Fair insurance: Digitize the ordinary, humanize the extraordinary

Vishwanath Ramarao, Chief Product & Technology Officer at ACKO General Insurance reveals how the company is disrupting the insurance space with a customer-first thinking and creating a fairness strategy model.

There is a lot of noise out there.

The insurance space, akin to other sectors, perpetually hears about digital marketing, digital distribution, artificial intelligence, the Internet of Things, machine learning, telematics and so on.

In all this clatter, it is hard for insurance companies to discern the bigger picture.

What does success look like for an insurer in a digital world, and how is it achieved?

“The focus should be on simplifying insurance for customers, not just in the copyright, not merely in the user interface and the journey, but fundamentally creating simpler products that are simple to work and easy to claim. While technology plays a key role, there is even a larger role played by our core thesis of being a customer-centric company,” says Vishwanath Ramarao, Chief Product & Technology Officer, ACKO.

ACKO, founded in November 2016 and having started operations a year later has been labelled as India’s first digital-native insurer. It takes pride in calling itself ‘different’ from other insurance companies.

Being different, making a difference

Traditionally, the general insurance market in India has adopted a channel-led business strategy. The first customer of the insurance company is the agent who sells the policy on behalf of the company—it could either be physical entity or a digital intermediary like a PolicyBazaar.

“Building a Direct-to-Consumer (D2C) company has been an interesting journey. We questioned everything about insurance. What are the layers, and what products does it constitute? How do you sell a product, and how does one change a sector that has traditionally been a push-oriented play, where people are urged to buy,” Vishwanath says.

He shares that in India there is a clear absence of a single protection product. In other words, there is no ‘unified platform’ where consumers can trust it for their protection needs and at the same time get an exceptional service experience.

“If I am a customer of a traditional insurance company for 10 years, the company treats me exactly in the same manner as they treat a customer who joined their platform a week back. They treat me with the same fraud filter with another customer who joined last month. Why is there a need to look at data only from a business process perspective. Why can’t we look it from a customer’s perspective,” Vishwanath says.

This implies that if an insurance company is highly channel driven, it will fail to know its customers well enough.

‘Sachetizing’ insurance

There’s a lot at stake when developing a new product or service, more so for a new entrant. Yet, ACKO decided to break away from the traditional route. “If a customer has a core need, and if the product meets their needs, they will buy it. We have been able to create product/s and deliver an experience for consumers that pulls them towards us,” Vishwanath says.

ACKO pioneered the concept of sachet insurance, or bite-sized insurance policy covering specific customer needs for a comparatively short duration. It rolled out contextual micro-insurance products in the market through alliance with Ola, Goibibo, RedBus, Urban Clap, and other online ecosystem companies. This was a small moment insurance typically attached to a single transaction.

“Many people didn’t want to buy long term products with lengthy commitments. While the bite-size offerings played out well in other sectors, we brought it in the insurance market, and it worked well for us too,” Vishwanath says.

Shaping tomorrow, staying ahead

Saying transformation doesn’t make it happen. And making an investment doesn’t mean a company can automatically capture its full value. ACKO took steps towards creating a strategy that was clearly linked to value and differentiating capabilities—one that was customer-led and tech-empowered.

“We worked from everything grounds-up, looked at the way we communicated with our customers, recalibrated our sales and claims process. The design and experience layers shaped with a sharp focus on making life easy for consumers. This has been our first focus area around the product and technology piece,” Vishwanath says.

The second transformation layer for the company has been around the pricing. Although pricing has become an increasingly critical factor in achieving competitive advantage in the insurance industry, many companies are still trying to find the right balance in their pricing schemes.

“When you don’t have high quality data, you end up with averages. Underwriters have been forced to use statistical estimation and averaging tools that have made insurance decision-making coarse. For our auto insurance product, we started something called as ‘personalized pricing’ for customers,” Vishwanath says.

This means that if you are a ‘safe’ driver you will get better pricing. On the other hand, you will be penalized and will have to pay a higher insurance for being an unsafe driver.

“Through this we have created an incentive system where good drivers will start to realize that there are benefits to safe driving,” Vishwanath says.

The company has replicated this concept for its health insurance segment too. So, if you are someone who eats healthy and are fit, your insurance purchase price will be better than somebody with an unhealthy lifestyle.

Use of technologies like AI/ML can help companies not only set better pricing models, but through a deeper understanding of customer data, algorithms can unveil key product features and coverages, making customized products feasible in insurance.

“It’s important not to get lost in false projects. It’s easy to say that we are AI/ML-enabled, but if there is no value to business or to the customer, it is pointless. Tech should solve what matters to the customer. A large part of the technology solutioning that we do is surrounded by a product framework of ‘customer-first’ thinking,” Vishwanath says.

Adjudication: Humans vs machines

For several years, insurers have talked about “auto adjudication,” which refers to state where insurance admissibility and claims decisions are not in the hands of human claim handlers but are mostly taken by data and ML algorithms.

“Here you are replacing human judgment, their ability to read and understand legal policies, contracts between two parties, etc., and expecting machines to understand all this and do a perfect job, an even outperform humans. This is an extremely tough problem, and it will take years for insurance companies to fully crack this,” Vishwanath says.

However, he states that some portions have started to get cracked. For example, consider a scenario where a customer’s car windscreen has been damaged by a flying stone/pebble thrown up by another cars tyre. The algorithm based on the photographs and videos of the windscreen can assess the damage and decide whether a repair or a replace strategy is needed.

“It can decide between the two strategies, both from a consumer standpoint and from an insurer’s standpoint. This has already been done without human intervention,” Vishwanath says.

Building a ‘fair’ insurance ecosystem

ACKO has been working towards making insurance pricing fair for all consumers. It wants to ensure that consumers have the information to make the best decisions when buying or using insurance.

“Insurance experience for users has been like visiting a dentist. One knows that it will be painful. As a sector we need to be think about our customers and how we can bring fairness within the organization through best practices and use of technology. The fairness principle will become a critical piece for insurance companies,” Vishwanath says.

ACKO wants to be seen as a thought process leader in the insurance space. “We want to
transform the entire sector, not just our own company,” Vishwanath says.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members

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