A technical revolution has ushered in the insurance industry. Technology-driven innovation wherein the synthesis of technology and insurance is built to enhance customer experiences and simplify policy management issues.
Insurtech has already started to make waves in the insurance world. Its rise has led to an explosion of new startups and established players adopting innovative business models that are starting to disrupt traditional insurance models.
Companies are increasingly moving towards more consumer-centric offerings that are often delivered in embedded software, also known as insurance apps.
The Rise of Insurtech Startups
More than 3,000 insurance technology startups have emerged over the last six years, according to PwC research. This number can increase to 4,800 by 2020.
The financial crisis of the late 2000s was an essential catalyst for insurance technology innovation. The combination of new consumer behavior, constrained resources for large insurance companies, and greater access to technology have resulted in the development of insurance technology business models that allow insurers to better compete with other parties, including tech-giant Google.
Another critical factor in the rise of insurance technology has been the changing consumer behavior towards insurance.
Changing Consumer Behaviors
Younger generations are more likely to purchase financial services through digital channels than older generations. It is especially the case for transportation and travel-related insurances, the market in which insurance technology has made the most progress.
Technology is opening up new markets for insurers to reach their customer base. For example, telematics technology (connected cars) can provide real-time speed and location data that might be used for insurance purposes. Expectations about the payment experience are also changing. Consumers are increasingly expecting more convenient payment experiences, with 44 percent of consumers saying they hope companies make it easier to pay their bills.
What are the Key Benefits of Insurtech Solutions?
- Rapid Growth
Large multinationals have traditionally dominated Insurtech. The rise of insurance technology provides consumers with many more options for innovative insurance solutions, driving competition and creating more choices.
Companies that provide insurance technology products can scale up very quickly thanks to technology.
The amalgamation of insurance and technology allows insurance companies to reach new markets that might otherwise be unable to purchase their products. For example, a company that sells telematics insurance may not have the resources to get drivers in emerging markets where car ownership is growing. However, insurance technology solutions can provide these drivers with telematics insurance at an affordable price.
- Increased Productivity
According to reports, insurtech investment reached approximately $4.9 billion in 2018.
One of the essential benefits of insurance technology solutions is the increased automation and digitization of tasks. Insurtech has increased productivity in traditional insurance models. It has allowed companies to increase their productivity and reduce costs.
The use of insurance technology also allows insurers to outsource specific processes, such as claims handling or underwriting, allowing them to focus on their core business.
- For Insurance Providers
As mentioned above, insurance technology allows insurance companies to reach new markets that might otherwise be unable to purchase their products. In addition, insurance technology provides unique products and pricing options that can increase insurance companies’ revenues. Conversely, insurers can also use insurance technology solutions to reduce operating costs by improving the efficiency of time-consuming and expensive processes, such as claims handling and underwriting.
The top three insurance technology solutions that insurance companies expect to see in the next five years include:
- Claims processing and customer service: more automation and digitization of claims handling.
- Underwriting: improved use of big data analytics for more accurate risk assessment, allowing insurers to reduce premiums or offer new products.
- New product development: New product development uses big data analytics to identify customer needs and provide innovative solutions.
- For the Customers
In the short term, insurance technology is likely to have a more significant impact on consumers than insurance providers as it develops.
Insurtech can also help customers pay their bills through convenient payment platforms like Klick2Pay. Customers benefit here as they receive a full quote online and can choose to use any preferred payment method, including credit/debit cards, online banking, or even a cash payment via mobile.
It can also help customers access new products and services. For example, insurance technology has allowed many companies to provide energy efficiency solutions for homes in the UK, such as smart meters, which monitor usage and suggest ways to save money on bills.
Insurance technology will likely continue to grow and transform industries in the coming years, including insurance. It is important to note that insurance technology will likely affect different sectors in different ways. For example, it may increase demand for telematics insurance in emerging markets but lower premiums in developed countries.