd

ay In

sure

r

Ecosystem partnersOnline filing of form and uploading photos

Product Enquiry

• Physical meeting• Call/video conference• Telepresence• Chat• ...

on my Phone

STP of policy issuance / online payments and delivery

App based claim intimation and progress updates

Auto reminders and one touch renewal payment

Insurer Providingnon-Insuranceservices throughthird party tie-ups

Insurer automatinginsurance servicesand interaction forcustomer convenience

Travel UpdatesMy Travel

Online Home Monitoring Systems

My Home

My Risk

My Claim

My Renewal

Driving Performance Measurement

My Car

My Proposal Form

My Policy

Ecosystem management and governance

Product innovation& bundling

Social medialistening

Campaignmarketing engine

360°advanced analytics

Omnichannel customer experience

10

Customer Agent

Third PartyProvider

Insurer

My FamilyOnline health tagging of elderly family members

Technology Enablement

Online SME Tax reporting

My Tax Online Manpower Mgmt. Systems

My Workforce

Everyday Insurance

Figure 12: The architecture of an Everyday Insurer

To cater to increasingly demanding customers’ requirements and to keep growing in the market, today’s insurers have to provide a unique customer experience. The traditional insurance market is a commoditized market. To be able to compete in the future and to be relevant in the customer’s eyes, insurers need to engage their customers directly, building a more direct and sustainable relationship with customers. The proposition of ‘Everyday Insurance’ is targeted to make the insurer create this footprint in the customer’s digital world.

This non-commoditized proposition to the consumer is a bundled proposition to provide the consumer with traditional insurance products coupled with short and long term risk management for all aspects of life. Built around an ecosystem of customers, insurer and third-party providers, Everyday Insurance touches the customer’s life in various spheres and through various media. It not only supports the customer’s traditional insurance requirements, but also helps him/her manage his/her other related or non-related activities through the insurer’s support. An everyday insurer rises above today’s customers’ expectations by linking insurance services to the customer’s current ecosystem.

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Value proposition

The everyday insurer’s value proposition to the customer has two main components

•The traditional insurance product, provided digitally

•Ecosystem risk management

Insurance support

Built on digital enablers, everyday insurer’s automated insurance services enable the customer to manage his/her policies, renewals, claims, proposal forms and risks. This change takes multiple forms through the policy life cycle. During sales product information and needs analysis can be provided in an interactive manner digitally. During policy issuance, customer KYC details can be taken online resulting in real time policies. For claims, notification can be done online by filling up an online form and uploading pictures where necessary. Claim status can also be tracked online. Auto-renewal reminders can be sent to customers near their renewal date. One click renewal is made possible through the bank account linked with the policy records. Insurer could also proactively pitch for upselling. The list can be endless as the industry moves towards digitization of its entire value chain.

Ecosystem support

However, engaging the customer beyond the traditional insurance product would need to be done in order to position the insurance company in the consumer’s mind. The proposition could range from home security systems connected directly to the customer’s mobile phone to a tax reporting portal for an SME customer. Providing customized traffic updates, speeding warnings while driving, health condition updates of elderly members of the family etc. are just a few examples of non-insurance support insurers could provide to engage the customer and increase loyalty. The Everyday Insurer would need to partner with various third party providers to provide these non-insurance services.

Architecture of an everyday Insurer

To provide the described value proposition an insurer needs to develop a comprehensive understanding of the customer and should be able to reach the customer through various routes. This section describes the capabilities an insurer needs to develop in order to evolve as an everyday insurer.

360o customer view

Comprehensive understanding of the customer can be made possible through a 360o customer view enabled by advanced analytics. Tapping into a customer’s records available in the policy

administration system, his/her social media presence and other digital footprints, analytics has the power to understand the customer beyond insurance product and predict customer behavior. Analytics uses data related to customer’s likes, dislikes, recent purchases, GPS navigation, events planned etc. to assess his/her purchase interests and intents. This allows the insurer to treat each individual customer as a unique customer segment- a customer segment of one. Insurer is thus empowered to run very specific campaigns to its customers within very low budgets. A deep understanding of each customer’s behavior also can be fed into product innovation and bundling to enrich the product portfolio. Social media listening can be employed in proactive grievance handling to provide customer delight.

Omni- channel presence

A digitally enabled insurer is well equipped to provide the customer a truly omni-channel experience. Omni-channel presence is the use of a variety of channels and combination of such channels in a customer’s shopping experience. The channels include agencies, brokers, banca, direct through website, mobile stores, mobile app, consumer forums and other channels of transactions. This entails providing the customer a holistic and unified product experience through all the aforementioned channels. The customer would be facilitated to reach the insurer for policy purchase, renewal, claim or any other query by just a click or a call.

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2.3 Size of the Digital Opportunity in India- Enhanced revenues and efficient operations

In a digital world, winning and retaining customers hinges on creating value for them that enhances the convenience and quality of their everyday lives beyond mere transactions. With increased interactions, comes a larger opportunity for selling and hence increase in sales revenues. Additionally, the same digital also provides prospects for developing more efficient operations and hence increased profitability. The following paragraphs detail the magnitude of these opportunities for Indian insurers.

Increase in sales revenues

The impact of digital on sales revenues is two-fold:

•through digitally bought policies and

•through digitally influenced policies.

Policies are currently bought digitally through a combination of insurance websites, aggregator websites and online sites of insurance brokers. However, the need for advice in insurance still means that digital consumers prefer to research insurance options online before actually purchasing through traditional channels. This online research includes a combination of visits to community forums, blogs and even news websites. Digital influence in sales also comes during with traditional channels using

Poor Mass Emerging Affluent

Affluent High Net Worth

Total

Segmentation Criteria (Annual Household income in Rs ‘000)

<150 150-500 500-2000 2000-10,000 >10,000

Households (in Million) 162 85 17 3.6 0.25 ~270

Retail Health Policies (Approx.) 7 23 40 15 2 85

Retail Motor Policies (Approx.) 4 390 160 33 2 590

Retail Accident Policies (Approx.) 40 20 2 60

Retail Travel Policies (Approx.) 8 20 2 30

Total Non-life Policies (Approx.) 11 410 250 90 8 765

Potential Digitally influenced Non- life sales 0 0.8-0.9 1.7-1.8 3.3-3.4 0.3-0.4 6.1-6.5

Retail Life Policies-New (Approx.) 640 1520 660 170 10 3000

Potential Digitally influenced Life sales 0 0 1.4-1.5 1.8-1.9 0.60-0.63 3.8-4

Total Digitally influenced sales 0 0.8-0.9 3-3.2 5-5.2 ~1 10-11

Total Digitally influenced sales (2020) 0 6-7 25-26 41-42 7.8-8 80-83

Online Renewals of life Insurance 4-5 10-11 4.5-5 1-1.2 0.08-0.09 20-23

Online Renewals life Insurance (2020) 22-23 53-54 23-24 6-7 0.4-0.45 104-108

Source: IRDA Annual Reports, Accenture Analysis

Note:• Sales in Rs ‘000 Crore• Policies in lakhs• All numbers are estimated for FY 15 unless mentioned otherwise

digital means to book sales. These digitally enabled sales today make up a significant portion (almost 20%) of retail insurance purchase. We believe that the trend of digitally influenced sales being larger than directly bought digital policies will continue well into the next five years.

Digitally enabled insurance sales are expected to grow by 8 times in the coming 5 years. In FY 15, digitally enabled non-life policies are estimated to be ~Rs 6200 Cr and digitally enabled life policies (new) are expected to be ~Rs 4000 Cr. Online renewals of existing life insurance are expected to become 35-50% in the next 5 years from 10-15% in FY 15. This will result in a 5X increase in online renewals of life insurance policies by 2020.

Table 3: Potential digital sales in five years

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31

Note:• Expenses in ‘000 Rs Crore • All numbers are estimated for FY 15

Figure 13: Digitally enabled insurance sales by 2020

Figure 14: Potential cost savings from digitization (on the base of FY15 numbers)

10

80

2015 2020

Digitally Influenced Insurance Sales (Life & Non-life)(Rs ‘000 Cr )

Online renewals of life Insurance (Rs ‘000 Cr )

8x

20

105

2015 2020

5x

Increase in profitability

Various digital initiatives as listed in the previous section represent an incredible potential source of profitability, demonstrating that one of the main benefits of digital transformation is cost leadership. Insurers can optimize their operating models as suggested and bring down their cost ratio. Of the total operating expenses, Information Technology expenses can be expected to decrease by ~10% and other administrative expenses by ~15%. Therefore creating a potential to enhance bottom-line performance of the industry by ~8000 Cr.

Life Non-life

Operating Expenses of Insurers (Rs ‘000 Cr)

5.5

2.5

0

5

10

15

20

25

30

35

40

45

Life Non-Life Total Savings

2.5

38.5

5.5

16.6

8.0

Potential Savings with digitalization

Potential Savings with digitalization

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33

3. Operating Model Imperatives for Insurance Companies

Having understood the changing behavior of the new age digital consumer and the increased importance that the companies are giving to the digital transformation of the business, we now dwell on some of the imperatives that must be incorporated in the operating model of insurance companies to successfully tread on the digital transformation path. While technology will remain at the core of this new operating model, it is critical to build systems that are resilient and capable of working on data from varied sources at high velocity to provide highly scalable solutions.

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3.1 Key Operating Differentiators of Digitally successful firms

Digital, mobility and social media have had a profound impact on the lives of the consumers globally. Companies, too having taken note of the same, are changing their business models to accommodate the changing consumer behavior. Companies who have been agile and have been able to transform the earliest are the ones who are occupying the major chunk the market pie. Thus, it is the agility and the speed of companies and not their size that is helping them address the new market needs through innovative business model. The tipping point has already been reached and digital/technology could no longer be exploited only to foster operational efficiency; companies need to focus on leveraging digital to offer greater customer value. Traditional business models have been disrupted across industries giving rise to a range of new capabilities, competition and hence value proposition.

The Choice

The Clear Choice -Doing it Better vs. Doing it Di�erently

Improve Operations

Change & Transform the Business

Change & Transform the Industry

Incr

emen

tal B

usin

ess

Valu

e

Low HighLow

High

Structural

Breadth of Impact and Leveragability

Do Itbetter

Do ItDi�erently

Change theGame

We have reached an inflection point of digitization where companies have a clear choice available of “Playing to win” against “Playing not to lose”. We have seen enough examples of disruptive business models that have completely transformed the industry. A case in point is the recent spurt in online marketplaces. Unlike the traditional business, the online marketplace has no inventory, warehouses or huge organization set up. The secret of its extremely lean operating model is an excellent smartphone application with customer convenience at its focus.

Figure 15: The clear choice

What we learn is that-for a successful business model you need the agility to transfer your core value proposition from source to the destination. Digitization and mobility are the quickest means that help you achieve that. By doing so companies are not just transferring the core proposition differently but are essentially changing and transforming the industry. Thus it is imperative to view every business as technology business and keep customer convenience at the core.

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Digital Physical Blur: Extending Intelligence to the edge

Technology Trends in Insurance

Insurers have to ride the next big digital disruption wave and hence must be cognizant of the opportunities and threats that this wave brings.

Those that win the race to transform into digital insurers will find opportunities to disrupt their existing markets as well as to drive new revenues and profits in industries and customer segments where they have not traditionally competed. Those that don’t get out of the starting blocks quickly enough will be outrun by more aggressive insurers—and they may also lose market share and profits to tech companies, automotive manufacturers, and other companies pioneering emerging technologies that undermine the traditional insurance business model at its foundations. The choice is a stark one: become a disrupter or be disrupted.

We believe for the insurers to Play To Win, they have to consider 5 key imperatives described here.

The real world is coming online as smart objects, devices and machines increase our insight into and control over the physical world. It’s a new layer of connected intelligence that augments employees, automates processes, and incorporates machines into our lives.

•From wearable devices to home sensors and vehicle telematics, intelligent interfaces are blurring the physical and digital

•There is unprecedented connectedness as these “edge” devices touch each other

•Cloud is being used to share data as amount of data increases exponentially even as the prices of these devices fall and quality improves

•Digital Physical blur to help insurers get contextual data that can help refine risk, products and transform customer relationships

•Carriers that started off with pay-per-use insurance offerings are moving toward mobile, contextual and behavior-based products

Example-In India, Policybazaar.com has carved out a new business for itself by using Chleon’s insurance telematics- as-a-service to calculate future motor insurance premiums for car drivers. With the driver’s permission, his or her personal driving score can be provided to insurance companies that have accepted this score as a rating factor

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Data Supply Chain-Putting information into circulation

•For example, an auto insurer could leverage traffic data in its mobile app or data from another vehicle in close proximity to warn insured drivers of accident hotspots or traffic congestion

•Build embedded teams with knowledge of the business problems

Cognitive Computing

•Leverage machine learning capabilities incorporating components of artificial intelligence-Cognitive Computing, to manage the scale and complexity of data supply

•Insurers could use natural language processing to transform unstructured data, such as social media posts or claims submitted in free text, into insights

•Streaming data-ranging from news to weather information-could help insurers to better respond to catastrophes

Monetizing Data

•Realize the latent value of the data collected by forging new partnerships to creating new revenue streams, or even entering new markets

•Monetize data-sell data insights directly, share them through partnerships, or develop entire ecosystems around them, but in a way that is sensitive to the issue of data privacy

•Insurers could even sell data to their own customers or offer it to them as a value-add—for example, usage patterns of commercial vehicle fleets

Focus on hardware-Build scalable systems

Data is the most valuable assets for insurance firms. It has to be treated more as supply chain-enabling it to be accessed and then to flow easily and usefully through the entire organization—and eventually throughout the organization’s ecosystem of partners too.

Few insurance companies have mastered the concepts at the foundation of modern data management— ideas such as the mobility and portability of data, its structure and velocity, and data as a “saleable” product or monetization.

More uses of data

•Capitalize on the business value from the external data obtained from partners, data-as-a-service providers, or open data sources

•Augment these sources with social media sentiment, weather data, and more and make informed decisions while also adding value to the customer’s life

Eclipsed by more than a decade of innovation in software, the hardware world is now a hotbed of new development as demand soars for bigger, faster, more efficient data centers

•Benefits of “hyper scale” innovation will trickle into the data center in the form of cost reduction

•Legacy IT systems will be threatened by a deluge of unpresented amount of data

•As all of this information begins to be collected every hour, and, in extreme cases, multiple times per second, large systems are required to store and analyze this data

•Hyper scale computing designed to crunch through vast volumes, variety, and velocity of data at rapid speeds and with great efficiency are required

•Insurers will need to look at the latest innovations in the world of hardware to enable the digital transformation of their businesses

•Correct recipe of commodity versus specialized hardware and private versus public cloud architecture will be required

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App ecosystem-Be a part of the thriving ecosystem

•Lifestyle apps that encourage risk friendly consumer behavior-for example, regular exercise as monitored by fitness trackers could help improve customer retention and reduce the frequency and size of claims

•With mobile apps, the insurer is there with the customer when he or she needs risk management advice or even impromptu risk cover

Architecting Resilience-All time availability

•Insurers need to be able to gather and operationalize big data uninterrupted and at speed and provide uninterrupted services to their partner ecosystems

•Business continuity and systems availability are of paramount importance

•To provide a range of everyday services to connected customers, insurers must begin to consider how they will architect their IT infrastructures to support nonstop business processes, services and applications

•CIOs must use a business-driven strategy to manage risk across the enterprise, understanding which assets are critical and then prioritizing resilience and active defense measures accordingly

•A wholesale shift in mindset to the idea of 100 percent uptime

Mimicking the shift in the consumer world, enterprises are rapidly moving from applications to apps. As organizations push for greater operational agility, there is a sharp shift toward simpler, more modular and analytics-enabled apps. Mimicking the appetite for mobile apps in the consumer market, enterprises are starting to deploy lighter, simpler, more modular and analytics-enabled apps to end-users within their organizations as well as to their customers and business partners.

•It is imperative for insurers to rapidly develop, or partner to create and launch new applications and be positioned to innovate, collaborate, improve customer experiences, and enrich personal interactions

•Considering apps for reducing the customer churn rates

In the digital era, businesses are expected to support the nonstop demands that their employees and stakeholders place on business processes, services and systems. As a result, today’s IT leaders must ensure that their systems—and to some extent those of their key business partners—are designed for resilience under failure rather than designed to spec. Hence,

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3.2 Digital interventions along the Value ChainDue to the digitization and disruptions in other industries customers have been found wanting more in other industries including insurance. Thus, time has come for the insurance industry players to take cognizance of this fact and start their efforts towards providing mobility solutions to their customers and capture the market share and reap first mover advantages.

Insurers need to take cognizance of three areas to identify the strategy that would help them identify the challenges in the current operating model and leverage mobility to convert those challenges into opportunity.

Below we present the typical insurance value chain and follow it up with various challenges that the traditional model has and also suggest various mobility solutions along those dimensions.

Figure 16: Mobility solutions along the value chain of insurers

Insu

ranc

e Co

. Captive AgentDrivenDistribution

IndependentAgent DrivenDistribution

Rate/Quote/ Illustration

Policy Issuance

Billing

Policy Renewal

First NotificationOf Loss

1ST & 3RD PartyInjury / PropertyDamage

Payments &PaymentsProcessing

Secure InvestmentReturns

Risk and Regulatory Compliance Management

Ongoing Customer & Agent Service

1 A

2 B

4 D

5 E

6 F

7 G

Branding & LeadGeneration

Analyze Market & Customer Needs

Configure / Deploy/ Maintain Product

1 A

8 H

3 C

Business Challenge

Mobility Opportunity

Distribution &Marketing

Product Development& Pricing

Underwriting Policy Holder& Producer Admin / Servicing

Claims & Benefits Investment

Source: Accenture Insurances Business Services Analysis & High Performance Industry Architecture for Insurance

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Theme No. Challenge OpportunityM

obile

Con

sum

er E

ngag

emen

t in

a Di

gita

l Age

1 Consumers have become lot more demanding

•Seek transparency

•Expect availability of self service options

•Attach a lot of significance to convenience

•Evaluation before buying requires them to have immediate access to information

A mobile application that provides all the information required by the customers over the lifecycle of their insurance policy will

•Provide convenience to the customer

•Facilitate action at each stage through Omni channel experience

•Mobile enabled enrollment process and instant feedback and notifications as the policy passes through different stages

•E.g. Notification about traffic congestions, travel planning, personal finance management, weather warnings based on customer geolocation etc.

2 Pricing the insurance products is definitely one of the most difficult ask for the insurers

•Every customer behavioral attributes are different, a condition which is aggragvated due to moral hazard

• Insurance companies have to invest a lot to balance the rewards and risks of their policies

•Retention of the right/profitable customers becomes a challenge

•Employing content listening tools and analytics to understand the behavior and create risk and profitability profile

•Capturing client behavioral data and activities using mobile technologies and analyzing these with an analytics engine to manage risk and pricing with appropriate premiums

•E.g. Using telematics to offer customized premiums based on driving behavior ensures the right pricing which would ensure right risk reward returns and also help in retaining clients

Gro

wth

Driv

en b

y th

e Al

way

s-on

Con

sum

er

3 •Diverse customer segments makes it increasingly difficult for the insurance companies to segment their customers and provide personalized product offerings

•Lack of granular customer segmentation and risk profiles makes it difficult to retain and acquire customers

•Mobile technologies-location services, notifications and applications can help determine opportune moment to sell policies and capturing customer characteristics and offering personalized products based on customer behavior with real time insurance quotes

•Customers could be allowed to configure insurance to meet their requirements

•Customers could also be allowed to make quick micro insurance purchases based on the situations through their mobile devices

4 Inherent limitations of the physical delivery channels for insurers thereby limiting

•Ability to capture market

•New opportunities to sell their products

Additional channel options

•Seamless integration with the social media platforms like Facebook employing a customer centric approach

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Back

-offi

ce O

ptim

izat

ion

thro

ugh

Auto

mat

ed U

nder

writ

ing

and

Polic

y Ad

min

istr

atio

n5 Attrition is a pain point for the insurance firms

•Aggravated if the currently digital savvy workforce is not given the tools and systems that would enable them to effectively and efficiently dispense their work

•Paper based manual processes are extremely time consuming and costly

•Also on the customer end, it causes servicing issues if the customers are not given the policy premium calculation details in real time

•Mobility helps agents remain relevant in the digital age allowing them to perform their functions effectively and efficiently

•They can use tablets to create customer specific presentations, proposals, do real time what if scenarios, provide real time quotes and capture digital signatures thereby reducing errors giving customers a delightful experience

6 Huge cost overhead owing to inefficient and obsolete transaction processing

•Competition is further driving the cost overhead in fight for sustaining the market share by providing door step customer service and capturing client documentation

•Limited application validation is error prone and further increases rework

•Companies can integrate the processing systems with mobiles and tablets

•Customer could be provided with self-service tools to upload relevant documentation thereby reducing cost overhead

•Online application processing can help in data validation and reducing errors

•Underwriting process could also be streamlined resulting in faster policy issues

Nex

t Gen

erat

ion

Clai

ms

Man

agem

ent

7 Insurance companies grapple with unexpected events which will impact its portfolio of assets

•Challenge to be able to forecast the losses due to such events and manage financial investments accordingly

•Costs involved in collecting data after the event are huge and data validation issue also remains

•Event based communication to policy holders of say an impending hailstorm could help in reducing the damage

•Allowing the customers to access the insurance application and upload images from the accident/issue sight would not only help the insurers in easy collection of data and validation but will also further help in controlling any further damage and organization of help based on situations

Table 4: Opportunities for Customer Experience improvement and cost reduction along the value chain

The time has gone for the insurance organizations to start their digital journeys. While many have adopted technologies such as digital distribution, grafted their digital strategies onto legacy systems, business processes and business models, it is imperative for them to plot the stages of their digital journeys where they will transform their businesses more thoroughly.

The choice for most insurance carriers is to transform into a risk manager, advisor and value aggregator at the center of a digital ecosystem that delivers high-value services to customers every day, or be pushed to the periphery as an interchangeable, commodity service provider with limited control over your destiny.

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ConclusionThe Indian insurance industry is not new to changing consumer preferences. Indian consumer preferences have known to change with rising and falling economic growth (eg. stock market booms), social communication trends (eg. advent of the mobile) and structural (eg. rise of the motor OEMs). However, the push towards Digital stands apart from all these changes in terms if the size and speed of the change. Till now, insurance companies largely had an ability to tackle these changes, absorb them into their operating models and hence, have a revised customer proposition in quick time.

Probably for the first time, the market change has left the insurance industry well behind in a very short period. Over the last three years insurers have begun to feel the need to relook at the way they can position themselves in frontof the client in a fundamentally new manner. This is especially a challenge for the industry as the direct customer touchpoints with insurance companies are few.

The Digital push brings three types of opportunities for insurers in India. The first is in terms of repositioning themselves in front of the customer. The opportunity stems from the fact that insurers now have a channel to directly reach out to the customer. Creation of a new ecosystem, or being a part of one would be essential to stay relevant in a customer’s mind. However, in order to do the same, insurers would need to break the barrier of low-awareness for risk management

The second opportunity is in terms of helping improve revenues by increasing the number of insurance customers and by increasing risk management products being sold to existing customers. Given the nature of products, the non-life insurance segment is better suited to tap into Digital based revenue growth.

The third opportunity is in terms of reducing operating and distribution costs. While the business case for cost reduction is fairly obvious in Digital, implementation and value accretion has been a challenge for insurers. The key constraint to implementing changes for a Digital value chain are the legacy systems (manpower and technology) that

currently drive today’s insurance companies. As a result, we also see a clear focus of insurers on the revenue enhancement side and little or no focus on digitizing their operating models.

In the short to medium term, we expect to see new insurance companies (more so in the non-life segment) looking to tap into the Digital space while existing insurers ready themselves to innovate and deliver new propositions. These companies would test the boundaries of what products, channels and processes can actually be digitized and to what extent the industry will continue to be driven through traditional ways of doing business.

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Contact

Samir Bali Managing Director Financial Services , Accenture India samir.bali@accenture.com

Naman Vidyarthi Principal, Accenture Strategy Accenture India naman.vidyarthi@accenture.com

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with approximately 323,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug 31, 2014. Its home page is www.accenture.com

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Founded in 1925, Indian Chamber of Commerce (ICC) is the leading and only National Chamber of Commerce operating from Kolkata, and one of the most pro-active and forward-looking Chambers in the country today. Its membership spans some of the most prominent and major industrial groups in India. ICC is the founder member of FICCI, the apex body of business and industry in India. ICC’s forte is its ability to anticipate the needs of the future, respond to challenges, and prepare the stakeholders in the economy to benefit from these changes and opportunities. Set up by a group of pioneering industrialists led by Mr G D Birla, the Indian Chamber of Commerce was closely associated with the Indian Freedom Movement, as the first organised voice of indigenous Indian Industry. Several of the distinguished industry leaders in India, such as Mr B M Birla, Sir Ardeshir Dalal, Sir Badridas Goenka, Mr S P Jain, Lala Karam Chand Thapar, Mr Russi Mody, Mr Ashok Jain, Mr.Sanjiv Goenka, have led the ICC as its President. Currently, Mr. Roopen Roy, is leading the Chamber as its President.

ICC is the only Chamber from India to win the first prize in World Chambers Competition in Quebec, Canada.

ICC’s North-East Initiative has gained a new momentum and dynamism over the last few years, and the Chamber has been hugely successful in spreading awareness about the great economic potential of the North-East at national and international levels. Trade & Investment shows on North-East in countries like Singapore, Thailand and Vietnam have created new vistas of economic co-operation between the North-East of India and South-East Asia. ICC has a special focus upon India’s trade & commerce relations with South & South-East Asian nations, in sync with India’s ‘Look East’ Policy, and has played a key role in building synergies between India and her Asian neighbours like Singapore, Indonesia, Bangladesh, and Bhutan through Trade & Business Delegation Exchanges, and large Investment Summits.

ICC also has a very strong focus upon Economic Research & Policy issues - it regularly undertakes Macro-economic Surveys/Studies, prepares State Investment Climate Reports and Sector Reports, provides necessary Policy Inputs & Budget Recommendations to Governments at State & Central levels.

The Indian Chamber of Commerce headquartered in Kolkata, over the last few years has truly emerged as a national Chamber of repute, with full-fledged State Offices in New Delhi, Guwahati, Bhubaneshwar, Patna, Ranchi and Mumbai functioning efficiently, and building meaningful synergies among Industry and Government by addressing strategic issues of national significance.

Indian Chamber of Commerce Head Office

Dr. Rajeev Singh Director General-ICC 4 India Exchange Place Kolkata 700 001 T: +91 33 2230 3242 F: +91 33 2231 3380/ 3377 E: ceo@indianchamber.net W: www.indianchamber.net