145559 19th – 25th September 2020 INSUNEWS Issue No. 2020/38 Weekly e-Newsletter QUOTE OF THE WEEK INSIDE THE ISSUE Insurance Industry 2 “Reading furnishes the mind only Insurance Regulation 12 with materials of knowledge; it is Life Insurance 14 thinking that makes General Insurance 25 what we read ours.“ Health Insurance 32 Insurance cases 54 John Locke Pension 55 IRDAI Circular 59 Global News 59 INSURANCE TERM FOR THE WEEK Underwriting Risk Definition: Underwriting risk refers to the potential loss to an insurer emanating from faulty underwriting. The same may affect the solvency and profitability of the insurer in an adverse manner. Description: Underwriting is a critical risk mitigation mechanism adopted in the insurance industry. The process helps in deciding the appropriate premium for an insured. The underwriter needs to match the premium received with the claims paid with an eye on profitability. In the event of a dichotomy between the two, with the premium received not sufficient enough to cover the claims, the insurer is confronted with the probability of loss. The premium charged by the insurer must incorporate the risk premium that covers not only the claims but also the capital requirements, also called the solvency requirements. In the event that the matching is not done in a pragmatic manner, the underwriting risk arises. Source INSURANCE INDUSTRY Indian Insurers adopting cloud and how! - The Economic Times – 24th September 2020 India’s young insurance industry as compared to the global peers is steadily evolving with adoption of new age technologies which enable faster deployment of services not internally but end users too. Indian insurance companies have started adopting cloud and all are at different stages. Insurance CIOs & CTOs believe having a right cloud roadmap which is aligned to the enterprise’s policy is critical in determining the pace of cloud adoption. The pandemic has fastened the pace of cloud adoption as India had imposed one of the most stringent lockdowns where all the economic activities and physical exchange of services had come to halt. Face to face selling of policies was a pre- dominant factor across the insurance industry and more heavily in life insurance. The lockdown forced insurers to enable end-to-end digital delivery of services right from on boarding to policy issuance to settlement of claims. Max Life Insurance is leveraging cloud to deliver scalable, agile technology platforms for meeting their customer expectations. Most of their customer facing applications are hosted on cloud and they were able to scale up applications across 1000 of users overnight. Manu Lavanya, COO, Max Life Insurance, said, “We have started to build a comprehensive data lake on the cloud to create a 360 view of the customer which can help us in leveraging intelligence to create personalised journey’s and Omni channel service experiences. We’ve built a conversational interface powered by Google Cloud to solve queries and improve services. We have kickstarted a strategic initiative wherein we will transition the bulk of our IT infra to cloud over the next 3 years.” 2 Adopting the right cloud strategy as per the insurer’s requirements has few important benefits in terms of its cost effectiveness, faster deployments, scalability, simplification and a few other benefits. At Reliance General Insurance, they’ve partnered with Microsoft Azure for cloud based services. Rakesh Jain, ED & CEO at Reliance General Insurance said, “We run a hybrid cloud environment with a dozen or so critical services and large applications running on the cloud and the remaining ones in our On- Premise data center.” Their strategy is to remain in a hybrid environment giving them the best of both worlds - the cost efficiency of an on-premise environment, the scalability and robustness of the cloud. He added, “Leveraging the cloud is a progressive journey as we must manage business expectations along with our re-engineering needs.” At IndiaFirst Life Insurance, the cloud journey was started recently and is still in the initial stages. It’s Chief Technology Officer, Sankaranarayanan Raghavan said, “We’ve started on it and are on Office 365, from a data centre perspective we are majorly on-premise both the disaster recovery and main data centre. But we’ve started our journey and implemented with Nutanix and thought of how we can do it right from storage to orchestrating to managing licenses, etc. Second, we will be going ahead to move development platforms to the cloud.” “Third, all the digital assets and channels we’ve got will go into the cloud. Not all of it has gone; it's in the pipeline and roadmap. We will be accelerating this much faster in the coming times as it gives us agility to do things.” Future Generali Life Insurance’s Chief Technology Officer, Byju Joseph believes, cloud adoption is a gradual process. According to him anything distribution facing and customer facing has to be cloud native without any questions. He added, “While we can move the virtual infrastructure to the cloud, we’ve taken a conscious call to make it a private cloud within the data center. By 2021 end, around 65% of my infrastructure will be on cloud. We take a balanced approach, I would want to put an application on cloud only if it’s cloud natïve and not just for the sake. Technology supports and enables the growth engine. CIOs are looking to be ready with the capabilities that require expanding whenever the need arises and cloud gives the enterprise the agility to expand. TOP Source Insurance: Data analytics can make insurance firms smarter - Financial Express – 23rd September 2020 As the value chain continues to become more digitally connected, insurers have the prerogative of better understanding customer segments and partners, and adapt to consumer needs in near real-time. In the near term, most of the digital insurance consumers will likely be young, educated and with higher levels of income. To meet customer needs, most insurers have already started to collect a wealth of data. However, they have been slow in monetising this asset. To understand and meet consumer needs, there is an immediate need to create new business lines or models to capture the value of data and analytics. As more and more insurance consumers shift online to interact, compare products and prices, and make purchases, the volume of available data is increasing exponentially. Data-enabled processes Over time, Big Data and refined models will work for allowing risk pricing at an increasingly granular level. There 3 is nothing to deny the fact that the insurance industry is a major component of the economy. It enables individuals and companies to take more risk, which further empowers innovation and growth. And the fuel of the insurance is data. Technology revolutions of the last few decades and falling cost of technology create new opportunities for insurers to harness the data. Data-enabled processes will minimise friction and streamline the customer insurance journey, from request for coverage to claim. Digitalisation will thus help improve the customer experience and also the efficacy of back office processes. The true opportunity, however, lies in leveraging the collected data to fundamentally change how a particular business operates and delivers value to its customers. Engaging with customers Most insurers are striving to fundamentally change their relationship with consumers through the use of real-time monitoring and visualisation. Consumers who agree to let insurance companies track their habits can learn more about themselves, while insurers can use the derived data to influence behaviour and reduce related risks. For instance, in the auto insurance industry, telematics is being used to monitor driving habits and behaviour of the consumers in real-time. Apart from providing digital transformation, use of more data and better tools to collect and report on data means better compliance. And this is particularly because insurance companies are subjected to increasing regulatory mandates at various levels. As insurance companies consider new uses for the data they collect, they must also be aware of the mandates from multiple agencies. In all the cases, the ability to collect, report and use data makes regulatory reporting easier and more consistent. Yet another important reason why insurance companies need to embrace data is for fraud detection. One of the biggest issues that insurance companies are facing right now is fraud. According to most insurers, 1-1.5 out of 10 claims is fraudulently filed. This is alarming, given the limited number of policyholders that an insurance company may have. While some policyholders do it sloppily, some do it meticulously and get away with it. With the use of Big Data analytics, a large amount of data can be checked in a short amount of time. It includes a variety of Big Data solutions, such as social network analysis and telemetric. This is the biggest weapon insurers have for detection of fraud while filing claims. (The writer is Saurabh Tiwari.) TOP Source Coming soon: An all-new customer experience in the Insurance space – Live Mint – 22nd September 2020 Circa 2030. You will be able to buy an insurance policy for yourself at the click of a button and a chatbot embedded in the digital interface of the insurer will offer instant redress to all your queries. Your policy will be tailor-made for you, seeing your history and other risk parameters. The insurance industry is at the cutting edge of innovation and the Covid-19 crisis has accelerated the need for this digital transformation. As the modern-day customer seeks value and ease of use in every aspect of their lives, the Insurance sector has also embarked on their digital journey and even areas like customer acquisition – where face-to- face contact was considered essential – are being digitized.