Like the financial sector, which is currently being disrupted by fintech, the insurance industry is also going through a digital transformation driven by insurtech. But what is insurtech, exactly? And how is it changing the insurance sector as we know it?
What Is Insurtech?
Insurtech, a combination of “insurance” and “technology,” simply refers to using technology to drive cost savings and efficiency in the insurance industry. It explores ways for large insurance firms to offer personalized policies using data obtained from connected devices. It allows them to match product prices to potential customers’ behaviors and preferences.
Insurtech isn’t particularly new, as it took root as far back as 2010. At the rate insurtech startups are cropping up, industry experts expect the market to grow by as much as US$21.72 billion between 2020 and 2024.
How Is Insurtech Innovating the Insurance Industry?
Change is the driving force behind the rise of insurtech. Rapid technological, environmental, social, and business evolution affect the risks that companies and individuals face. And to give them a sense of security, the insurance industry needs to keep up.
As the volume of risks rises, so will insurance claims. But to know the additional challenges, insurers need a way to get in touch with their customers. They need to determine precisely what gaps to fill. Enter insurtech.
Insurtech provides insurers a means to tap into their customers’ inner desires. Using technologies like artificial intelligence (AI) and big data, they can identify how consumers behave, what they’re looking for, and how much they’re willing to shell out to ease their minds.
The adage “different strokes for different folks” gave rise to the various insurtech types that include:
Help insurance agents or brokers find the right product across different carriers for a specific customer. More than time savings for agents and brokers, these let carriers see potentially untapped possibilities or opportunities. They can look at competing products from various vendors within a single platform, for instance, to give potential clients a wider range of choices.
It’s not a secret that the insurance industry is heavily data-driven, hence its need for data solutions that can connect multiple systems so users can access actionable information. The applications under this category source information from all available systems and compare and analyze data to help users make more informed decisions.
Digitize insurers’ payment systems and allow customers to pay effortlessly, typically online, with just a few button clicks or finger taps.
Help independent agents or brokers get multiple insurance quotes in one go. Instead of filling out forms for various carriers and waiting days to get quotes back, they can just input all information into a single platform and receive quotes in minutes.
There may be others, of course, but these four are probably the most popular insurtech solutions in the market today.
Why Aren’t All Insurers Jumping on the Insurtech Bandwagon?
While 86% of insurers believe they need to innovate to stay in business, not all are turning to insurtech. The primary reason why insurance companies are somewhat reluctant to adapt could be the highly regulated nature of the insurance industry, which carries many legal ramifications. Many insurers argue that they’ve survived for as long as they have because they were very cautious. That cautiousness stops them from working with startups, which many insurtech companies are.
While others may consider this fear unfounded, given the rise of (once-upon-a-time) startups like Facebook and Twitter, many insurtech startups have come and gone. And in an industry that aims to provide security and stability, that would indeed pose a big problem.
Benefits from Insurer-Insurtech Partnerships
On the flip side, 70% of insurance companies are interested in collaborating with insurtech providers. Their reasons include developing new offerings, improving operational efficiency, managing customer experiences, gaining advanced data management capability, and enhancing existing offerings. Take a look at the possibilities below.
Today’s generation is all about managing everything they do via their mobile devices. Convenience is their top priority. And because insurtech is consumer-focused, insurers can enjoy the benefits of micropayment processing, mobility, and Internet of Things (IoT) connectivity.
Partnering with an insurtech company can allow insurance companies to extend their services to mobile channels, attract customers who prefer self-service options, and make information and services accessible and available everywhere.
Operating at the Optimum Level
Insurtech is powered by cutting-edge technologies like cognitive process automation, natural language processing (NPL), and machine learning (ML). Their apps can thus be scaled easily to meet any enterprise’s needs.
Cognitive automation, for instance, can help insurance companies improve the efficiency and quality of computer-generated responses. Workflow automation solutions, meanwhile, can let them create new automated workflows or customize existing workflows. Finally, NLP-powered chatbots can humanize human-machine conversations while automating customer service portals.
Expanding Your Horizon
While many insurtech companies need traditional insurers’ support for underwriting and risk mitigation, they can fill in gaps for insurance companies in terms of micro- and on-demand insurance provision. An example would be American Family Insurance (AmFam), which harnesses the power of innovation, advanced analytics, and connectivity through investing in insurtech companies like CoverHound, HomeTap, Bunker, Wireless Registry, and LeaseLock.
Given the rate at which insurtech is disrupting the insurance industry, we can surmise that it’s here to stay. And if the current digital transformation wave continues, insurance companies can probably start looking into (if they haven’t already) revolutionizing their business models if they are to stay on top for years to come.