Climate risk and agricultural insurance are emerging as key areas of focus for providers in India, driven by the country’s fast-growing agricultural insurance sector and increasing vulnerability to climate change.
India, the third largest agriculture insurance market globally, has seen premium income from agriculture rise from US$100m in 2000 to $4 billion in 2022. As it scales, India’s government has realised that it has to start building on its own data infrastructure, said Anuj Kumbhat, co-founder and CEO of India’s Weather Risk Management Services (WRMS) at a panel of Indian insurtechs during InsureTech Connect Asia in Singapore on Wednesday (Jun 5).
The massive integration of some 30 million farmers through Aadhaar, the world’s largest biometric ID system, enables them to be paid out within a few days of claims but has required a lot of data, Kumbhat said.
“I guess early on, when the government recognised the challenges of settling claims – that it’s taking about 8 to 10 months to settle a claim – they started building on the data infrastructure, and they’ve involved other private sector companies who are interested in participate,” said Kumbhat.
The Indian government is building up data capabilities around modelling and developing yield solutions for agriculture, which has been more AI-driven, he added.
WRMS is also doing data training and data enhancement using AI models and developing pricing models and product development models through AI to better develop validation methods for parametric triggers.
“We are building AI models and computer vision technologies to identify some crop damages, issues in the crop and identify the crop losses,” Kumbhat said. “All these put together has resulting in developing a data network for a crop insurance market to thrive and grow and for a faster, cleaner settlement (of claims).”
Other types of parametric products have also been developed — such as parametric insurance for gig economy workers and Uber drivers, who face business interruption risks when there is a flood or heatwave. WRMS announced a partnership with microinsurer MIC Global to launch a flood resilience insurance product that will be offered to India’s merchants and gig economy workforce.
These solutions are often distributed through crop and agriculture insurance, especially in rural areas, said Kumbhat, and companies are putting in technology to make distribution quicker with less manpower. “The idea is to set up the network and then do a lot of other insurance around that,” he added. “So that’s the kind of product innovation that is happening around technology, both in the insurtech and fintech space for financial inclusion.”
AI and data
But there are still challenges to be addressed in the implementation of AI and data, even as India’s insurance market grows at an exponential rate. The insurance sector is expected to grow at around 14 to 15% CAGR for over two decades, said Shri Rajay Kumar Sinha, member for finance & investment at regulator Insurance Regulatory and Development Authority of India (IRDAI).
India’s insurance sector still faces significant challenges, with a huge protection gap of 90%, non-life penetration at 1%, and insurance density less than $100 per capita, and the country has aimed to empower consumers with choices in terms of insurance and how they access and pay for them.
To do so, the IRDAI has simplified and loosened rules around insurance product launches, pricing and distribution. “We have not yet reached to a complete open architecture so far as distribution is concerned, but we are getting there,” he said.
New technologies that will interpret and analyse the data generated by India’s vast, digital-savvy generation will help create and offer complete insurance solutions. “The convergence of insurance in technology has been instrumental in catalysing innovation, enhancing customer experience and optimising operations within the insurance industry,” he said.
But the vastness and the size of the data sets and models require insurers and insurtechs to define data standards collectively, said Prerak Sethi, co-founder of the India Insurtech Association (IIA).
“I think it’s important for us as an industry to start with data models that kind of come together, and what that will unlock is very unique business models in terms of adjacent ecosystems building very highly contextual insurance products that they can go out and distribute in a more seamless way,” Sethi added.
The IIA, which now has 240 firms in its membership, has increasingly been joined by big companies in lending or companies in health tech or agri tech that are trying to build products with specific value propositions, Sethi said.
Many of its members are seeking to go global, as they also investigate how to resolve the next big set of problems to solve for. “(Indian insurtechs) have gone from having a large domestic market and lots of potential within the India market to also saying hey, as insurtech players, how do we go global?” he said.
“They are building out of Pune, Bangalore, Chennai, but saying ‘hey, I got clients in Singapore, Malaysia, Indonesia, Vietnam’,” Sethi added. “We’ve got great distribution players. We’ve got corporate technology companies, and even we’ve got consultant law firms. Everybody’s coming together.”
