The Future of Innovation in Insurance — It’s in the Data
Have you ever opened your mail to discover a medical bill with an unpaid balance that you thought your group health plan would have already covered? Or, were you ever involved in a car accident and could not find your insurance card or the phone number to report a claim?
Circumstances like these make insurance frustrating, inconvenient, and often, a negative experience for the buyer. This is where insurtech comes to the rescue with the specific aim to make insurance simple, transparent, and affordable in hopes to restore the confidence of the policyholder in the insurance value chain.
What is Insurtech?
Insurtech — inspired by the word fintech — is a portmanteau of “insurance” and “technology” and refers to the use of technology to enhance or automate insurance services. Where innovations that emerged over a decade ago from the fintech revolution like mobile banking, crowdsourcing, social lending, and blockchain forced traditional financial organizations to rethink their business model, so are insurtech innovations forcing traditional insurance carriers to re-examine their client experience, policy concepts, and appetite for specific types of risk where they can excel and not be just one more insurance package on the shelf.
What Insurtech Means to the Industry
Many incumbent insurance firms are just beginning their journey toward innovative transformation through technology. Their focus is on improving security, reducing fraud, driving brand awareness, expanding access to products and services, and deepening personal interactions with their clients.
Insurtech firms have a head start as digital-first operations, born of a belief that this is simply the way to do business. Instead, these firms are on a mission to improve the insurance value chain by building solutions that scale existing carrier and broker operations — or invent entirely new products that go toe-to-toe with the old guard.
Insurtech is exploring avenues that large insurance firms have less incentive to exploit. This can include offering ultra-customized policies with better value for the money, social and peer-to-peer insurance, or using new streams of data from internet-enabled devices to dynamically price premiums based on customer behavior. Insurtech startups concentrate on blue ocean opportunities providing a new means of gathering or analyzing data in near real-time, interacting with agents and policyholders, and fitting new products to the perceived needs of consumers and not just recycling age-old policy forms from the last century.
In 2021, global investments in the insurtech space reached a new high at $15.8 billion in deal flow, according to Gallagher Re’s Global InsurTech Report. This is the highest capital inflow on record, totaling more than 2019 and 2020 combined.
With 2022 off to a slow start (or end, depending on how you look at it), we may be reaching a point where the tracking of insurtech investments will be difficult as many of the new entrants are mostly pure technology plays. With insurtech interest shifting from distribution and marketing towards claims, ongoing customer satisfaction, and risk management, there is less of a need for insurance expertise and more of a need for technical capabilities such as process automation, artificial intelligence, data extraction, data translation, data enrichment, and data cleansing.
Early Insurtech vs. Insurtech Now
While insurtech 1.0 brought a centuries-old product into the digital age by providing retail consumers with convenient methods to purchase insurance online, the 2.0 phase of insurtech is moving toward solutions focused on business-to-business and commercial applications. The next wave of insurtech entrants will undoubtedly seek to unlock the full potential of new products like parametric policies that have already been digitized, facilitating straight-through processing of claims, automated underwriting, to-the-minute insurance pricing, and machine learning-driven claims adjudication.
The next level focus on the digitization of the insurance value chain and high-quality data will ultimately help brokers and carriers better understand each other as well as the real needs of their clients. Enhancing the user experience and empowering the consumer far beyond the purchasing process will take the adversarial aspect of insurance off the table and hopefully provide clarity on the “whereas’s” and “wherefore’s” that cloud the interpretation of policies and fuel the skepticism and frustrations of insurance buyers.
Ask yourself these questions: How much of the fine print in the policies on offer today was originally written generations ago with a quill or a fountain pen? What kind of world can we help shape by propelling the insurance industry forward.
Insurtech will guide us to the answer.
Thoughts on this? I’d love to hear where you’re at with insurtech and the steps you’re taking to involve it into your business. Reach out and let’s talk!
Published on: 09.19.22