In this article, we will first look at the technology used by insurtech firms and incumbents.
Insurance has existed for centuries. However, it was not until the most recent technological advancement that its business model began to experience drastic disruptions in an unprecedented manner.
But what are the industry’s leading trends? Insurance is a complex industry, and grasping this new technology can be difficult. To come up with marketing ideas, you don’t have to be a data scientist in the field.
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What Exactly Is Insurtech?
Insurtech is the use of emerging technology, such as artificial intelligence, machine learning, blockchain, and even drone technology, to improve and streamline the insurance industry’s business operations, as well as to help improve customer satisfaction across the insurance value chain, including product development, marketing, underwriting, and claims processing.
Insurtech is the application of technological innovations to find cost savings and efficiency in the current insurance industry model. The term insurtech is a combination of the words “insurance” and “technology,” and it was inspired by the term fintech.
Also read: What does technology Insurance cover?
Understanding Insurance Technology
The belief that the insurance industry is ripe for innovation and disruption underpins insurtech.
Insurtech is pursuing opportunities that large insurance companies have less incentive to pursue, such as providing ultra-customized policies, social insurance, and using new streams of data from Internet-enabled devices to dynamically price premiums based on observed behavior.
Based on the basic level of data used to group people, some people pay more for traditional insurance than they should. Among other things, insurtech is attempting to address the issue of data and analysis head on. Using data from a variety of devices, from geolocation tracking in cars to activity trackers on our wrists, these companies are creating more finely defined risk groups, allowing products to be priced more competitively.
In addition to better pricing models, insurtech startups are experimenting with a variety of potential game changers. These include using deep learning trained artificial intelligence (AI) to handle broker tasks and find the best combination of policies to complete an individual’s coverage.
There is also interest in using apps to consolidate disparate policies into a single platform for management and monitoring, developing on-demand insurance for micro-events such as borrowing a friend’s car, and using the peer-to-peer model to create customized group coverage while incentivizing positive choices through group rebates.
The Importance of Insurtech
Insurtech is playing an important role in changing how coverage is applied and paid for in a variety of ways:
- Insurtech improves customer satisfaction. Customers are more engaged in selecting their coverage, understanding their needs, and receiving personalized service as a result of the use of technology. Instead of having to visit a branch or speak with a representative, the future of insurtech is shifting toward self-service, online transactions where customers can choose their preferred engagement channel.
- Insurtech increases efficiency. Policyholders and policy seekers can frequently use the internet and apps to research and explore options. Many insurtech companies enable users to quickly access the information they require without having to wait for business hours or an available representative.
- Individuality is valued in insurtech. Many new tools (discussed below) are now available to better understand each individual’s true needs due to the innovative nature of information gathering and data processing. Based on historical data, this not only improves pricing but also provides more reliable, consistent coverage.
- Insurtech increases adaptability. Flexible, customized, short-term, or transferrable plans are more common in modern insurtech offerings. Instead of requiring individuals to commit to long-term contracts, insurtech is more likely to provide individuals with specific coverage for a specific need over a specific time period.
- Insurtech lowers operating expenses. Traditional insurance companies relied on physical locations that required manual labor. Insurtech firms can now operate remotely, with staff interacting with customers all over the world. The online company’s operating model is similar to skimmer but with less overhead.
- Insurtech may reduce fraud. Insurtech firms may be able to detect fraudulent activities if data inconsistencies arise by leveraging data, analytics, trend analysis, and machine learning. Furthermore, big data may be able to uncover potential loopholes that insurers can work to close in order to avoid exploitation.
What Insurance Problems Does Insurtech Address?
Management of Claims
Traditionally, the claims management process involved manually reviewing each claim, deciding what compensation to award, and then remitting that compensation. Insurtech firms are now attempting to develop processes that automate certain processes and detect fraud.
Larger corporations can use technology to collect and aggregate specific data points related to specific claims. These claims can also be validated by comparing different data streams using automation. Finally, large corporations can use automation or repetitive workflows to pay out a large number of claims with little or no human intervention.
Underwriting
Underwriting entails reviewing a person’s profile, assessing their risk profile, and extending them an insurance package offer that includes their coverage.
A client’s information will also include their monthly premium as well as any compensation they may be entitled to under various claims.
Much of this information can be mined or collected automatically. Even if a client is required to submit information, modern technology uses a large number of data points to compare against historical data, allowing it to constantly learn, grow, and make more educated assumptions. This means that the data determines whether or not to extend a policy to the individual and what price is reasonable for the associated level of risk.
Contract Fulfillment
There are numerous contracts that occur in the insurance industry, whether it is related to paying out a claim, enforcing a different insurance level tier, closing a customer’s policy that has expired, or approving a new customer.
Smart contracts can be triggered to execute when certain criteria are met when using blockchain technology. This eliminates the need for a human to handle the contract, allowing an unbiased, neutral party (i.e. technology) to evaluate contract criteria and determine the appropriate course of action.
Risk Reduction
As previously stated, big data can be used to collect, analyze, and summarize information.
This includes investigating a customer’s past behavior and evaluating a wide range of claim types. Insurers may be able to detect fraud, protect against unsuitable risk, or better understand where they may be most vulnerable based on the information gathered.
Insurtech Innovations Driving Change
There is a growing and evolving range of technology used in insurtech that is changing the way insurance is performed. The following are the most notable technologies that are being used.
Machine Learning/Artificial Intelligence
Certain tasks that previously required human interaction can now be performed entirely by technology thanks to artificial intelligence functions.
Customers, for example, would previously have to interact with representatives to have questions answered; now, interactive conversations with chatbots may allow a customer to receive assistance without speaking with a human.
Machine learning, the ability to extract historical data and compile predictive models, is a subset of artificial intelligence.
These models are then used to disseminate information and can be configured to include a feedback loop. If additional data is fed into the model in the future, the model may “learn” and continuously evaluate how to calculate appropriate premiums based on demographics or risk profiles.
Automation
Change in the insurance industry is dependent on efficiency.
This means that when insurance customers fill out a form online, the information is automatically saved in a data warehouse or used to generate a policy ready for signature.
When technological tools can carry out a process on their own, automation tools are used to avoid manual human intervention.
Big Data
The term “big data” refers to the collection of massive amounts of data.
This includes a wide range of data, real-time data collection in real time, and a variety of data sets.
Big data collection techniques enable insurers to collect a broader set of data that can be used to analyze a customer’s risk profile and better understand their characteristics and habits. Furthermore, this data can be collected for millions of customers and fed into the previously discussed predictive models.
Blockchain
Though most commonly associated with cryptocurrency, the fundamental foundation of blockchain technology is immutable, distributed ledgers.
This enables unchangeable record-keeping to ensure information security and reliability. It also enables smart contract execution to take place on a blockchain, remaining dormant until specific conditions are met in order to release insurance proceeds or validate an insurance client.
Drones
Insurtech also relies on cutting-edge hardware technologies.
Drones can be used to assess properties, assess property damage in areas where humans would be physically unsafe to traverse, or audit a site for a claim.
Drones are increasingly reliant on high-definition photo and video quality, allowing assessors to rely heavily on photographs and saved images from flights.
The Internet of Things (IoT)
The Internet of Things is another insurtech innovation that is based on physical innovation (IoT).
Despite being a digital concept, IoT is based on the interaction of physical goods and software. For example, auto insurers now frequently offer devices that measure vehicle speed, handling, and driving habits and can be used to reward or penalize good driving habits.
Insurance companies can now base premiums on the smallest of details, which was never possible before.
Is Insurtech Related to Fintech?
Insurtech and fintech are frequently regarded as distinct industries. Both rely on modern solutions to transform the way traditional services are delivered.
However, there are numerous distinctions between the financial and insurance sectors. As a result, insurtech firms are unlikely to provide financial services in addition to insurance coverage.
Is Insurtech More Effective Than Traditional Insurance?
Some customers may prefer to interact in person with a dedicated insurance agent they’ve known for years.
Other customers may prefer to choose their own policy, which can be canceled through an app. Insurtech simply provides a new way of providing insurance coverage that traditional insurance may not have been able to provide. It is simply a matter of consumer preference whether one is superior to the other.
Conclusion on insurtech
The introduction of technology is causing disruption in the traditional insurance industry. This new industry, known as insurtech, provides customers with a new way to do things by gathering information differently, executing contracts more efficiently, and analyzing data more accurately. Though some may fear that the insurance industry will lose its personal touch, insurtech strives to provide lower, more customized, and more flexible coverage.
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