Marking a major paradigm shift in its legacy approach, the insurance sector is embracing InsurTech in an all-encompassing manner. The industry has recently made a presentation to the regulator asking permission to own a 100% stake in relevant tech startups from the current cap of 10%.
Many insurance companies still rely on age-old legacy software at the back end, whereas these next-gen companies are aptly applying technology in areas ranging from fraud detection to cross-selling of products.
Regulator IRDAI has said that it is working on creating a regulatory sandbox to encourage Insurtech in the Indian landscape. The regulator has already made its stance clear on usage of wearable/portable devices for the purpose of underwriting a policy.
It has mentioned that when it comes to insurance product design and pricing, details of such devices being used should be part of product filing and such products should first be tested in a sandbox environment or a test run should be done.
So, the government is trying to develop a UPI kind of ecosystem for the insurance sector. NPCI-promoted UPI gave a technology ecosystem to foster phone number-based fund transfers and retail payments.
As per a report published in ET, Prashant Tripathy, CEO, Max Life Insurance says that the company wants to buy 100% stake of those InsurTech companies which align with its business. Company has set up dedicated teams to monitor new technologies and estimate their disruptive potential.
The current crop of InsurTech firms is largely focused on building platforms which are demand aggregators and then use Artificial Intelligence and Machine Learning, in the form of robo advisors to execute usage based selling.
These companies are also using technology that aids fraud detection at the point of sale, mainly in underwriting. Furthermore technology is being applied for assessment of risk, for instance, wearables are being used in the context of `diagnostics’ for better underwriting. Some are using sensors that stick to the skin and relay data for overall fitness level.
Presently, life insurance companies are using either in-house or outsourced big data or artificial intelligence for underwriting.