accompanied by industry led innovation, which in turn must be
enabled through the effective use of evolving technology.
1. Regulatory structure and policies
While the regulatory structure for the industry will continue to evolve, special attention will be paid to the regulatory framework for microinsurance.
Key driver Likely future direction
Evolved regulations • There is a critical need to set microinsurance goals at an industry level and then supporting the industry with the right set of policies and reporting procedures. Currently there are no microinsurance goals on business numbers. Microinsurance overlaps with rural category regulation for which the goal is on ‘number of cases as a percentage of total cases’. There is a need for the regulator to create a supportive framework, such that the goals can be drawn on contribution to premium (as opposed to cases) which would also drive the insurers to devise innovative models to serve the target microinsurance population.
• Need to create grievance channels and a resolution system appropriate for low income policy holders.
• Regulating new channels for distribution and mandating risk carriers which are unregulated or under other authorities to become licensed.
• Central and state Government funding for insurance: RSBY could be
extended beyond health and transformed into the parent scheme for both life and health insurance. With extension of coverage beyond the poor class to low income self employed groups, the risk profile is expected to improve and even savings and retirement schemes can be offered to the mass segment. Cost and Risk
sharing models
• A microinsurance exchange, where graded portfolios (by underwriter, risk assessment, mortality statistics etc.) can be traded. Innovative structures at an industry level, such as the pool and the exchange, will enable
microinsurance initiatives to be managed as a collective – rather than by the replication of underwriting risks and costs by each company.
• A microinsurance pool, enabled by the pooling together of all revenues accrued through initiatives run by insurance companies, the Government, postal services amongst others. Payment of claims will be managed by the pool based on information stored in smart cards or mobile phones.
2. Industry led change/innovation
Ultimately, the mantle of increasing the penetration of microinsurance in India will fall on the insurance industry. Enabled by favourable regulatory structures, the industry will be empowered to innovate – in low-cost customer acquisition, product designs and pricing, customer service and in claims handling. While each insurance company will develop its own strategies and capabilities, it will also have the opportunity to create path-breaking collaborative models. The combination of internal and collaborative models will be the catalyst for increased microinsurance penetration.
3. Leveraging technology
The incredible innovations in technology, over the past 20 years, have transformed the way that humans and organisations exist. In areas like information aggregation and management, communications and human-machine interfaces, technology has enabled new paradigms. Future indicates an increase in the rate of technology innovation.
Key driver Likely future direction Creation of common
databases for microinsurance
• The need to reduce operating costs in microinsurance will drive a model that includes shared infrastructure and a shared database. By itself, it will allow insurers to amortise costs, but linked to the microinsurance pool, it will have significant impact on reducing costs.
• The biggest advantage accruing from a shared database will be the availability of a significantly larger set of information required for modelling, risk analysis and fraud protection. This is similar in concept to a credit bureau’s database accessed by all members.
Collaborative industry models
• FMCG, telecom, retail, railways, cable TV, broadband and other mass
distribution/reach companies can bundle insurance covers with their products or services and share customer information leading to better understanding of segment behavior
Key driver Likely future direction
Wireless access • An increasing number of the Indian population will be connected to wireless networks – either as telecom subscribers or through embedded devices (smart cards, biometric devices, embedded identification tags etc.). With significant progress in the miniaturisation of wireless transmitters and the resulting low costs, almost everything will be connected in the future – PAN Card, AADHAR card (for individual identification), Voter ID card and many personal items. All of this will lead to the generation of massive amounts of segment specific data, enabling a sharper focus on product development for the target market.
Biometric devices, smart cards, embedded devices
• Leveraging off recent initiatives by the Central and many State Governments like issuance of smart cards to the ‘poorest’ Indians to keep track of financial payments and health records.
• The newer generation of smart cards will be enabled with one or two biometric sensors and a wireless interface. These cards will have enough memory to store financial transactions, health history for a significant period of time. These cards will not be proprietary to any particular IT platform/ language/ Operating System to enable universal usage.
High powered computing engines and mass storage [cloud computing]
• In the future, massive data stores will enable companies to collect, collate and manage the huge volumes of data that will be generated through the wireless devices and other customer interaction channels.
• These companies will use sophisticated data analysis tools to analyse all types of trends – by demographic or geographical profiling, multiple economic segments, products, risk classes, by channel views and finally for each individual customer.