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insurance The Chartered Accountant
The State of the Art in Insurance:
A Vision for the Future
The Insurance Regulatory and Development Authority
of India (IRDAI) has committed to enable ‘Insurance
for All’ by 2047, where every citizen has an appropriate
life, health, and property insurance cover, and every
enterprise is supported by appropriate insurance
solutions, making the Indian insurance sector globally
attractive. Thus, the insurance industry stands on
the brink of a transformative era, poised to leverage
advanced technologies and ethical practices to
reshape its landscape. Traditional models often suffer
from complex bureaucratic processes, opaque policy
documents, and, at times, unethical practices. This
vision outlines a path forward, using machine learning
(ML), artificial intelligence (AI), clear accountability,
CA. Shailesh Haribhakti and ethical standards to create a transparent, customer-
Member of the Institute
focused insurance ecosystem that delivers exceptional
service, builds trust, and ensures long-term financial
stability. The entire insurance ecosystem comprises
of 3 pillars viz. insurance customers (policyholders),
insurance providers (insurers) and insurance
distributers (intermediaries).
T
his Vision shall try to address the use of ML/AI based
interventions at the following 4 levels of insurance transactions.
i. Risk Assessment and Underwriting
a. Risk Assessment
b. Straight-Through Processing of Policies
c. Policy Documentation
d. Independent Confirmations of Policies
ii. Claims Processing
a. Automated Probate-free Claims Transfers
b. Claim Processing
c. Improving Balance Sheet/Profitability
iii. Intermediary Management
a. Enhancing Honesty and Integrity of Intermediaries
b. Optimizing Commission Structure
iv. Internal Capability Enhancement
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The Chartered Accountant insurance
i. Risk Assessment and Underwriting
To ensure that customers genuinely
a. Risk Assessment: Multi-Parameter Analysis
understand their policy—its
Advanced ML and AI models hold the potential
to revolutionize risk assessment by synthesizing
benefits, conditions, surrender
a vast array of data from an ecosystem of sources. values, and claims processes—an
Going beyond historical data, these models can independent system must validate
incorporate real-time information on climate,
socio-economic factors, individual behaviors, comprehension before policy
and macroeconomic indicators to build a issuance.
comprehensive risk profile. This ecosystem
approach enables dynamic assessments that Implementation: By using AI to analyze
accurately reflect each customer’s unique risk applications and perform underwriting
profile and adapt over time. instantaneously, and integrating cloud
and blockchain technologies for secure,
Implementation: AI engines can pull data
verifiable records, insurers can streamline
from IoT devices, environmental databases,
STP. Blockchain’s immutability ensures data
health records (with permissions), and social
integrity, enhancing trust in the automated
media, creating a multi-dimensional view
process.
of risk. This precision enables the insurer to
personalize premiums fairly, reflecting each Outcomes: STP reduces policy issuance time
insured party’s specific circumstances. from weeks to minutes, significantly cutting
costs and enhancing customer experience.
Outcomes: This level of risk analysis reduces
This system enables insurers to handle higher
underwriting errors, lowers premiums for low-
volumes, drive growth, and deliver the level
risk customers, and improves profitability
of speed and convenience that modern
by aligning premiums more closely with
customers expect.
actual risk, enhancing fairness and customer
satisfaction. c. Policy Documents that a Common Person can
Understand
b. Straight-Through Processing (STP) of Policies
Complex and jargon-filled policy documents
Straight-Through Processing (STP) aims to
often leave customers feeling overwhelmed
eliminate the manual bottlenecks traditionally
or misinformed. The goal is to create
involved in policy issuance, achieving
straightforward, accessible documents
seamless, end-to-end automation. With STP,
that clearly outline the product’s benefits,
the application review, underwriting, pricing,
obligations, conditions, and claims processes.
document generation, and policy issuance
processes are completed in real-time, enabling Implementation: By using natural language
policies to be issued instantly. processing (NLP), insurers can convert
technical language into plain, customer-
friendly terms. Interactive digital documents
can include explainer videos, visual diagrams,
and highlighted key points to further ease
understanding.
Outcomes: Transparent documentation
fosters trust, reduces customer complaints,
and minimizes disputes. When policy terms
are easy to understand, customers are
empowered to make informed choices,
enhancing satisfaction and reducing the
likelihood of misunderstandings.
d. Independent Confirmation of Policy
Understanding
To ensure that customers genuinely understand
their policy—its benefits, conditions, surrender
January 2025 | www.icai.org | 73
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insurance The Chartered Accountant
values, and claims processes—an independent
system must validate comprehension before Using AI to streamline
policy issuance. This additional step safeguards claims assessment and fraud
both the insurer and the insured.
detection, insurers can
Implementation: AI-driven chatbots or live
video sessions equipped with sentiment ensure that legitimate claims
analysis can interact with customers to are paid promptly, with
confirm their understanding. Customers may
answer simple questions about key policy funds transferred directly to
aspects before finalizing their agreement. beneficiaries’ accounts.
Outcomes: This confirmation process
protects against mis-selling, reinforces b. High-Quality, Bureaucracy-Free Claim
customer trust, and fulfills an insurer’s duty to Processing
act responsibly. It ensures that customers feel
A seamless claims process is vital for customer
informed, reducing the risk of disputes and
satisfaction and retention. Using AI to streamline
promoting a positive customer experience.
claims assessment and fraud detection, insurers
ii. Claim Processing can ensure that legitimate claims are paid
promptly, with funds transferred directly to
a. Automated, Probate-Free Claim Transfers beneficiaries’ accounts.
The traditional claims process can be slow, Implementation: AI models can review claims
complex, and stressful, especially in times of for fraud indicators, reducing the burden
bereavement. The future of insurance should of manual assessments. Digital banking
allow for automatic claim transfers to beneficiaries integration enables instant fund transfers,
without the need for probate. bypassing traditional, time-consuming
Implementation: Smart contracts on a bureaucratic steps.
blockchain platform enable automated Outcomes: Faster claim settlements improve
disbursement of funds upon verification customer experience, strengthen brand
of the insured’s death. Integration with reputation, and build loyalty. Robust fraud
government records for death verification detection ensures that payouts go only to
would streamline this process further. legitimate claims, enhancing fairness and
Outcomes: Beneficiaries receive their claim reducing losses.
payouts quickly and without bureaucratic c. Building a Stable, Liquid, and Trustworthy
hurdles, providing financial relief when it’s Balance Sheet-Profitability
most needed. This approach enhances the
insurance provider’s reputation and builds To support these customer-focused initiatives,
trust in its commitment to customer care. insurers must prioritize financial health and
resilience. A balance sheet that emphasizes
stability, liquidity, and the capacity to weather
economic shifts builds trust and ensures
sustainability.
Implementation: AI-driven analytics guide
investment and risk management, optimizing
portfolio allocations and ensuring liquidity.
Diversified investments and prudent
reinsurance strategies enable insurers to
remain well-capitalized, fostering resilience
against market shocks.
Outcomes: A financially stable and liquid
balance sheet reassures customers and
investors, supporting long-term growth
and enabling insurers to weather economic
uncertainties.
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The Chartered Accountant insurance
iii. Intermediary Management Outcomes: This structure encourages agents
to recommend suitable policies for lasting
a. Enhancing Honesty and Integrity Among value, reinforcing customer satisfaction and
Agents/Intermediaries trust. It reduces “churning” and results in a
Given the pivotal role of agents/intermediaries more stable and profitable customer base.
in customer interactions, fostering honesty and iv. Internal Capability Enhancement: Creating a
integrity is critical. Severe penalties for mis- Culture of Advocacy
selling, such as commission clawbacks and
potential license revocation, deter unethical A customer-focused insurance company must
behavior. AI-driven monitoring systems can cultivate a culture in which every employee takes pride
oversee agent-customer interactions, flagging in its services and would confidently recommend
any misrepresentations. them to their family. This sense of advocacy can be
achieved through continuous training, a supportive
Implementation: Agent performance work environment, and alignment of personal values
metrics can be recalibrated to reward ethical with the company’s mission.
practices, long-term customer satisfaction,
and retention. Agents receive digital tools Implementation: Regular training in technology,
that standardize communication, ensuring product knowledge, and ethical standards
consistency and transparency. ensures employees can serve customers
effectively. Recognition programs that reward
Outcomes: Customers trust agents who employees for demonstrating company values
prioritize their needs and provide honest help build internal advocacy.
advice, enhancing brand loyalty. An integrity-
focused approach creates a healthier, more Outcomes: A culture of internal advocacy
customer-centric distribution channel. fosters pride, loyalty, and a shared commitment
to quality service. Employees become natural
b. Commission Structure: Payment Linked to ambassadors for the brand, creating a ripple
Premium Realization effect of trust and satisfaction among customers.
To discourage short-term sales tactics and Conclusion
encourage genuine customer care, commission
payments should be structured to depend on The vision for the future of insurance is one that
premium realization over time. Commissions that seamlessly integrates advanced technology with
only vest after the second premium payment ethical practices to create an industry grounded in
align agent incentives with customer retention. trust, transparency, and customer care. Technological
advancements, the biggest game changer in the
Implementation: A staggered payout insurance industry, will continue to streamline customer
model provides commission based on policy onboarding and claims processing through AI-driven
milestones, with additional incentives for tools and digital platforms. These innovations can
longer policy retention. Clear, transparent enhance customer service and operational efficiency,
metrics inform agents of these benchmarks. making insurance more accessible and transparent. As
a result, the insurance industry can transform itself into
a beacon of reliability and resilience. This future-ready
insurance ecosystem will not only meet the evolving
needs of modern consumers but also build a foundation
of trust and loyalty that will support sustainable growth
for generations to come.
Author may be reached at
[email protected] and
[email protected] January 2025 | www.icai.org | 75
