Insurance arguably is a low-touch business. What it means is that unlike other financial services like banking, the stock market and the like, those who go in for insurance do not keep in touch with the companies that provide the cover over their lifetimes. Except at the time of policy purchase/renewal or claim, there is no connect worth talking about with an insurance company and its customers.
And this creates a real problem both for insurance companies and their customers. This is because what has been insured—the customer's life or property—changes its character over time. People become older and properties depreciate, but that is not much of an issue compared with other major life changes that people fail to notify their Insurers about in time.
The significance of nomination
The most critical aspect is nomination. Insurance companies routinely ask for nomination details in the application form and if the person insured is unmarried at that time, he or she would identify the parents as nominees. But after the person gets married, the financial security of the spouse may hinge upon the other partner's monthly income. In case of death or a debilitating disease or disability, it’s critical that the spouse get the benefit of the insurance rather than the nominees chosen prior to the marriage.
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This situation could reverse, too, if a person chooses the spouse as a nominee but gets divorced later. Life-altering events like marriage or divorce, or births in the case of a family floater health insurance, for instance, are typical cases where people forget to notify the insurer in time. This failure to notify may cause financial losses in cases of claims for hospitalisation or motor accidents.
The policyholder's responsibilities
In case of sudden hospitalisation caused by any unexpected health event, the policyholder must ensure that the insurance company or its appointed third-party administrator or TPA for cashless hospitalisation claims is notified as soon as possible. If this is not done, the insurer will disallow cashless treatment. In such a situation, he or she may be forced to dip into their savings and claim reimbursement later on.
It’s worth noting that reimbursement claims are a cumbersome affair—many questions would be asked and the claim may not be paid in full or even rejected completely.
As insurance penetration is spreading into smaller towns and rural areas, a very common occurrence is after the death of the insured, his/her family is unaware of the insurance cover taken and may fail to notify the insurance company concerned in time. Quite often, the relatives stumble upon the policy after a long cap but may not be able to claim the insured amount due to the delay in notification. This underlines the necessity of keeping the immediate family in the loop about any such policy.
A recent trend is to embed insurance into other product offerings like bank loans, credit cards, travel tickets, etc. Most of us may be using these products on a daily basis but are not aware of the extent of insurance built into them. So, when an accidental death occurs, the family of the deceased does not know about insurance embedded into the credit cards or travel tickets and fail to notify the entity in question to get the proceeds.
The result of all this is that insurance companies get away with millions of dollars of claim liabilities they would otherwise be required to honour if only their customers notified them at the right time.
Can tech be the saviour?
So how do we solve this problem of non-notification in time? The simple answer is digital technology.
Much like fintech in the case of the larger financial market, insurtech is making things easy for all. If the insurance company is using a new-age, digital system, it will have functions and features to “engage” with the customer in real time not just at the touch points of sale or claim but throughout the life journey of its policyholders. These systems help engage with customers on a variety of topics beyond insurance through value-added services like wellness, financial planning advice, lifestyle information and counselling, etc.
Insurance companies can build a low-cost communication bridge with their clientele in real time, informing them and their families at all times about the benefits of staying in touch.
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In case of an unfortunate event, any kith and kin who’d get access to the policyholder’s mobile phone could see the daily dose of notifications and come to know about the insurance details. Insurance apps that stay in the customer's mobile phone can detect key data points about customer lifetime events and can give timely notifications to the insurance company to avoid lapse of policies or claims.
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