Embracing Innovation : New Products by Legacy Players

While fintechs are celebrated for their agility, innovation, and cost-effectiveness, legacy players have traditionally been seen as more established but often encumbered by outdated technology.

However, in recent times, these legacy financial institutions have launched several innovative products and services, some in collaboration with fintechs and others independently. This shift demonstrates their commitment to evolving with the times and meeting the dynamic needs of their customers.

Here are a few illustrations

1. Elevate by ICICI Lombard

ICICI Lombard launched an AI-powered health insurance product ‘Elevate’ which claims to provide personalized solutions to customers to meet the needs of dynamic lifestyles, unforeseen medical emergencies, and medical inflation. Leveraging AI, Elevate interprets customer data to recommend optimal coverage, ensuring personalized insurance plans that cater to individual needs.

It seems that the AI engine is only being used as a rules-based recommendation engine with some parameters around medical conditions, geography, PEDs, etc. We are yet to see how the same can be leveraged to arrive at pricing. Read more about Elevate here.

While there has been an advent of AI in insurance, specifically in processes of claims management, predictive analytics, underwriting assistance, and customer service, we are yet to see tech feasibility of the same at scale. The West has seen some adoption of AI in insurance, prominent examples being Root, a Pay How You Drive insurer, which leverages multiple AI solution providers in claims operations, Sayata which uses its proprietary model for underwriting, etc.

2. Aditi by Narayana Health

Narayana Health, a subsidiary of Narayana Hrudayalaya was granted the Insurance manufacturing license by the IRDAI in Jan’24 and recently launched its first product — Aditi. With an annual premium of ₹10,000, the plan claims to insure a family of four covering surgery costs capped at ₹1 crore, other treatments costs capped at ₹ 5 lakh, and discounted diagnostic tests all at Narayana Health hospitals.

Models like this are known as integrated care models, which means that the provider and payor primarily are the same parties. This requires a high level of collaboration between physicians, specialists, hospitals, pharmacies, laboratories, etc, and has found success in the US with companies such as Kaiser Permanente and Blue Cross Blue Shield. This can be done by either owning hospitals or maintaining extremely close relationships with the partner hospitals.

Click here to read more about Aditi and here to know more about Kaiser’s integrated care model.

3. Loans against Insurance by Life Insurance Companies

With a push to increase the share of secured lending, companies have started to leverage products like Mutual Funds and Insurance to lend against them. Many insurance policies and MFs are surrendered/ withdrawn money from due to a shortfall of money during an emergency and lending against them is aimed to help with it. This comes after the IRDAI mandated insurance companies to provide loans on policies across all life insurance savings products.

For example, Tata AIA floated an instant loan service for its policyholders where they can access emergency funds of upto ₹1L within 1 minute through the instant loan facility without losing any coverage. This makes them the first ones in the industry to offer a digital end-to-end processing system for loan payouts. Click here to read more.

Notable Startups in LAS include Abhi Loans, 50Fin, Volt Money, etc.

4. MSME Sahaj by SBI Bank

Sahaj is a collateral-free loan initiative designed specifically for MSMEs by the SBI to boost the growth of MSMEs. This expedites invoice financing and facilitates loan approvals and disbursements within a mere 15 minutes, eliminating the need for manual intervention and significantly enhancing efficiency for businesses. The program targets MSMEs that have not previously utilized credit facilities from SBI thus furthering financial inclusion of the new to credit businesses. Read more about the scheme here.

MSMEs have struggled with access to financing as they are often deemed as high risk borrowers by traditional lenders. Even if they manage to navigate through the application processes, financing options are offered at prohibitive rates determined by credit, risk, and lending practices that are not best suited to serve MSMEs.

We have been bullish on the verticalized invoice discounting and deep tier supply chain financing space, given the higher visibility on money flow and end use. For the uninitiated, deep tier supply chain financing (DTSCF) essentially means leveraging a “corporate anchor” to lend down the chain to small suppliers. Read more about DTSCF here.

Notable Startups in the SCF space Rupifi, ePayLater, etc.

5. Developer Kits by Banks

Banks including ICICI and HDFC Bank have launched API developer portals which provide businesses and consumers easy access to custom banking services while also ensuring complete safety and enhanced efficiency. These also allow developer organizations to use their API platform, build custom APIs, and co-create products.

These are particularly useful in Open Banking, allowing banks to commercialize their infrastructure by moving into the BaaS space and providing core services to fintechs and other third parties. This increases the reach of banking products to the underserved segment while also conserving costs. Read more about the developer kits here.

It is particularly interesting to see these developments which highlight that legacy financial institutions are not only keeping pace with fintech innovations but are also contributing significantly to the digital transformation of India’s financial landscape.