Changing trends and future of health insurance in India

The buzzwords in corporate boardrooms, these days, are “big data” and “data analytics.” And the insurance sector is no exception! The way insurance is being underwritten in today’s world is fast changing. And feeding this massive data revolution is your and my digital footprint. Whether it is ordering food online through mobile apps or paying for it through mobile wallets, or even hailing a taxi online, we are leaving behind a valuable trail of information every minute of our lives.

And it is this data that is being mined and analyzed by various organizations and institutions to eliminate risk, improve their efficiency, make their services more cutting-edge, and offer better products to us. While insurance companies once relied on historical data for actuarial calculations and risk management, they now draw upon data sources that are updated by the second. This enables them to be more responsive in an increasingly volatile risk environment. Thus, real-time data has become central to any kind of risk underwriting, and one who has access to this data enjoys plenty of advantages over his peers and is in a better position to underwrite risk.

Today, we have agencies such as CIBIL maintaining our financial scores, which determine our financial track record and our creditworthiness. Banks and financial institutions use the CIBIL score as a reference before sanctioning a loan. Imagine the benefits if a similar score was available to the insurance companies. For example, in the life insurance sector, insurers try to assess the risk factor by looking at a customer’s medical profile, asking the customers about their lifestyle habits, and often through a health check-up.

But what if we can create a “Health Score” on the lines of the CIBIL score? A scorecard that you will maintain throughout your life, and the better the score on your card, the better the rate you get for your insurance policy. The concept can be extended to the corporate sector, where employees of large companies as well as the employers can be encouraged to maintain a better Corporate Health Score. It will enable insurance companies to underwrite better risk and also help them develop a scientific method and a predictive model to forecast trends.

Such a scorecard can be developed for other kinds of insurance as well, such as fire, marine, etc. For example, in the motor insurance sector, if we know that the rate of failure of the various components of an automobile, we would be reasonably competent to predict the chances of failure of the car, and therefore we would be able to predict possible instance of accidents due to the failure of the care. Similarly, for a driver, we can have a rating not only on the number of signals he breaks but also on the number of tickers he gets. The data can be married to the data on his medical fitness.

It is abundantly clear that the use of big data in insurance is already transforming the industry. For example, Ford has partnered with a company to develop a driver score app, which uses privacy-enhanced technology to tell insurance companies how drivers are performing to potentially lower their premiums. In the not-too-distant future, it will be possible to get an insurance policy by just swiping your thumb because your Aadhar account will have all information about you and is also connected with your bank account and it will be linked to your health insurance and life insurance scores.

The penetration of Insurance in the Indian Subcontinent is way below that in the other countries, however, we cannot ignore the fact of the sheer size of the market. For example, LIC alone today has more policies than the entire population of Australia, which just goes to show two things the penetration is still low, but in absolute terms, it is more than most countries. So, we have the volumes, we have the technology and we have now the will of the insurance companies to tap this vast potential.