The meaning that we can catch from the word Insurtech is as simple as its breakdown words, “Insurance” and “Technology”. Just like any other growing segment, this new buzz focuses on upgrading the existing insurance model and making it more coherent.
Well, we would comment, the insurance industry needed this innovative eye a long time ago. But nevertheless, it’s better late than never. Insurance companies have started paying attention to game-changing technologies. These technologies empower the niche industry by taking care of the creation, distribution, and administration of the insurance business. The human effort is expected to be minimized and thereby increase the dynamicity of the industry.
All, in all, Insurtech streamlines the customers’ offerings and ensures the best customer experience. In this blog, we are planning to introduce you to the new buzzword and discuss its onset in the industry.
Who thought that the Insurance industry is boring and you would never have smart devices to operate it? Well, here is the end of the boringness. Insurtech, meaning, the use of the latest technology is here to help insurance companies develop new products, and services and also optimize the business model.
The idea was brought into the picture by the amalgamation of disruptive technologies in the fintech industry. The class-part technologies like machine learning, artificial intelligence, and big data have in a way strengthened the offerings of the industry making it more powerful than ever.
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Let us look at the structuring of the Insurtech ecosystem:
Insurance companies are evolving and can be categorized into two main types.
In this section, the Insurtech ecosystem is analyzed from an operational perspective and the branching is done based on the functions.
The operational perspective includes product distribution, value chain, security, big data, and customer experience.
In this section, the Insurance system is divided based on the sector and addressed accordingly. The segmentation considers all the dynamics, methodologies, and characteristics of the insurance companies.
The sector perspective includes customer services, buyers, platforms, and marketplaces.
We can say, with all these segmentation and implementation, the insurance industry will become more poised and defined. Insurance companies can now efficiently explore dynamically priced insurance policies, small business insurance, and social insurance options.
Also, insurance companies can access data streams from IoT devices. It looks like procuring insurance will soon become a matter of minutes.
Say, for example, you are traveling to a foreign land and you need travel insurance. Would you prefer to refer to a pile of documents and analyze the best suitable policy? This last-minute hassle is massively minimized by opting for mobile solutions. These insurance solutions will quickly analyze the coverage, liabilities, and other premium information. Based on the analysis, the system will provide you with the insurance coverage policy in a day.
Now let us look at the various components of Insurtech:
The components of Insurtech can be divided based upon the
1. Technology perspective
2. Solutions perspective
Elaborating further, from a technology perspective, you can use the following technologies.
- Artificial Intelligence:
You can automate the entire functioning of the mobile app and plan more accurate and defined responses using artificial intelligence.
- Machine Learning:
Machine learning and AI make a great combination. Machine learning can help you extract important insights which can further be clubbed with AI for an ultimate user experience.
- Internet of Things(IoT):
The Internet of Things helps you connect devices and perform risk analysis based on the collection.
- Blockchain technology:
Blockchain technology is basically used for the security of the data shared over the platform. It protects the insurer’s data and sets up a trust bond between the insurer and insured parties.
- Advanced data analytics:
By using data analytics and analyzing the set of data, insurance companies can gather deeper insights into customer behavior and thereby customize the user experience.
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Moving forward, from a solution perspective, you can have the following offerings.
This solution type assists brokers and agents in finding a particular policy from the range of policies available. Appetite solutions drastically improve the efficiency of the system and the way transactions are made on the platform.
Data is everything. If Insurance companies can collect data and leverage its benefit, it serves their profit.
Payment automation is the best thing that can happen in the insurance segment. Customers can make payments online using the digital system at its best.
Quoting solutions can be made easy during Insurtech. The traditional approach of receiving quotations and comparing them was quite tedious. Instead, automation will make it all quick and easy.
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What are the challenges of Insurtech that one may encounter?
We can say, for ages, we have been following manual methods of working. Be it insurance distribution, underwriting, claim handling, or any other operations.
However, InsurTech will induce dramatic changes in the entire system and transform the corporate culture and corporate governance.
The regulatory factors will be taken care of, also, the time consumption for a task will also be reduced. Having said all this, the changes should not hamper the current scenario in a way that people feel uncomfortable during the operation.
We need to ensure that technologies that businesses are planning to use should work in favor of the company. Therefore, one should use industry-specific technologies only.
Say, for example, if you are using artificial intelligence, it may serve to benefit insurers, but decision-making lies in the hands of humans. Also, you need to ensure that the team of individuals working in the company are tech savvy and have adequate knowledge about the implementation of technology in the system.
The next big barrier is privacy. The distributed ledger system spread across various systems puts data at risk. However, insurance companies have to implement various data safety rules and abide by regulations in order to ensure the security of the data.
Knowing all of these transformation factors,
Let us see the importance of Insurtech.
The changes technology will bring to the insurance segment will be noteworthy. To describe how it will impact the segment, here are the various scenarios.
- It will boost the customer experience:
Comfort is the main thing that today’s customers seek. By leveraging technology in this segment, customers will have a more personalized experience. They can engage easily and swiftly over the platform, select their coverage, understand their needs, etc. in an organized manner.
- It will promote efficiency:
It looks like Insurtech will serve the pain point of the entire Insurance system. Technology assistance will help policy seekers and policyholders to research and explore various policy options over the platform. They can quickly access the information and save hours of man work.
- Insurtech will enhance flexibility:
Insurance companies will now be sorted with the type of experience they wish to provide to the customers. They can now focus on other important tasks instead of running behind covering long-term arrangements.
- It will be a cost-saving option:
In simple words, eradication or lessening of human power will break down the overall cost drastically. Insurance companies will be able to operate remotely without having the need to hire staff or place and pay for the same.
- Insurtech will decrease the chances of fraudulent activities:
The main reason why technology is empowering segments is the security factor. Technologies like blockchain and big data will assist insurance companies in keeping track of the activities, saving all the locations, and identifying any inconsistencies.
This way, one can save the company from a big risk of fraud.
If you are still skeptical about how Insurtech will be the next buzzword, here are a few examples of Insurtech companies making the revolution.
- Lemonade: A company selling insurance coverage through mobile applications.
- Docadoo: This platform uses customers’ phones and smart devices to collect relevant information using an API. This app also helps individuals assess risks in real-time.
- Avinew: The platform using the Internet of Things to track customer habits, ways of interaction, and other systems.
- Bdeo: A mobile app using AI for the claim processing.
How will Insurtech make money?
The simplest answer is, by charging minimal overhead and operational costs. Also, insurance companies can earn revenue from clients or acquire customers, but that is only an optional thing.
The insurance sector is growing at a lightning speed. The introduction of new technologies seems to make things different, efficient, and effective. However, insurance companies interested in implementing technology in the given area should make themselves aware of the various legal aspects applicable to the scenario. For more information, connect with our experts on the topic.