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How Union Budget could shape the future of InsurTech

How the insurance sector is innovating itself. Image courtesy The Blue Diamond Gallery

As India approaches the unveiling of the interim Union Budget 2024, the InsurTech sector stands at a pivotal juncture, poised for transformative changes driven by technological advancements and supportive policies. This budget, transcending its role as a mere fiscal plan, is set to be a strategic blueprint for integrating cutting-edge technologies and regulatory frameworks within the insurance industry, thereby potentially heralding a paradigm shift that bolsters efficiency, inclusivity and market resilience.

Embracing technological innovation

The budget is expected to be a catalyst for the integration of advanced technologies into insurance. With the AI market in insurance projected to reach a staggering $45.74 billion by 2031, and blockchain’s growth expected to hit $1,393.8 million by 2023, these technologies are not just futuristic concepts but imminent realities. The integration of IoT forecasted to expand to a market size of $304.31 billion by 2027, further underscores the budget’s alignment with digital transformation in insurance. The incorporation of AI and machine Learning in claims processing and fraud detection, alongside blockchain’s role in securing operations and IoT’s contribution to real-time risk assessment, signifies an enhancement in the sector’s efficiency and customer-centric approach.

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Regulatory frameworks and tax incentives

A pivotal aspect of the budget is the establishment of a conducive regulatory framework that fosters innovation while safeguarding consumer interests. The expectation of tax incentives and a simplified GST structure for insurance products would stimulate further growth, encouraging innovation in the InsurTech space. The favorable changes could also encourage individuals to explore insurance and avail the necessary coverage for their needs.

AI, IoT and blockchain: Triad of digital transformation

The confluence of AI, IoT and blockchain is ready to revolutionize traditional insurance practices. AI’s predictive capabilities, IoT’s real-time data access, and blockchain’s secure and efficient operations are expected to dramatically enhance the insurance landscape, aligning with the budget’s emphasis on digital infrastructure and cybersecurity.

Big data and advanced analytics

The evolving role of big data and analytics is ready to offer deeper insights into risk and customer behaviour, enabling more personalised insurance solutions. This aligns with the upcoming budget’s focus on leveraging technological advancements for improved service delivery.

Cybersecurity: A key focus

In an increasingly digital world, the emphasis on robust cybersecurity measures is paramount. The budget’s potential investments in advanced cybersecurity systems are crucial for protecting sensitive consumer data and maintaining customer trust. Similarly, strengthening data protection and privacy laws is essential in the digital age, a focus that is expected to be reflected in the budget to maintain consumer confidence and ensure ethical data use.

Financial inclusion and infrastructure

The budget could prioritise making insurance more accessible, with investments aimed at enhancing the digital infrastructure and promoting overall financial inclusion, especially in underserved regions. The budget’s role in promoting microinsurance products for rural and low-income groups is expected to address significant gaps in the market, ensuring that the benefits of insurance reach the most vulnerable sections of society.

Public-private partnerships (PPPs)

Encouraging PPPs in the InsurTech sector, the budget could leverage innovation and reach from both the private and public sectors. Such a move could help develop comprehensive insurance solutions that benefit not just the customers but also the industry.

The interim Union Budget 2024 has the potential to be a landmark for the InsurTech sector in India. By addressing challenges related to focus areas, such as digital infrastructure, financial inclusion, and data privacy, the budget could lay the groundwork for a resilient, inclusive, and innovative insurance sector. These steps will not only enhance the sector’s efficiency and customer orientation but also ensure its alignment with global trends and standards, securing a robust future for InsurTech in India.

The author is a co-founder and CTO at Insurance Samadhan. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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