Insurtech is the use of technology innovations to squeeze out efficiency from the insurance industry model. It refers to technological innovations that are created and implemented to improve the efficiency of the industry. Insurtech powers the creation, distribution, and administration of the insurance business
Insurtech firms are exploring opportunities that large insurance firms have less interest to exploit, such as offering ultra-customized policies, agri insurance, covering micro lending loans, social insurance, and using new data streams from Internet-enabled devices to dynamically price premiums according to client behaviour. Venture capitalists are interested in insurtech because the insurance industry is well poised to take advantage of disruptive and innovative technologies. Insurtech helps large insurance companies explore new options outside of traditional human efforts
Changing customer behaviours
Customers today access their insurance requirements from many devices like the smart devices. Today, Phone apps, auto-monitoring devices, and wearable technology all form a part of the tracking tools for insurtech. This helps provide quite a bit of data to assess premiums & customised solutions for the client. For example a sudden travel plan will require insurance immediately, and the customer does not wants to wade through a piles of policy documents. Customers wants accessible mobile app options that quickly summarizes coverage, liabilities, and premium information
Technologies involved in Insurtech
AI (Artificial Intelligence)automates human functions for quicker and more accurate responses. For example, a chatbot may help a potential customer to navigate through a website and settle on an insurance product.
Machine Learning is a subset within AI. Insurance companies have vast amounts of data that can provide valuable& critical information on their customers and whether they need an insurance product. This data can be risk modelled (when data is used to predict future losses). Other type of models like Demand modelling can also estimate premium amounts and predict demand.
IoT devices(IoT = Internet of things) are connected to the internet, and this data can be collected and used in risk analysis. For example, a company may have its vehicles fitted with GPS. These trackers may record the vehicle speed, braking pattern, and location and thus predict safety and accident risk. Similarly, information collected from technology like Fitbits or Apple watches can be used to analyse health risk. Insurance products thus can even consider this information and thus offer potential customers discounts for using such devices.
Apps can be designed for individuals or corporates. Insurance apps may streamline the process of selecting policies and help make it easier for customers and the insurer.
Drone technology is used for aerial surveys to specifically inspect a particular property and check if it’s in a dangerous zone such as those prone to earthquakes, erosion, or storm damage. Drones can even inspect building or crash sites.
Blockchain technology improves data security standards & builds a trust between the insurer and insured, while bringing down cost & thus improves efficiency. This technology reduces human resources, improves TAT on processing of claims, and improves the quality of data collection.
With data analytics, insurance companies will get deeper insights into client needs and thus improve the objective of targeting products and services. They can improve the TAT on processing of claims &customize marketing to each customer, giving a competitive edge over other insurers.
Some Used cases which the Insurtech startups are working on
Block chain technology used cases
- Some insurtech companies have used blockchain to develop a software that can store customer identification details from government or non-government authorities. This enables the company, the reinsurer, and the broker to have complete control over all customer records.
- Companies can use blockchain technology to create a simplified & standardized claims document such that it can be reviewed by underwriters in real-time. They may also automate smart contract elements, resulting in its execution to be flexible and transparent. This builds strong relationships between customers and insurers.
- Smart contracts are build on automated protocols which makes it simple for documents to be authenticated, negotiated, and even enforced when needed. For example for of a life insurance policy claim, the system will automatically look through death registers online, ascertains the validity of the claim & initiates the claim without troubling the family. Smart contracts improves client experience and also increase the speed & accuracy of clearing claims. Further frauds can be reduced if companies can register contracts, run authentications, and clear claims through this process
With insurtech, companies can detect & eliminate the incidents of fraud with a decentralized digital depository. This verifies the identity of an individual and the claim, safeguarding against duplicate claims or third party interferences, thereby enabling all transactions to public record
Insurance companies can use insurtechs to streamline premiums and claims. For example, an vehicle insurance policyholders can draw payments based on the distance driven. A software system inside the vehicle records these distances in real-time so the premium can be calculated and paid. This not only simplifies the process, but also reduces errors.
There are though some challenges which need more work ;
One of the main challenges to insurtech is the issue of privacy. Distributed ledger technology aka blockchain is a shared database across multiple systems and websites. Since It is constantly changing, thus it poses issues for data protection laws. For Regulators the International jurisdiction privacy is a very big concern. They have multiple approaches to distributed ledger technology management. Distributed ledger technology may be decentralized due to the collaborative nature, which also means that no one organization can be held accountable when disputes arise. This aspect makes it a challenge to fully incorporate into insurtech
While the used cases are not exhaustive and the industry and experts are opening up new avenues as we go in print on this article. The fact is that this is a completely new world which is opening up on the Insurance Industry and in the next few years, we will see a sea change in which Insurance products are sold & used.
“Opportunities don’t happen. You create them”