What is Insurtech and Why Does It Matter?
Insurtech combines the insurance industry with technology and their recent emergence has to do with the ever-changing market’s needs and providing an adequate alternative solution to traditional approaches. Insurtechs help streamline operational processes, offer a better user experience, and save costs.
Put simply, insurtechs give a time-adequate answer to the changed behaviour and demands on the market’s and clients’ side. Important to know is that the insurtech business is a subsector of fintech and as such relies heavily on modern technology, in particular Artificial Intelligence (AI), big data, digital ecosystems, etc. Being popular for their innovations, startups in insurtech accumulated over $16.5 billion in investments between 2010 and 2019. Given the ongoing Covid-crises, digital technologies are predicted to increase in value even further.
Why is Insurtech Increasingly Important?
For starters, insurtech comes with a great amount of flexibility and cost-saving solutions. While a standard insurance company without insurtech is constantly flooded with data such as claims, this means harnessing employees to do the work. A future trend is that 80% of these tedious, repetitive tasks can be delegated to AI, while an insurance expert can manage the 20% of highly complex cases left to process.
What adds up to the importance of insurtech is customers’ desire for more digital interactions with their insurer. Nowadays we have busy schedules, deadlines, too little time and so many plans – can you also relate? I guessed so. Technology is here with the intention to relieve us from some of the pressure and as such, insurtech clearly has a lot more to offer in the future.
- Changing Customer Expectations
The whole idea behind insurtech startups revolves around meeting up to customer needs, reducing costs, and doing it in an elegant manner.
When Covid-19 forces social distancing on us, we stay connected through technology. Modern solutions such as fintech and insurtech are here to offer even easier ways to stay connected and protected.
In a world that is everything but predictable, to have access to smart and convenient services is empowering and gives a sense of much-needed control.
- Uncertain Environments
No one expected the novel coronavirus to reach a pandemic level and to change so immensely our everyday life. To live in such an uncertain environment is stressful because there are lots of unknowns to the equation the whole world is trying to solve – going back to normal at some point.
To be able to rely on technology is an unprecedented chance our ancestors did not have. We operate digitally now and though there are lots of challenges that come hand in hand with this fact, there are also lots of unexplored possibilities. Insurtech is one step ahead, applying cutting edge technology to allow for fully remote and highly flexible insurance products.
- Need for a More Tailored approach
The insurance sector is considered to be rigid when it comes to how customers are perceived. Insurtech on the other hand focuses a lot on clients’ expectations on how modern solutions should be offered
In short, modern problem-solving tools should be efficient, convenient, and include a variety of ways to help clients. One way this is achieved in Insurtech is through personalization. Every client is treated individually and a tailored solution is produced to match their exact needs. Resonating with clients’ needs and showing an understanding of the uniqueness of every insurance claim brings added value for the client and can significantly increase their satisfaction.
Top 5 Insurtech Trends Shaping the Future
1. Communication Beyond Simple Chatbots
A chatbot is a relatively simplistic software that processes linear-driven natural language. Typically, a pop up runs on a website and opens a chatbot tool for instant communication with the customer via predefined menu options.
A more advanced communication tool that is also a future trend is conversational AI which is yet to be fully developed. Nevertheless, it can have a huge impact on creating better customer services and positive user experiences. What conversational AI actually does is to automate verbal or nonverbal messages the way humans do. Natural voice understanding, as well as natural image processing (e.g. scanned paper documents), are also key areas to improve.
What is more, conversational AI will influence other technological tools such as virtual assistants and messaging apps, which are some of the showcases of insurtech. Although a real person-to-person interaction will never get out of date, it is tempting and exciting to know just how much potential for communication there is beyond the already familiar.
2. Data-driven Services
In our digital era data is a critical asset and has powerful potential. Whoever has access and a deep understanding of it has the upper hand in decision making. Insurtechs are capable of advanced data analytics which is a driving innovative force.
Moreover, data-driven insurance is seen as a future trend because insurers will need to have continuous access to various data sources. What is also expected to happen is that the insurance industry will make a big shift from simple data extraction and distribution to refinement. This way a bigger product catalogue can be offered to a customer.
Let’s not forget that a major topic in data management is its protection. Information security, regulation compliances along with data ownership and transparency are highly demanded services which every self-respecting company should rely on if they want to gain competitive advantage (maybe here or in the previous section we can mention and link to the product of Dreamix+Pryv for Insurtech)
3. A New Way of Risk Management
Standardized risk management practises in the field of insurance include risk identification and assessment to attribute risk to relevant factors, risk control, and mitigation to set upper limits, and risk monitoring and review to have proper documentation proof of any non-compliances.
How can insurtech step in to further enhance these risk mitigation practises? As data is scattered across a digital ecosystem, e.g customer’s personal info can be accessed on multiple channels, which decreases the risk of omitting important details. Furthermore, insurance technology helps boost reaction time in case of insurance price adjustments or detecting changes to claim rates.
4. AI and Automation
High hopes are given to AI technologies and automation and these are well deserved. AI makes existing organisational processes slick. Knowledge management and simplification of claim processing are just a few examples of how AI and automation can significantly increase insurance business efficiency.
Another highly utilizable use case of AI is fraud detection. Up to 10% of insurance claims are suspected to be fraudulent so if AI successfully identifies fraud rings or networks, this definitely leads to positive outcomes for an insurance company.
Needless to mention that no human being is capable of analysing big data and making proper sense of it. Through AI big data analysis insurers come across some valuable insights concerning their customers such as specific behaviour and repeating patterns. Also, a higher speed of information processing is reached which results in greater customer satisfaction and higher retention rates – goals every insurer has on the agenda.
5. P2P Insurance and Benchmarking Capabilities
Peer-to-Peer or the “social” insurance Insurtech creates the opportunity to increase trust between insurer and clients. As all insured members are mutually connected by their insurance policy, they share the responsibility of maintaining relatively low individual risks so that assigned low costs can remain longer. Even though the P2P concept is not something profoundly new, nowadays’ social network platforms and the sharing economy as a whole enable insurers to better incorporate the model.
Today, technology is always transforming and adapting to what the market wants. We’ve all observed how fintech app Revolut for example shook the idea of how modern banking can operate. Being a sub-branch of fintech, we can expect from Insurtech huge benchmarking capabilities as well. After all, old ways won’t open new doors. The time is ripe and calling for new standards that better suit modern customer needs.
Author Biography Aleksandrina Vasileva
Aleksandrina is a Content Creator at Dreamix, a custom software development company, and is keen on innovative technological solutions with a positive impact on our world. Her teaching background mixed with interests in psychology drives her to share knowledge. She is an avid reader and an enthusiastic blogger, always looking for the next inspiration.