InsurTech, or “insurance technology”, is a diverse range of shifting technologies that are used in the insurance industry. There are some specifics which we’ll outline, but any technology that is utilized by an insurance company for the purpose of maximizing their efficiency could likely be considered InsurTech.
Traditional insurance companies that have not adapted to the digital age are under mounting pressure, and are facing increasingly collapsed sales. The difficult part for traditional insurance companies is that it’s not possible to suddenly switch to digital, and so they’re lagging behind innovative new insurtech startups and insurance companies that are building with a “digital first” mindset.
Digital transformation is not instantaneous, and for the insurance industry, the process is held up by legacy technology, shifting regulatory and compliance requirements, and perhaps difficulty in letting go of traditional methods of doing business, such as the aforementioned legacy technology and inefficient paper-based processes. In truth, insurers cannot avoid filing paperwork, but many are stuck in traditional pen-and-paper routines.
Even though we’re living in the digital age, many traditional insurance companies are still relying on paper and PDF forms for building customer databases and core processes such as claims, policy sales, and onboarding.
Overall, the insurance industry is standing on the edge of a significant paradigm shift, and insurtech companies are no longer seen as disruptors, but innovators leading the way. InsurTech can be utilized in all types of insurance, from health and car insurance, to cybersecurity and liability insurance.
According to research from Accenture, a Fortune Global 500 professional services company, the insurance industry is among the top industries most susceptible to disruption, and by the year 2022, insurance companies that miss opportunity to digitalise their process could suffer market share erosion close to $200bn, and miss the opportunity to pursue new growth activities worth $177bn.
What opportunities does InsurTech bring to the insurance industry?
As a subset of Fintech (financial technology), there are a lot of opportunities for InsurTech to create using smartphone apps, wearables, accident processing tools, online policy handling, and administration of insurance.
The InsurTech industry is driven by Big Data, Artificial Intelligence (AI), and the Internet of Things (IOT), which is where most capital is being invested into InsurTech.
Some examples of InsurTech in use would be:
- Monitoring devices in automotive vehicles, to determine whether a driver was speeding, wearing their seatbelt, etc.
- Activity and health wearables, such as heart rate monitors and offering premiums to consumers who show no signs of arrhythmia, or lead active healthy lifestyles.
- SaaS (Software as a Service) platforms that can manage insurance and payment coverage.
According to a KPMG report, “The adoption of wearable tech […] is beginning its own revolution within healthcare.” As wearables continue to be adopted by insurers and customers, there is expected to be an increased use of genomic and epigenetic technology to determine a customer’s biological age above their chronological one.
This will likely radically alter the way that life policies are priced and provides a more accurate way of assessing factors such as smoking and drinking on an individual’s longevity.
According to that same report, artificial intelligence and machine learning will also play a big role in how InsurTech transforms the insurance industry: “AI has a wide range of uses that can greatly simplify onboarding and customer service, in particular the claims settlement experience. Though the experience to date of claims estimation for auto damage has been mixed, it is an
example of how, in the future, a claim will likely be simpler and cheaper to process and therefore settled more quickly, to the benefit of both insurer and customer.”
AI can be used not only to help consumers settle claims faster, but also to protect the insurance companies themselves. ShiftTechnology, for example, is a company that focuses on AI-based fraud detection and claims automation, and claim to be able to detect potential fraud in insurance claims with a 75% hit rate.