- Date : 09/06/2021
- Read: 8 mins
Zero documentation and no tests mean entry barriers to digital insurance are negligible – one simply taps, pays, and receives the policy online.
It was almost five years ago that Indian authorities identified e-commerce and digital platforms including mobile phones as the next generation tools to increase insurance penetration in the country.
In a draft proposal on 7 June 2016, the sectoral regulator – the Insurance Regulatory and Development Authority of India (IRDAI) – proposed that its “insurance self-network platform be available as regular internet website (desktop and mobile) or as a mobile app or both”.
Since then, according to reinsurer Swiss Re in a report on India released in November 2020, payment and e-commerce apps have emerged as its “most popular form of digital platform” for buying insurance.
Swiss Re saw this as a “sign of the traction these [platforms] have built up in India”. Driving this traction are millennials, both men and women, lured by products specially designed for them.
The 2020 lockdown pushed these “digital-first” consumers further towards digital insurance, the report said.
How millennials are driving digital insurance
Swiss Re, quoting data from American mobile market analytics company App Annie, said Indian smartphone users downloaded 19 billion apps in 2019. This number was behind only that of China.
Indian users, most of whom are millennials, also spent about 17 hours a week on social media, more than those from China and the US.
These trends, coupled with factors like faster internet connection and better and cheaper smartphones, have led to an increase in digital connect between buyers and sellers in various sectors, including insurance.
It has also led to the entry of new players. For instance, India’s two biggest e-commerce players, Amazon and the home-grown Flipkart are vying for a slice of India’s $280 billion insurance market through tie-ups with big insurance companies.
Also to have become active in the digital insurance space are payment firms such as Paytm and PhonePe, which also have similar insurance partners.
Related: How digital payment methods are changing the face of the Indian economy
Enter bite-sized, sachet, and small-ticket insurance
The report, based on a survey across five Indian cities in June 2020, measured the acceptance of six such products designed for digital platforms, and in fact, are specifically tailored to fit a mobile screen.
Variously referred to as bite-sized, sachet, or small-ticket insurance, this category of policies are typically designed for a comparatively shorter duration to cover very specific needs, and not restricted to health or auto insurance.
These policies command lower premiums and are easily purchased using a smartphone without documentation or tests.
Swiss Re’s survey results found consumers warming up to the concept, with over 70% saying they would purchase all six products that were tested – especially plans relating to critical illness and hospital cash.
Of them, it was the younger lot – both men and women – who were more open than people aged 50 and above. Frequent apps users also tended to like the offerings.
Related: What makes buying life insurance online click?
Sachet insurance and its key features
Critical illness and hospital cash are not the only areas of interest for digital-first consumers. What also makes bite-sized/sachet insurance appealing to millennials is the range of non-traditional insurance products that the category covers.
For instance, there are specific policies for:
- Online fraud;
- Mobile screen damage;
- Cab ride setbacks (injury due to accidents, loss of baggage, theft etc.)
There are some features that make sachet policies appealing to young consumers:
- Being need-based, they do not require long-term commitment and continuity;
- This makes them affordable and a great value for money; for example, cab-ride insurance can cost just Rs 1 a ride;
- Zero documentation and zero tests mean entry barriers are negligible – one simply taps, pays, and receives the policy online;
- Claims are also hassle-free, and can be got on smartphones;
- These plans meet short-term specific needs, which makes them a good entry point to insurance for millennials.
Related: 8 Reasons to buy insurance online
Flipkart’s non-health offerings
A great example of entry point insurance would be Flipkart’s cover against digital fraud at less than 50 paise a day. IRDAI granted Flipkart a composite license which allows it to sell three life, three non-life, and three standalone health policies.
Consequently, Flipkart has tied up with Aegon Life, Bajaj Allianz, and Care, mainly for health and life covers. However, with Bajaj Allianz, it also offers non-life insurance, such as a cover against cyber fraud and cellphone damage and auto insurance.
Its cover against losses due to cyberattacks and cyber fraud (including phishing and SIM jacking) extend to Rs 10 lakh, with annual premiums starting at Rs 183 – for a cover of Rs 50,000.
Its mobile protection plan offers covers for various software and hardware glitches, including cracked screens and damage due to liquids. Premiums start at Rs 99.
Flipkart’s auto package is discussed later, along with that of Amazon.
Related: Here is how buying term insurance online helps in achieving goals
Flipkart’s life and health insurance
Flipkart’s life cover, offered in association with Aegon Life, includes a lump sum payout for any of 36 critical illnesses including cancer and heart attack, apart from COVID-19. Premium starts at Rs 153 for a life cover of Rs 1 lakh and critical illness cover of Rs 10,000.
With Bajaj (premium starting at Rs 5928 with coverage up to Rs 5 lakh), it offers coverage at actuals up to the sum insured for room rent, nursing charges, and ICU costs. Additionally, it offers daily hospital cash benefit of Rs 500 for 30 days, and 100% sum insured reinstatement.
With Care (premium from Rs 3806; coverage up to Rs 20 lakh), it offers domiciliary hospitalisation – up to 10% of sum insured if treatment exceeds three days – and extended coverage for people aged above 50.
For room rent etc., it offers up to 1% of the sum insured of Rs 3 lakh.
PhonePe’s dengue and COVID-19 covers
Flipkart’s payment gateway PhonePe has also joined the health insurance market with policies for dengue, coronavirus, and hospitalisation expenses.
Its dengue and malaria insurance plan offers cover against four more diseases – chikungunya, Japanese encephalitis, kala-azar and filariasis – at an effective monthly premium of Rs 4.
The plan comes in four variations with daily covers from Rs 500 to Rs 5000 and offers a fixed, one-time payout of sum assured for hospitalisation of at least 48 hours at any hospital in the country.
Other features are:
- No bills required;
- Annual premium from Rs 49;
- No medical tests required;
- Amount credited to policyholder’s bank account directly.
Its coronavirus insurance plan offers hospitalisation cover of up to Rs 50,000 and Rs 1 lakh, with annual premiums pegged at Rs 396 and Rs 541, for pre-and post-hospitalisation expenses for 30 days including tests and consultations.
Costs of PPE kit, gloves, and masks are covered.
Auto insurance from Flipkart, Amazon
Both Flipkart and Amazon have reached out to millennials through auto insurance policies that include 24x7 roadside assistance facility for both four-wheelers and two-wheelers.
Amazon’s auto insurance, offered in partnership with Acko General Insurance through its payment gateway Amazon Pay, is already disrupting the insurance industry.
A vehicle’s insurance premium is based on many factors – its current value, age, geographical location etc. That being constant, Amazon Prime customers get three add-on covers worth Rs 1500 for just Rs 40, these being:
- Roadside assistance: Free towing services and free mechanic’s services for minor repairs;
- Outstation emergency: Offers a flat Rs 1000 if repair takes more than 12 hours
- Consumables cover: Covers cost of nuts and bolts, lubricants etc.
Flipkart’s cover for four-wheelers offers cashless claims settlement at over 4000 network garages, plus zero depreciation benefits. For two-wheelers, new policyholders can transfer 50% of their no-claims bonus from their old policies.
Swiss Re sees a role for both digital and traditional distribution channels as consumers value interaction with both. However, where digital insurance clicks with millennials is that it does not rely on middlemen, who have proven to slow down innovation for the insurance industry at large.
As a consumer, it is you who stands to benefit the most as digital insurance promotes direct engagement with customers, enabling the insurer to design competitive and personalised policies as per the customer’s needs.
Moreover, digital platforms make it easier for you to access policies and make claims. As everything is online, there is no requirement for any paperwork when buying a policy (and no tests either). Making a claim is similarly quick.
Swiss Re said most respondents were okay with insurers using their personal data to design customised offerings, and many found it “thoughtful”. Maybe you will feel the same after going digital with insurance!