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Sustainability Through Digital Insurance

Satinder Singh*, Jashandeep Singh and Shilpi Gupta

Chitkara Business School, Chitkara University, Punjab, India

Abstract

This chapter aims to highlight the unprecedented role of digital insurance in achieving sustainability. As the world has been continuously striving to reduce its complete dependency on paperwork to combat deforestation, water pollution, security risks, and ensure sustainable development. This study merges scholarly opinions with what is the scope of the digital insurance world under the principles of sustainable insurance, and whether digital insurance can ensure sustainability. The digitization of the insurance platform addresses the most significant answers to problems such as how to bring down the paperwork to zero, ensure the complete system is eco-friendly, bring every important stakeholder online, bridge the gap between development in the insurance sector without compromising with natural resources, and how close we can go to ensure sustainable development with insurance sustainability principles. The digitization of insurance operations welcomes sustainability and helps in meeting sustainable development goals. However, there are certain challenges before the entire insurance industry that cannot be ignored at any cost to ensure sustainability. This practical aspect highlights the key transforming scenario via the digital platform for insurance companies and explains how being digital can bring forth the merger of sustainability with expanding digital ecosystem.

Keywords: Digitization, digital insurance, sustainability, sustainable goals, ecology

1.1 Introduction

The world has been striving to reduce its complete dependency on paperwork because it causes deforestation and water pollution, compromises security, and is one of the environmentally unfriendly acts that drain the revenue proportion [1]. The intricacy of paperwork always creates confusion among customers at the time of subscribing to any insurance policy, and likewise when they file for a claim from an insurance company. The need of the hour is customers, nowadays, demand insurers should bring ease and accessibility to the insurance sector as they are enjoying in other sectors [2], and they also look for 'mobility' that does not lose the connection among policy subscribers, old insurers, and technology manufacturers [3]. To cater to the needs of the customers, insurers can tap into a new way of generating revenue if they change their conventional ways and go for an ecosystem mindset [4]. The answer lies in the digital mode of insurance that can offer zero dependencies on paperwork and smoothen the operation at the fingertips of customers.

The insurance industry has been experiencing a huge impact from adopting digitization in a corporate environment, products and processes, customer engagements, and association with other rivals [5]. Ever since the term "Industrie 4.0" in 2011, this Industry 4.0 version started to receive attention across the globe [6].

"Digitalization is destined to deeply modify the financial and insurance ecosystem, impacting all activities that compose the whole insurance value chain, from product development to pricing/underwriting, sales and distribution, policy and claims management, and asset and risk management" [7].

Digital transformation of industrial and consumer markets is integral to Industry 4.0 [8]. The global digital insurance platform shared a $96.34 billion market share in 2020, and it would be $279.51 billion by 2030 with 11.3% growth at a CAGR from 2021 to 2030 [9]. The 4.0 new insurance version empowers the insurance market players to use the new ecosystem [5]. It aids technology innovations that lead to the creation of nascent products, processes, ways of production, and business themes [10]; the chained computers, smart materials, and interlinked intelligent machines, and decide with less human involvement [11]; increases resources efficiency and waste reduction [12]. Insurance companies can revamp their profit and loss accounts through digitization by lowering costs and generating new avenues of revenue with new business models [13]. As of now, insurance companies that are delaying the transformation of their operation into digital soon will be eliminated by those who have embraced the digital transformation.

Undoubtedly, the digitization of insurance operations welcomes sustainability and endeavors to achieve sustainable development goals highlighted in the United Nations General Assembly in 2015. These set of goals - education, health, social protection, job opportunities, and protection of environmental ecologies - can be achieved with equal participation of governments, the private sector, civil society, and every human being around the world [14]. The previous rich literature has defined sustainability well, and academia has developed three key pillars of environmental, economic, and social sustainability [15-17]. Besides, digital insurance has gradually been bringing down the dependency on paperwork to zero, contributing to sustainable development objective achievement; economically, maximizing work efficiency, generating huge data for more job opportunities, and controlling the wastage of time, money, and cost; socially, covering every remote area, reducing governments' as well as societies burden of treatments and losses, easy accessibility for all.

Different continents have been slowly transforming their old version insurance sector into a digital one. For instance, Asian insurance companies have increased their investment money in digital capabilities after registering huge disturbances in their operation during the COVID-19 pandemic to assist a digital-hybrid growth model for their traditional distribution mechanism [18]. Likewise, the European Insurance and Occupational Pension Authority have introduced a digital transformation strategy that emphasizes a systematic, balanced, and holistic approach to the European insurance markets [19]. In the USA, the outbreak of the COVID-19 disturbance has pushed the growth of digital insurance in the economy and it has been predicted that it will reach $ 23.92 billion by 2025 [20]. However, the Indian insurance industry is witnessing the slow growth of digital insurance companies. As of now, only ten companies have registered their business as a complete part of the digital world such as Digit insurance, Acko Insurance, PolicyBazaar, RenewBuy, Kneko, Probus, SecureNow, Clinikk, BimaPlan, and Finsall. Another positive side of India's digital policy is that it is a member of BRICS countries that have been supporting India to enhance the adoption of digital financial infrastructure and ecosystem and ensuring regulatory framework to support digital and financial literacy with a core focus on data protection [21]. As per the Mint [22] latest prediction, India will witness $ 1 trillion as a digital economy by 2025. Following different reports, opinions, and research articles, this research is an attempt to compile the data and report on how digital insurance across the globe assists economies in achieving sustainable goals and ensures sustainability in the present and future of the insurance industry. It is believed that this paper will contribute to creating a roadmap for future research to identify more avenues in digital insurance policies and offer suggestions on improving shortcomings.

To do so, this paper aims at taking a bird's eye view of the previous research database that covers all the initiatives taken by different regions to transform the traditional insurance industry into a digital industry. First and foremost, we have developed a conceptual framework, and then the products and different features of digital insurance are mapped with sustainable development goals.

1.2 Theoretical Background

1.2.1 Origin and Concept of Digital Insurance

The dawn of digital insurance has been only possible after spatial innovations and upgrades reported in the "Internet of Things." It was Kevin Ashton who first coined the internet of things in 1999. The whole world, in 1990, registered the first application of the internet of things in coke vending machines to measure the quantity and freezing of coke [23]. Nevertheless, the internet of things has immersed into our routine lifestyle which it includes consumer and long-lasting goods, cars and trucks, industrial and useful ingredients of sensors, internet connectivity, and powerful data analytic capabilities that ensure the transformation of the style of work we do, live and play [24]. According to Bandyopadhyay & Sen [25], this mechanism establishes a new connection that is being widely used for, nowadays, exchanging information and communication between people and things. IoT things have been sprawling their wings [26], and India is no exception to this. As per the report prepared by Chaudhary [27], The Indian government has earmarked $15 billion for its Indian digital reserves and predicted that by the end of 2022 it will reach a record level of $ 560 billion.

1.2.2 The Internet of Things

The internet of things has engulfed every corner of the industry throughout the world because it carries connectivity to internet-like feature that has been developing programmed devices as well as sensors. The IoT will positively bring transformation to the world shortly, networked devices will be...