Technologies are being adopted across all sectors, but we see insurance companies taking a particular interest. From artificial intelligence (AI) to machine learning (ML), insurers are wasting no time in swapping out their outdated, conventional processes with improved services to enhance workflows. The popularity of innovations and technology come from their convenience and sheer data driven capabilities which offer secure and automated solutions that can support with customer engagement, fraud detection and processing of claims via machine.
What is insurtech?
‘Insurtech’ is a phrase coined from the combination of ‘insurance’ and ‘technology’. The term refers to the use of technological innovations which have been designed to suit the insurance industry model. Whilst the technologies may not have been solely designed for insurers, they offer a plethora of efficiencies and enhancements which will drive a more competitive insurance product.
Much like fintech, insurtech is similar by leveraging modern digital solutions to counteract issues which have arisen from the relative traditional processes. We see the rising uptake of these technologies with insurance-based companies because of the availability of the Internet of Things, artificial intelligence (AI), machine learning (ML), predictive analytics and more. Such innovations are able to revolutionise areas of insurance, such as:
- Claim evaluation
- Risk mitigation
- Processing contracts
- Underwriting policies
- Rapid pay-outs
- Data processing.
Why is it so popular?
Previously, as well as currently, providers have been paying large sums and proportions of their revenue on resources that provide a basic level of return – whether that is through data, financial return, customer engagement, or product growth. The current drive in insurtech is to tackle the lack of connectivity between data and analysis directly through a multitude of avenues such as geolocation tracking, online tracking and competitive analysis which build more comprehensive product offerings that can be priced more reasonably.
As consumer needs have been changing, the demand for a greater range of insurances has not faltered, with consumers looking for products and services which can be managed through one provider and cater to changing lifestyles. More recently we see insurances for day borrowings of vehicles, flexible income protection, travel, and numerous micro-events. And it is the emergence of insurtech which will help traditional providers rapidly evolve their product offering to improve their customers’ experience, enhance underwriting and actuarial processes, and develop bespoke product offerings at a competitively low cost.
The importance of insurtech lies in its ability to create changes in important areas of the insurance processes and can change how insurance cover is applied and paid for. Some of the most fundamental enhancements that we’ve seen from insurtech include:
- Improving customer experience: Technological enhancements are creating better communication channels with customers. With this, they are able to see targeted communications that show coverage applicable to their needs and receive a more holistically engaging service. Insurtech is gratifying the need to move towards self-servicing with online deals and internet-based communications.
- Promoting efficiency: Both policyholders and policy-seekers now use their phones and bespoke apps to research their insurance options and choose a policy, without the need for a phone call with the provider. Insurtechs are empowered with automated answers and better customer engagement to overcome barriers such as business hours and available manpower to answer queries.
- Adds flexibility to products: With modernisation of insurances, the use of insurtech brings greater flexibility to customise policies, offering them as short-term products, transferrable policies, better payment options and reduction of additional costs for small changes.
- Reduces operational costs: From simplified ways of working, machine-based processes, reduced needs for brick-and-mortar offices, and a linearised operational model to optimise insurance companies’ budgets.
- Creates a sense of value for the individual: Gathering data on trends and consumer movements provides insurtechs with the insights they require to best understand needs of individuals. This allows for better pricing, better product offerings and increases the likelihood of customer retention because of the consumer satisfaction in finding their insurance needs from one provider.
- Reduces risk: Through better processing of data, analytics and trends, machine learning can support insurtech companies to detect fraudulent activity by noticing inconsistencies in data. With smarter technologies, there are even opportunities for loopholes in policies and contracts which can be identified so that providers can avoid exploitation.
What will 2023 bring to the sector?
Whilst insurtech will change the landscape positively for the future, there are still areas of concern which will need to be overcome in the coming years, such as that of challenges around data privacy. Previously in the early dawn of insurtech innovations the concerns also sat around the surprising number of shutdowns of services, but many providers no longer experience downtime. Instead the challenges now are around data control and the frequent changes which occur in regards to regulations and legal frameworks. Irrespective of concerns, the market continues to grow with an expected size value of 7.87 billion USD by end of 2023, and revenue forecast of 152.43 billion USD by 2030. 2022 saw the growth of insurtech across areas of the Americas and is expected to span further in Europe, Asia Pacific, Latin America and MEA in 2023.
There are numerous innovations which will drive the insurtech market as a leader in the world of finance, including AI, ML, automation, big data, blockchain, and the Internet of Things. Each of the innovations will be key in driving the exceptional data and analytical advantages to overcome the inherent problems with traditional insurances in selling, minimising policy abandonment and concise communication. Insurtechs are expected to continue to grow, and have the technology model integrated into larger insurance names to tackle plaguing issues around underwriting and administration. Through the adoption into incumbent insurers, trust around the insurtech models will continue to grow and encourage faster adoption into new markets.