How personal data protection bill can be a blessing for insurers in India

As per the latest IRDA report, insurance penetration in India stood at 2.76% for life insurance, while general insurance penetration stood less than 1%. Compared to other Asian countries and the world average, which is close to 6%, India still looks like a greenfield for the growth of the insurance business.

However, several factors have been impeding the growth of insurance business in India, including lack of awareness, preference for cash transactions, exclusion from the organised financial system and many others.

While actuaries worked out many complex estimates for various risks, it was never possible to accurately assess risk in a suburban or rural area due to lack of reliable data sources and transparency. Working in such a market with traditional ways, which includes setting up a branch to maintain a physical presence, is not only expensive but also doesn’t guarantee growth.

Additionally, a high margin of error in estimates forces the insurers to keep the prices high, which is a clear impediment to market acceptance in a price sensitive market like India.

However, things have taken a positive turn with the digital push and financial inclusion initiatives of Indian governments. These initiatives have received a huge fillip due to the growth in smartphone adaptation, which has been on the rise in rural and semi-urban markets.

Thus, more and more financial and personal data will be available for these previously uncharted locations.

Overcome Insurance Challenges with Data & Analytics

Europe, including the UK, is experiencing “pay as you drive” motor insurance plans. A simple, fair and logical step towards the pricing of the insurance product from traditional, ‘your premium may support the rash driver’ to ‘drive better and pay lower.’

Figure: Personal Data Protection Bill Opens the gates for Data Analytics in Insurance

Such general insurance products have an interesting value add. Insurers can share driving data with the drivers and help them improve their skills and decisions. In fact, with the personal data protection bill in place data owners can seek their data stored with the fiduciaries (insurers and automobile companies in this case).

Even without personalisation, insurers need to sift through a huge amount of data to assess the risk and predict the losses. The personalisation makes it easier for the insurers to offer better services, identify newer risks and expand their markets.

Role of Personal Data Protection Bill

Capgemini in their 2018 World Insurance Report indicated that customers in developing nations including India are more willing to share their personal information with the technology leaders for personalised services. Currently, this ratio stands at slightly above 25% and sheds light on the opportunity for the insurers to use data analytics for personalisation and risk prediction.

Regulations are important ground-breakers when it comes to uncharted business territories. Unregulated business space is like the uncharted space, which is both exhilarating and dangerous. In the absence of data protection regulations, Indian businesses and consumers (data owners) may never gather enough confidence to aggressively push into the data analytics territory, even when it may offer to resolve multiple critical issues for them and help them grow their market share.

Insurers who need to rely on available data to assume the probability of loss and then assess individual risk, stand to benefit the most from a regulated data market.

Personal data protection regulations can give more confidence to the online consumers (especially Gen Y) to permit insurers in accessing and analysing their data to not only provide personalised services but also improve the overall product offering.

Anonymisation of Personal Data

Alternatively, anonymisation of personal data is a present reality (search and social data) and usually does not require owner permissions for research and analysis purposes. Thus, collecting user data without collecting information that would help identify them could be the first few steps for Indian insurers to consider.

However, this is no longer completely uncharted territory. Few private life insurers have already shown considerable improvements in their business metrics and brand value using data analytics, especially in managing fraud and improving the claim settlement ratio (CSR).

STT GDC India Conforms to the New Guidelines

Personal data protection bill sets the expectations straight with the data fiduciaries and businesses collecting user data; i.e., to store a functional copy of the data on Indian soil with adequate safety standards.

Third-party data centre colocation service providers with dedicated infrastructure are better equipped to ensure high standards of safety compliance along with other necessary SLA demands like uptime and connectivity. STT GDC India’s 15 state-of-the-art colocation facilities offer high security ‘SISA PCI DSS Certified’ data centres, along with network-neutral connectivity, highly flexible and scalable solutions with multiple service providers.

The data protection bill is set to provide Indian businesses with a level playing field at par with global data-forward companies. As India’s leading data center provider, STT GDC India has a distinguished track record of adapting to the emerging situations and aims to equip the Indian organisations with the highest degree of security and policy control towards their transformation into a data-driven business.