InsurTech is now such a ubiquitous term that it is difficult to ignore. But then it should not be ignored! No one should ignore an industry that has seen global investment rise by 1900 percent since 2011! ($131 million in 2011 to $2.6 billion in 2016) and the InsurTech segment is pegged for yet more significant growth in the coming years.
But what is InsurTech?
InsuTech is a generic word that can be applied to the many segments of new technology that are disrupting the insurance space: smartphone apps, consumer activity wearables, claim acceleration tools, individual consumer risk development systems, online policy handling, automated compliance processing, and more..
InsurTech solutions have one thing in common; they focus on digitalisation as a tool to deliver insurance as a lifestyle or service proposition. It is the technology that puts the customer, not the Insurer at the core. Almost 80 percent of insurance customers want personalised and just-in-time insurance and these expectations have to be met in new ways.
…and how will InsurTech change the insurance landscape?
Consumers are presented with technological conveniences in so many other areas of their lives, from alarm clocks that go off based on sleep patterns, to smart apps that allow you to control the temperature of your house or the TV programmes you record from the other side of the world. They therefore expect easier to use, more customizable and more accurate insurance products – elements that rely on continued advancements from technology.
By using the capabilities of InsurTech, Insurers can completely change their business paradigm to a focus on the customer instead of the product. Thereafter, the possibilities become really exciting:
Insurance offered as a service
Today, 80% of purchasing decisions around the world are informed by a digital device, proving that consumers are searching beyond traditional means to be more informed. New technologies give consumers access to an unlimited supply of shopping information, and they expect the same from their Insurer. Customers are looking for tailored and convenient solutions.
New technology offers the capability for Insurers to develop “All in one” policies that cover a multitude of customer risks from auto, home and pet through to travel and health will emerge to deliver a tailored and convenient solution for customers whilst being efficient and profitable for the Insurer. In addition, sophisticated data and insights will allow Insurers to provide products that are relevant to users’ usage and behavior patterns. Insurance at affordable premiums can be offered for short defined periods – cover that is applied only when needed.
Lifestyle. Connected apps and IoT
Data from new tech such as wearables, connected personal devices and telematics will allow Insurers to offer increasingly personalised ratings to reflect the individual risk of each customer.
These connected technologies are part of the ‘Internet of Things’ (IoT). Many insurance carriers have started IoT initiatives over the last few years, for example car insurance telematics is already becoming mainstream. Moving forward, the key to unlocking the potential of IoT will come from the ability to deal with a high volume of data, to turn this data into new insights, and to turn these insights into relevant and distinctive value propositions and customer engagement.
Digital processing and the benefits of AI
Artificial Intelligence (AI) is another sector of InsurTech that has been gaining traction as an everyday tool for automating business processes in the insurance industry. Providers are looking at new ways to handle claims and risk management to improve their responsiveness to customers whilst also reducing costs.
By leveraging AI for business, insurers can eliminate much of the manual and repetitive nature of the claims process to achieve better end-to-end automation. AI helps to integrate information exchanged between disparate systems for seamless claims handling and faster straight-through processing. This enables insurers to shorten the claims cycle, all while enhancing the customer experience and cutting down on costs.
Fraud prevention is another area where the potential of this form of InsurTech is exciting. AI uses intelligent automation, pattern-spotting, and self-learning capabilities to help recognize potential fraudulent claims.
Blockchain is a type of distributed ledger that stores a permanent and tamper-proof record of transaction data. The simplicity and security that blockchain offers has inspired Insurers to investigate ways that blockchain’s distributed ledger and encryption can be used to provide the industry with secure transactions in near-real time, while also reducing the cost of maintaining the necessary infrastructure required for back-end processing.
One example of potential application is healthcare records. Once the records are on the blockchain, Insurers could obtain accurate data about a customer’s health. The amount of manual intervention would be significantly reduced in cases where data from multiple sources are stored on the distributed ledger. It would also offer the customer a level of transparency that has never been attained before in this industry.
InsurTech is here to stay, but despite the increased expectations from consumers looking for solutions that demand technology innovation from insurers, there are still many barriers to adoption. Steeped in tradition and burdened by outdated systems and paper-based operations, innovation is a challenge for most traditional Insurers, but they need to find a way. The demands of customers and the possibilities offered by technology is giving the industry a much needed push in 2017 to adopt InsurTech in a big way.