Insurtech is a fintech subsector that is growing fast, with the global Insurtech market expected to grow at a compound annual growth rate of over 10% between 2016 and 2020, according to Technavio. The term Insurtech is closely related to the innovative changes in the insurance industry which depends on the needs of the evolution of digital technology. Here are 10 latest insurtech trends to watch out for this year 2017:
1) New channels and devices
One of the largest developing areas within insurtech last year was IoT, telematics and sensors devices supporting insurance carriers and brokers. Companies like Cocoon are using home sensors and smart technology to reduce home insurance cost. With the increase of technology companies focusing on smart sensors, automation of processes and Internet of Things, this sector is expected to see a boom in supporting insurance companies with the most appropriate data that can reduce costs and provide insurer as well as consumer efficiencies.
2) Rise of Insurtech that address privacy concerns
People do not immediately trust insurers that intend to use their personal data. To reap the benefits of data, insurers need to tackle data privacy concerns. Insurers need to empower consumers to manage their own data. This year, the number of insurtechs that help insurers to handle privacy issues will increase.
3) Emergence of Blockchain
Blockchain technology is simplifying the claims process, alleviating high premiums, helping insurers create niche coverage and, most importantly, helping those who live in catastrophe regions. Smart contracts are also emerging as an ideal way to automate highly manual processes such as claims management and underwriting. Companies such as InsureEth allow airline insurance payouts automatically on delays or cancellations. Firms will continue to identify and develop use cases for blockchain in insurance.
4) Micro-Insurance to provide highly personalized services.
Insurance providers are using sophisticated data and insights to offer highly personalized services to meet customers’ increasingly specific expectations. One of most exciting developments in insurtech is that firms are giving insurance only when it is required. For instance, some insurtech firms are now allowing drivers to pay insurance only for the hours driven or the miles covered.
5) Underwriting automation
The future of underwriting is clear – automation is a key for future growth. In today’s global markets, a lot of consumers want to access insurance products in a fast and straightforward manner. To add value to their business, insurers are developing automated underwriting systems. Recently, Swiss Re enhanced its automated underwriting system, enabling it to guide the consumer through the underwriting process, reduce the number of referrals to an underwriter, and offer strategic information to help companies in an increasingly competitive world.
6) New Data Sources
Insurers need a lot of data all the time. In 2017, insurers will look to Internet-connected sensors and devices as new sources of meaningful data. Mobile apps, IoT and wearables will emerge as powerful and reliable sources of data that will progressively complement traditional underwriting data.
7) AI-driven automation
Market researchers expect to see AI creeping into the insurance industry. Recently, Fukoku Mutual Life Insurance replaced 34 employees with artificial technology. AI is giving insurers three main advantages. First, it is allowing them to mine greater volumes of data. Second, it allows businesses to scale analytics across the organisation by working faster and smarter. Lastly, it enables firms to develop their predictive accuracy.
8) Collaboration between insurtech and traditional insurers
As in the fintech revolution, a lot of fintech start-ups got their earliest interest and support from traditional banks. With insurtech, this trend is continuing. The top insurance companies are becoming the biggest investors in early stage insurtech initiatives. Insurers will continue to pump money into insurtech start-ups in order to secure their competitive positions.
9) The rise of Insurtech investment
Investments in insurtech surged from $800M in 2014 to over $2.6B in 2015. This investment continued to move at a steady pace last year. According to the “Pulse of Fintech” report, VC-backed Insurtech investments a hit $1 billion mark in the first half of 2016. This year will also see increased investments in insurtech.
10) Rise of P2P insurance business model
Recently, insurers are increasingly leveraging the power of community to offer affordable insurance. Consequently, P2P insurance has been gaining traction. The front runners, including Tongjubao in China, Friendsurance in Germany and Guevara in the UK have set their sights on the peer-to-peer model as creating disruption in insurance. Expect to see the rise of the P2P insurance model in 2017.