Context-based products: The future of insurance

Millennials comprise almost 40% of India’s population today, making them a formidable force. They take risks and prefer experiences rather than long term investments. For example, 47% of millennials surveyed in a poll said that they would rather save money and travel than save for a property down payment. They prefer using Uber, Ola and car-pooling services to buying their own car. To cater to millennial trends, insurance companies have launched innovative need-based products which are small-ticket sized.

When we think about insurance we think about life, health and motor insurance policies. Such policies are long term investments and provide a broad spectrum of cover. The premium for a term insurance policy can range between Rs 5,000 – Rs 15,000 per annum for a cover of around Rs 1 crore and a comprehensive motor insurance policy can cost around Rs 10,000 per annum. The millennial generation with its ‘seize the day’ attitude does not believe in investing in assets and therefore doesn’t prioritize long term cover around assets.

Insurance start-ups, as well as traditional insurance players, have launched simple and innovative products with premiums as low as Rs 10 – Rs 500. For fitness-focused individuals, there’s fitness insurance, which covers ligament tears and fractures while working out or while playing at a sports turf with prices as low as Rs 10 per session. Insurance companies have also started providing cover for events, one such product is marathoner’s insurance, which covers injuries during a marathon or the cost incurred in case the event gets cancelled due to unforeseen circumstances. Another innovative product is insurance for spectacles, which covers against accidental breakage of new spectacles at a premium of just Rs 75 per annum.

This generation also faces challenges and now, 1 in 8 women are at risk of breast and cervical cancer. Breast and Cervical Cancer insurance cover women for up to Rs. 1 lakh at a premium of around Rs 250 per annum. The policy also covers the costs of tests such as mammogram/pap smears if cancer is detected. From renter’s insurance to monsoon cover which provides cover for vector-borne ailments such as malaria and dengue, millennials have a plethora options to choose from and can decide on the appropriate cover based on their unique needs.

Context-based insurance products have taken the market by storm with various individuals opting for plans that cater to their needs. It is envisaged that the trend of need-based products will continue to grow with insurance companies innovating new covers and bringing them into the fold.

To maintain sustainable growth and to make sure that the products reach the desired target audience, insurers and intermediaries have started partnering with service providers to form mutually beneficial relationships. For event-based insurances, an insurance company can partner with the online ticketing platform while for spectacle insurance, insurance providers are tying up with opticians.

Traditional insurance sales were mainly based on sales personnel such as agents pushing products and often customers would end up getting a product that didn’t satisfy their needs. Context-based insurance makes such a process obsolete; insurance providers believe that these products are pull-based as they are bundled with other primary products or services to protect what the insurance policy is purchased for.

From a personal finance perspective, such context-based products make sense, as for millennials the meaning of investing has changed. A large portion of their finance is dedicated to travelling and new experiences such as eating out or adventure sports. Covering such experiences and activities with products that provide a one-time financial cover with a small-ticket size seems ideal. Context-based coverages can also act as complementary covers to full-blown insurance coverage. Women care insurance or fitness insurance can always provide cover in addition to an existing health insurance plan.

Millennials are more connected than ever before and digital ecosystems, blockchain technology and machine learning opens a brave new world for the insurance sector.

Take fitness insurance as an example; What if the insurance provider ties up with an app or a fitness tracker which gives it access data on your fitness routine. Machine learning algorithms can then record abnormalities in your routine and can predict when a claim is most likely to raise.

Imagine a world where you need to claim insurance and the hospital is notified beforehand making your treatment seamless. The future of insurance is a world where even minute data points can be measured, making risks predictable and thus preventable.

(The writer is co-founder & Chief Executive Officer, Symbo)