Regulatory sandbox is a workspace where tech-driven companies can ideate, innovate and test financial products. The insurance regulator invited applications for sandbox between September and October 2019 and had received 173 proposals.
Insurers have been asked to launch their products on a pilot basis with a cap of 10,000 policies or maximum premium collection of ₹50 lakh within six months from the time of approval. If insurers are able to successfully launch the product and meet this criterion, they can choose to offer the product among their mainstream offerings.
“Sandbox is a great way to drive innovation in a heavily regulated space like insurance. It provides companies the opportunity to test new products quickly. However, there are certain limitations in terms of the number of policies that can be sold and so on. It is yet to be seen how sandbox will change the insurance innovation landscape as it is a recent phenomenon,” said Naval Goel, CEO and founder, PolicyX.com, an online insurance marketplace.
While some insurers are still in the process of giving the products a defined structure, others shared details about what the products are and when they are expected to be available. Acko General Insurance Co Ltd and ICICI Lombard General Insurance Co. Ltd will soon offer products in the motor and health insurance space. We tell you what some of these products are.
MODULAR PRODUCT FOR TWO-WHEELERS
Motor insurance covers the losses to your vehicle and claim settlement can be a long-drawn process, which includes surveying the loss and so on, but now a defined-benefit product promises to disburse a pre-agreed sum in an insured event. Under the regulatory sandbox, Acko General Insurance aims to offer a fixed sum insured to the policyholder.
“This will help in settling the claims faster and bike owners will be able to take their two-wheelers back on the roads sooner. Since it’s a simple product, it could help in increasing insurance penetration,” said Animesh Das, head of product strategy, Acko General Insurance.
At the time of purchase, policyholders will have to pick a sum insured of their choice that will be disbursed every time a claim arises. Das said there is no limitation on the number of times you can file a claim and the sum insured is on a per accident basis. “If you buy a ₹6,000 cover, for every accident irrespective of the value of the actual loss, we’ll pay you ₹6,000.”
While this could work in case of small-ticket claims, if the loss is more than the pre-agreed sum insured and you don’t have a regular motor policy, you could lose out.
CRITICAL ILLNESS SHORT-TERM PLAN
With increasing demand for short-term unsecured loans, ICICI Lombard General Insurance is working on offering a short-term critical illness plan with tenure of less than a year. To distribute this product, the insurer plans to tie up with banks and other lending platforms such as NBFCs which offer personal loans.
“This product is meant for borrowers who take short-term unsecured loans. It’ll work as a regular critical illness policy but the number of illnesses covered may not be too many because it’s not a long-term policy. It’ll cover the most common critical illness that could destabilize you and hinder your loan repayment,” said Sanjay Datta, chief- underwriting, claims, and reinsurance, ICICI Lombard General Insurance.
VALUE-ADDED SERVICE–TRAVEL AND HEALTH
Insurance companies are not allowed to promote value-added services with insurance which is not true for other industries such as telecom where companies can bundle value-added services such as a Netflix or Amazon Prime subscription.
“Banks are also offering additional benefits with credit cards by way of discounts and freebies. Doing this allows sectors to grow and doesn’t really harm customers. Through sandbox, we want to try something similar with insurance products as well,” said Das. The company plans to offer value-added services such as gym membership coupons and medicine-related discounts with health insurance policies and hotel booking vouchers or discounts for cab-hailing services with travel insurance products. Das said the idea is to keep the additional services relevant to the insurance product so it doesn’t seem forced from the company’s end. “There is a possibility of some built-in price with the premium but that’s not our intention. Our idea is to allow partners to promote their services through our channel and not really mark-up the premiums.”
LARGER NETWORK FOR HEALTH POLICIES
According to the existing regulations, only hospitals are identified as network providers. However, both ICICI Lombard and Acko General through sandbox, will work with various partners in the health-tech space to cater to different health and wellness needs of policyholders. ICICI Lombard aims to create an app-based ecosystem comprising various digital partners.
“Our product will be a one-stop-shop for all health and wellness-related requirements,” said Datta. Acko plans to enroll other entities such as health service aggregators and health-tech platforms as network providers to enhance the interest of policyholders by offering multiple options for availing medical services.
Insurers are yet to announce details such as premiums and other terms and conditions, but are expected to launch these products in the next couple of months. Innovation is good, but often sticking to a plain vanilla plan works better. Watch this space!