Amongst the most common questions relating to insurance that I have been asked by the consumers revolves around the dynamics of products pricing. They are inquisitive and eager to know how the industry is underwriting risk and often express displeasure when I reply that a uniform methodology is adapted across the board when it comes to pricing, they retort by asking if comparing apples to oranges is fair? In all honesty, I have to admit that they make a valid point and this is precisely why the insurance underwriting process in India needs an overhaul. Rather, I have often found asking myself if it is fair to charge the same premium from a consumer who, for instance may have a family history of a certain type of ailments vis-à-vis those who do not have any such baggage or for those car drivers who drive 100 km against those who drive 10 km.

Now that it has been established that a flaw exists, the question before the entire industry is whether an alternative and a more personalized mechanism exist to overcome the handicap. While the answer would have been in the negative few years earlier much has changed now. Owing to the vast array of innovations that surround us in this digital world, new proxies such as the consumers digital and voice behaviour have emerged as a reliable alternative. Once fully integrated with existing infra of insurers, it will allow the insurance players to undertake a thorough analysis of the risk presented by the consumer and price them accordingly.

It is a well-established fact that digital behaviour speaks volumes about a person. In fact, this is why recruiters are increasingly scanning your social media profile before hiring you. The same holds true for insurers as well. In fact, they have the wherewithal to go beyond scanning social media and analyze things like how much time did you spend on searching the product and accordingly make an offer. For instance, if the consumer has taken up a lot of time researching about product offerings, it essentially reflects that they are price conscious and prefers value in comparison to those consumers who make the purchase immediately. Similarly, if the consumer is focused on asking questions regarding the benefits they are entitled to through their insurance product for a specific type of disease, the probability of the consumer being affected by such events directly or indirectly escalates manifold. In fact, even if the customer denies any personal affiliation with these diseases, the follow-up questions can easily decipher if they are speaking the truth or not.

Using the inferences derived from analyzing customers digital and voice behaviour, the insurers are able to draw inferences and profile the consumer accordingly to establish the risk associated with insuring them. This subsequently results in saving for the cost-conscious consumer and enables the industry to offer them more personalized service. Furthermore, it also substantially reduces the possibility of insurance frauds ultimately resulting in a win-win situation for the industry at large and the consumers as well.

To conclude, I would like to reiterate that the tech is always evolving and the industry should leverage these disruptions to move towards a more inclusive pay as you use model. If truth be told, the next round of customer onboarding to drive growth in the insurance sector will be fueled by the ability of the industry to incentivize the consumers. The mantra remains the same – 'Evolve or Perish'.

Source: The Economic Times