EP 109 – Vivek Ramji Iyer – Grant Thornton Bharat – Risk Protection To Risk Prevention

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Michael Waitze has been podcasting with some of the best investors and business builders globally and discussing all things startup with them from an Asian perspective. Michael worked in Global Finance for more than 20 years, employed by firms like Citigroup, Morgan Stanley, and Goldman Sachs, primarily in Tokyo. Michael always maintained a particular focus on how technology could be used successfully to make businesses more efficient and to drive P/L growth. Michael is quite skilled at connecting people and capital to innovative ideas and is a trusted advisor to both investors and founders. Michael is a leader in the digital media space, having pioneered the concept of a podcast network in Asia while building the biggest and fastest-growing listener base in the region. His flagship website, AsiaTechPodcast.com, has listeners in over 130 countries and is available on virtually every podcast player that supports RSS feeds.

Guest
Vivek Iyer

Vivek heads the Financial Services Risk Advisory practice for Grant Thornton Bharat. With two decades of experience across financial services in the GRC space, Vivek has worked with some of the leading banks , NBFCs, capital markets players, insurance companies and other financial services companies across the globe. His expertise ranges across the domains of management assurance, regulatory compliance advisory, risk management, corporate treasury and large scale GRC transformations.

The Asia InsurTech Podcast spoke with Vivek Ramji Iyer, partner and national leader of financial services and risk advisory at Grant Thornton Bharat about how insurers are moving from risk protection to risk prevention.

Michael Waitze
Hi, this is Michael Waitze, and welcome back to the Asia in InsurTech Podcast. This is the only podcast in Asia focused on insurance that gives entrepreneurs, thought leaders and investors a platform just to discuss how technology is reshaping the insurance industry in Asia. Today, I am joined by Vivek Ramji Iyer he partner and national leader of financial services and risk advisory at Grant Thornton Bharat Vivek, it’s really super to have you on the show today. How are you doing?

Vivek Iyer
Oh, thank you, Michael, thank you for having me. I’m doing great.

Michael Waitze
Super look, let’s just jump right in. What do you think is the biggest trend in InsurTech in India, and by extension, the rest of Asia.

Vivek Iyer
The biggest trend I really have been seeing is the whole move from a risk protection to risk prevention. And that’s is the theme that kind of that comes out. And that’s the biggest trend I see. And by definition, as a result of that, there is a lot of focus on customer experience. I mean, you can only move from a risk protection to a risk prevention, if you are able to kind of understand your customer better, and thereby provide him a far better customer experience leverage a lot of data. So to me, a lot of it actually flows from this key theme of moving from risk protection to risk prevention.

Michael Waitze
Got it? Look, I want to get back into that in a second. But maybe you can give us a little bit of your background, give our listeners a little bit of your background for some context. Okay,

Vivek Iyer
Yeah, thank you. So I lead the financial services risk advisory practice at Grant Thornton Bharat LLP in India, and primary look at governance risk management and compliance and do a lot of consulting advisory as well as audit projects for financial services clients. And over the past five years, I’ve been working back with the regulator in India, on a lot of FinTech and InsurTech initiatives, and especially have been actually lobbying back with the regulator on developing a regulatory sandbox. Conversations with the banking regulator have been fruitful, there is a regulatory sandbox approach conversations right now happening with the insurance regulator. And they’re also kind of keen on looking at the sandbox, close to about 20 years of experience. I’ve always been in financial services and worked across different professional services firms.

Michael Waitze
Awesome. I want to get back to this idea of the move from sort of risk protection to risk prevention. How do you see that playing out? And maybe like, what kind of advice do you give some of your clients on how they can get into sort of risk prevention as opposed to just protecting that risk.

Vivek Iyer
So one of the biggest shifts has that’s happened has been technology, the whole digital transformation, the handhold, the whole democratization of opportunities in the financial services face. And as a lot of customers start having access digital access to financial services. Insurance, obviously, is the first key choice and the first step naturally, and you will see more of that in, in the emerging markets. Because risk protection is one of the is one of the core things that people want to kind of first start with in their, you know, in their financial planning journey. And as a part of that journey, understanding the customers and actually providing customer experience has become extremely key, because the competition is severe. And with the whole technology, the being democratized right now, not just for consumers, but also for different industry and market participants, there is a lot of analysis done on the customer data. And thereby, as a result, a lot of innovation on the needs, and being able to preempt risks far more effectively, and given access to a large amount of data, which kind of makes it far more effective, to price the risks in a manner that you’re able to prevent it. You know, as we move to, you know, risk prevention, you are able to kind of identify the level of risk that’s applicable to a customer, and also kind of identify how that can be prevented, which means that your pricing of risk actually goes down, which means insurance products become actually more affordable. And that’s really what it’s all about to keep reducing the cost of customer acquisition to keep reducing the cost of at which insurance products are available to the customers. And that’s really the theme that I’m kind of seeing. You know, that’s why you know, the whole move from a risk protection to risk prevention. The whole customer experience is the piece that’s driving it.

Michael Waitze
And how does that work from a technology perspective? In other words, what sort of tech is getting implemented, to drive and there are a lot of words here, right. But what sort of tech is getting implemented to drive that digital transformation that then allows an insurance company or an incumbent insurance company or an InsurTech company on the in the new space to do the prevention part of it? And as opposed to the protection? And more than that, how do you get to drive that sort of individual experience? And is there an individual sort of building part of this as opposed to group most people think of insurance as, you know, pricing things as a group or as a risk pool? Right. But if you’re customizing are personalizing it, how does it get? Like, how does technology get employed to better the customer experience, but also make it cheaper?

Vivek Iyer
So, in fact, you know, the most interesting way in terms of I, you know, I’ve seen that evolve, is we’ve heard of, you know, different emerging technologies, you know, that are practically dead, I wouldn’t, you know, let me for the purpose of this conversation, you know, say that clouds and emerging technology, I know, it’s a little more mature today to call it that, but you know, just humor me for a bit here. When you actually combine cloud with Internet of Things, and data analytics, big data, actually becomes a big player that actually, that helps customize the experience to an individual customer. So just, you know,let me take an example here, is that, you know, in terms of combining the whole fitness devices that actually people wear, you know, the metrics, you know, the whole tracking of

Michael Waitze
You’re talking about, like Fitbit, or Apple Watches things like that, yeah,

Vivek Iyer
yeah. You know, Fitbit and the, and the different, you know, let me also say, iWatch because, you know, an apple fan, but never really kind of got that. That’s what my wife gets, I usually get the Fitbits.

Michael Waitze
Fair enough, I think we’re all in that kind of business as well. So fair enough.

Vivek Iyer
So in terms of combining that, you have a lot of data that’s actually coming in, through, you know, through the Internet of Things, you know, the Fitbit examples of that, now, that data kind of comes in, and other large amounts of data, and data that actually kind of comes in using the cloud technology for the purpose of actually storing that data. And done then running data analytics on it really helps you kind of develop insights, customer insights at an individual level, that will kind of help you position a product effectively, you know, just imagine a customer kind of comes into, you know, through a mobile app or through an online platform. And you kind of gather some bit of information from that particular person with an intent to provide him better pricing, even the customer knows that the more infomation he provides, it gets better pricing. And that is where as he provides more data, the information that data analytics and the insights that could have been actually help you position the right product to fit his needs. And that’s really what would significantly help you position the product at a customer level. Now, while I mentioned this, this is far easier for an InsurTech company

Michael Waitze
Why is that?

Vivek Iyer
In fact, because they don’t have the legacy infrastructure problems, the legacy IT problems, and they are able to kind of create the whole technology landscape, you know, from scratch. And it’s easier for them, I’m not saying that there are not technology opportunities for the incumbents, the existing insurance players there. In fact, a couple of technology, evolutions, there, you know, pretty exciting. So you don’t have to pieces specifically, that kind of really helped me kind of get a sense in terms of how you can augment, you know, how the insurance companies or traditional insurance companies can actually augment the our legacy IT infrastructure to provide the right kind of customer experience. So, you know,the whole point of headless technology, you know, and no code tunes, I mean, these two tech pieces are really interesting. Let me kind of explain each one of them a bit. Headless tech is is literally actually about using API’s between your legacy IT systems, which are back end systems, and developing a front end system, purely from a customer experience standpoint. Earlier when they were no API’s, you had to actually build a front end system on top of the backend system.

Michael Waitze
Yeah, like your front end systems like a view on your back end system, right. Yes, yeah.

Vivek Iyer
With headless tech. You can actually in terms of take customer experience to a new level. And that’s been one of the biggest pieces the way into in fact, a lot of Chief Information Officers or Chief Technology Officers of insurance companies are actually looking at this technology. And that’s one of the biggest, you know, tech applications from the traditional insurance company perspective that I’m am saying, no code tools, you know, that’s the next piece that I saw is that, essentially, you don’t need coders. That’s essentially in terms of democratizing the way you can actually build your customer experience. And that’s about, you know, dragging pages, dragging options, it’s very much like how in an Excel pivot table, you kind of drag things move things around to kind of have a representation, a visual representation of what you would like to see no code tools is very much like that. And these two things, I mean, I mean, you have headless tech, which kind of helps you to kind of have an independent front end system that is far more geared towards customer experience, combined that further with no code tools, which technically means that you actually have your business guys saying that, you know, this is what I think now I have a pulse of the market, I go and talk to the customers, I think this is what they need. And this is how it should be. No code tools could actually be used by the functional people who actually understand insurance customers on the ground.

Michael Waitze
So the API stuff, I completely understand that I get this idea of sort of headless tech, like I said earlier, in the old days, actually, not even that long ago, your frontend system was really just a view on a database of your back end system, whether that was policy admin, or some sort of mathematical calculation system, it went directly to that. And frankly, most of it was internal. But now with the sort of surge in the InsurTech space, if the InsurTech builds an API, then you can connect to it just with the API. So you can have whatever front end you want, and it doesn’t have to be connected to your internal back end, it can be connected to, frankly, anything that has an API, that’s with it. Right. So this is the idea of this headless tech. But no code. I’m curious whether you thinkany API stuff very well developed, been out there for, you know, decades, right. But no code is kind of a new thing. Are you confident that the sort of no-code platforms that are out there for developing this stuff are mature enough?

Vivek Iyer
No, no, honestly, they’re not yet. They’re not yet mature. In fact, a lot of mistakes would need to be done. But the whole point is that, you know, I mean, that’s the beauty of innovation, the person who makes the maximum mistakes and figures out the best way is also the person who has the whole first mover advantage.

Michael Waitze
Sure, I mean, there are a bunch of no code platforms out there, I try to look at all of them. So I can get a sense for where this is. And you’re right, look, back when Linux was first introduced, it wasn’t mature enough for, you know, investment banks to use, but then everybody put all their back end servers on it. So Fair enough, I understand how that works. It’ll be interesting to see how that kind of stuff progresses. But I do think that, at some level, that’s the way forward. I mean, for an analogy, you know, back when, you know, again, 20 years ago, if you want to build a website, you really needed a web developer to do that for you. And today, you can just drag it drop a bunch of components, and boom, you have a website in like two hours, right?

Vivek Iyer
Yeah.

Michael Waitze
So in a way, it’s not that difficult. I want to switch gears a little bit, if you don’t mind. Yeah, when you look at, I want to kind of back up and understand what your definition of digital distribution is, because I have questions about what the significance of it is. And when you look at it, do you think that So first, maybe a definition but then second, do you think that particularly in the insurance space in the insure tech space, that last year, which was dominated by COVID and pandemic talk, what was the effect of that on companies desire or appetite to be digitally transformed?

Vivek Iyer
So, in fact, so let me break down my response into two components in terms of how the, you know, the traditional insurance companies responded, and how the insurance distributors including, you know, brokers, they responded,though, the way I saw the insurance companies responding is the insurance companies believed that they had digital channels for a lot of their customers. And a lot of customers were actually opting for them. That’s because in terms of the spread of revenue was largely in terms of in the tier one cities where digital penetration was high. For other locations where the digital penetration was on the lower side. They tried to kind of augment that with some amount of digital literacy to people that piece of business got slowed, but they tried to compensate what they lost. in different markets by kind of making it up in some other markets. So while the digital importance was appreciated, there wasn’t much done by the traditional insurance companies because they believed that they already had digital presence. So another segment or the insurance distributors were the insurance brokers, they practically felt the whole challenge because the insurance broking community and more so from an Indian perspective is very paper driven, yet, it’s not really digitally transformed, the only piece that’s literally in terms of provided, you know, digitally to customers are, you know, competitive quotes from different insurance companies. But barring that the whole journey is basically a paper trail. And, you know, some of the leading insurance brokers globally who have presence in India as well have had similar problems. And there has been a lot of initiative and focus on digital transformations and also more in terms of, you know, the number of conversations we are having with different insurance brokers, I personally have had with different insurance brokers kind of mirror that need. So from that perspective, I’ve kind of seen a need for a lot of digital transformations. And also interestingly, there is a there is an insure tech provider called, you know, exigences systems. He specifically makes a front end system for insurance brokers to kind of, you know, he dye value chains, basically, in terms of contained in the, in that small system, he has actually seen his business boom, significantly, in the past one year of the lockdown, because most of the insurance brokers kind of reached out to him for a quick solution. So that’s another data point in terms of how I saw insurance broking as a business actually adopting a lot of digital transformation and for, you know, the traditional insurance companies to kind of see that I, you know, some of the traditional insurance companies wanted to kind of increase their penetration, you know, push digital channels more as compared to the brick and mortar channels. So that realignment of in terms of a larger push on distribution channels, there was a larger push on the digital channels, but it was more on usage, rather than any transformation. I mean, that’s the broad sense, at least in the past one year that I got.

Michael Waitze
Then what role do you think that these non traditional sort of digital distribution channels play? And I’ll name some of them in a second, but what role do you think they play in the growth and penetration of insurance in Asia and India, something that you just mentioned, right? In other words, in first tier cities, a lot of these companies felt like, yeah, we’ve got that covered. But in sort of second tier, third tier, and then you start getting into rural, where your opportunity to sell insurance is high, but your connectivity is low, but you do have companies like, Grab and Gojek, and, you know, companies that are have lots of users trying to sell insurance. Now, what do you think the role that they play is, do you think that’s beneficial? not beneficial? How do you attack that?

Vivek Iyer
So I think financial literacy is one of the largest roles I’ve seen them playing and let me elaborate on that a bit. So, you know, each one of these customers in, you know, in the non tier one cities, their understanding of how insurance helps address their risk needs. is limited. And the non traditional, you know, insurance players actually literally help explain that. And add to a great extent when you’re trying to increase penetration, insurance penetration, or for that matter, any financial production, product penetration in the country, understanding what you’re getting into is more important. And that’s one of the things that these, each one of these players actually hope for now, even before actually selling. Now, let me give an example in India, there is a there’s a huge, you know, but the mobile revolution, almost every person in the country has a particular mobile phone. And you know, a mobile theft insurance becomes a really big product. And from that perspective, from a mobile theft insurance standpoint, that becomes extremely, you know, explaining that product to them, you actually get their interest. Because today a mobile to them is actually not just for the purpose of calls, but for entertainment, for education, practically for everything. Offering a theft insurance to them and explaining it. It’s important. And that’s what most of these, you know, non traditional players offer an ability to understand, explain and tell them how this product would make a difference to them. And that’s a big, big difference. I kind of personally kind of experienced.

Michael Waitze
And do you talk about this topic with your clients in other words, when they’re talking about how do we expand? How do we increase penetration? Are you talking to them about partnering with some of these, and I even think ecommerce is a way to do this too, just like you said, for theft protection. But even if you buy a device, even if it’s not stolen, it may be damaged, right? So if you drop it, or if it falls into a puddle or something, it’s still may be damaged. And, you know, Apple care, kind of, I wouldn’t say they pioneered this, but most people don’t think of it as insurance. But they know, they want to have it to protect their device, do you see? Do you talk to your clients about this as well, and say, you may want to consider sort of point of sales, for insurance, and things like that, particularly through some of these alternative forms of distribution.

Vivek Iyer
So look, what the conversations, you know, from a client standpoint, you know, one of the things and most of the clients, you know, when you’re talking to them, they would actually in terms of, you know, disruption is a big, you know, is a common conversation to have. And most of the times the suggestion to them is that, you know, simplified, you know, look at your value chain. Where do you think, you know, from a value chain standpoint, you’re not able to really make a difference, and where across your value chain? Do you actually see some non traditional provider making a difference that is far better and larger than what you’re doing? having identified those vulnerabilities across your value chain, you can actually in terms of decide how you want to collaborate with each one of these players, in order to, you know, one of the biggest suggestions actually to, you know, each one of the clients that, that I personally have been given is that collaborate. You know, nobody is a rival, everybody is a friend, everybody is out there to actually make a difference and make money and you actually have to figure out a way of doing it well together, identify your vulnerabilities. See, in terms of what are the advantages that your rival has? What are the disadvantages you have collaborate, identify those gaps, and kind of collaborate across your value chain? You know, sometimes, you know, there. And it’s also about because some of the, you know, one of the most laziest responses that insurance companies have is, you know, what, let me just buy that, you know, and I’m sorry, I’m calling it a lazy response, because it’s like, Yeah, he’s a competition. He’s small, but I can afford to buy him. You know, and that’s where I tell them that, you know, don’t look at it that way. I mean, genuinely look at your value chain, and see in terms of what you are good at what they are good at, and how you can collaborate, having an ecosystem of technology partners, InsurTech partners, that’s what will literally in terms of change and drive your business.

Michael Waitze
Yeah, I mean, this whole idea, particularly in a market, where penetration is lower than it is in more developed insurance markets, collaborating is one of the best ways whether it’s with other incumbent insurance companies, or new insure Tech’s is the best way and I agree with you lazy answer is I just buy my market share. But the real answer to sustain that over time and understand how to grow, excuse me, is to partner with companies that are doing things that are different from you, and potentially learn from them, but also help them in return. That makes sense.

Vivek Iyer
Yeah, completely.

Michael Waitze
Can I can I back up to something you said earlier to you talked about education? You know, and financial literacy, which is something obviously, that’s very important to me. But how do you do like, what’s the mechanism for educating? And I would also say engagement is important, right? In other words, most people feel like, pardon me, that they buy insurance, and then they don’t hear from their insurance companies until there’s a claim to get made. You know, as long as it’s not sort of parametric insurance. How do you handle both of those things? Because I think they go together. In other words, you have to educate people that insurance is important. I know that the mobile devices is one way in, but then how do you keep them engaged so that they feel like their insurance provider, whether it’s an insurer tech, or an incumbent actually cares about them?

Vivek Iyer
So in fact, that’s, that’s really where the answer is. It is lies in kind of building up a sort of social infrastructure that will kind of kind of reach out to these customers. And let me elaborate in that, you know, we have so many insure insurance companies, and I’ll take the example of India, we have so many insurance companies, we have so many insure tech players. It’s very important for each one of these, you know, these insurance players is insure tech players to kind of come together, develop a sort of a nonprofit body that can actually kind of reach out to each one of the customers in different locations on a periodic basis, where actually literacy initiatives, engagement initiatives, they can be drawn and one of the best ways of actually doing is stories. You know, it’s it’s literally in terms of quite boring when you come up with these financial literacy initiatives where you talk about what insurance is, or, you know, how it can help you, if, and most of the people, you know, they connect with stories, if you have a story of someone in terms of how an insurance kind of help that person, how it and real life cases of people at the ground, you know, identify certain places where, you know, insurance change the life of a person take that story to different people project that in that area, they’ll be able to relate to it, they will want to listen to it. And it’s and and the reason I say a social infrastructure or nonprofit body will be able to drive it is because it’s very difficult for a profit making institution to have a unit that has such a dedicated social focus. And I’ll just draw a parallel shown what has happened from a payments perspective in India, is that the banking regulator actually set up a payment Infrastructure Development Fund, the objective of the payment Infrastructure Development Fund, the fund gets its corpus from different market participants gathered, these funds are then used for the purpose of subsidizing payment acceptance infrastructure for merchants at remote locations. And because unless you have acceptance infrastructure, at different points in time, there is no point in actually kind of giving any form of QR codes or cards or, you know, any other form of digital payment options to customers, because there is an acceptance infrastructure, they used this model for the purpose of ensuring so so actually focusing on developing public goods, you know, and financial literacy is one of the largest public goods and it’s very important that amount of investment should they should come and when an industry actually comes together to drive that it could be useful. I’ll be honest, do we have that? Not really? Should we go towards that? Yes, the answer is yes. Because we have some amount of examples, you know, that we are seeing in the payment space, which is, you know, more digital, from a, you know, a digital perspective and a part of the whole government initiative on a financial inclusion. And that’s really where, you know, some of the biggest opportunities could lie.

Michael Waitze
Yeah, I mean, it’s sort of nonprofit organizations that go out and educate people about a specific industry, whether it’s a FinTech Association, or an insure tech Association, can play a really positive role, because they’re not out there to make money or take money from people. They’re just out there to educate people. Right. So it feels kind of nonpartisan. Okay, so the last thing I’ll ask you, before I let you go is, when you look at the entire ecosystem in India and Asia, what kind of advice would you give to insurance companies to deal with startups and ensure tech?

Vivek Iyer
No collaboration, collaboration is the biggest key, I would tell them and one of the other pieces of advice, personally that I would give them is that look at acquisitions very cautiously. I mean, really look at the synergies that can come from collaboration and then collaborate. If the collaboration piece of better definitely look at it and look at an acquisition post that because in an environment today, we need to respect the amount of amount of cash that every company has, and they just need to be balanced about it. So collaborate and cautiously invest.

Michael Waitze
That’s really great. Look, I really want to thank you for doing this today. Vivek Ramji is a partner, national leader for Financial Services and risk advisory at Grant Thornton Bharat. I really appreciate your time today.

Vivek Iyer
Thank you, Michael. Really enjoyed this as well.

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