Harnessing Insurtech And Using It In Disrupting The Insurance Sector
In an over-simplified world, many see InsurTech as being the technology behind insurance. In the real world, however, InsurTech is a term applied to the many segments of new technology that are disrupting the insurance space: smartphone apps, consumer activity wearables, claim acceleration tools, individual consumer risk development systems, online policy handling, automated compliance processing, and more.
InsurTech is not just an increase in the way that technology is disrupting the insurance industry, but is also changing consumer expectations and demands. Take for example the way that Uber has changed consumer travel preferences and demands while uprooting a well established and once thriving industry.
Several immediate changes in consumer preferences are increasing demand for personalized coverage and improved customer interaction. Consumers are demanding more and will only continue to become more selective as they are exposed to innovative offerings such as:
- Discounted auto insurance for installing a telematics device to track safe driving
- Gym fee reimbursements from health insurance providers for wearing a fitness tracker that reports on exercise and health
- Peer-to-peer insurance that covers home contents, private liability, and legal expenses
Is InsurTech a threat to the insurance industry?
These numerous technological innovations that makeup InsurTech have been primarily spurred by smaller, more entrepreneurial firms. Traditional insurance firms have been slower to adopt new methods, due in large part to the potential switching costs as they migrate to new systems or new processes. That said, spurred by increased demand for self-service and technological inputs from consumers, as well as increased competition from the smaller and more nimble firms, large insurance firms are more actively embracing new technology and seeking to be change agents within the InsurTech space.
InsurTech came late to the game, mostly due to government regulation and the size and historical switching costs that insurance companies have had to bear to keep up with technology. The ever-increasing size of the insurable market provided additional incentive for entrepreneurs to begin to create innovative insurance products for the health insurance industry. Other industries began to follow suit.
Today, InsurTech is a $2.6 billion sub-industry that stands to either disrupt or empower the incumbents of the insurance industry. This year and in the future, we are poised to see increased investment in the space, as well as some dramatic changes:
- Lifestyle apps from insurers will enable them to gather valuable data, and become more relevant in the eyes of their more connected consumers.
- Variable premiums will start to emerge in offerings as more personalized ratings will be possible due to new techs such as wearables, smartphone apps, and the Internet of Things connected personal devices.
- “All in one” policies that cover more than just auto, home and boat will emerge as a convenient solution for consumers and profitable solution for insurers.
- Digital claims processing and loss handling continues to revolutionize the antiquated systems of the past.
Future of InsurTech
Like FinTech, global investments in InsurTech are increasing dramatically. Up to 1900 percent since 2011, the InsurTech segment is pegged for massive growth in the coming years. As consumers are presented with technological conveniences in other areas of their lives, from alarm clocks that go off based on sleep patterns, to self-driving automobiles, you will also see increased demand for easier to use, more customizable and more accurate insurance products — elements that rely on continued advancements in the InsurTech space.
But despite the increased demand by consumers for technology innovation from insurers, there are still some barriers to adoption that will need to be worked through in the coming months and years:
- -Complex insurance processes, such as health insurance claims, create a desire for face to face or over the phone human interactions
- -As adoption increases more and more data will be stored digitally — this opens up a host of potential problems with privacy issues and cyber attacks
- -”Acts of God,” such as tsunamis, wildfires, earthquakes, and flooding, will continue to plague insurers with unpredictability and falling outside data norms
- -Government regulatory hurdles will require concerted efforts between entrepreneurs, insurance firms and legislators
Also, along with these several barriers to adoption, there are numerous facilitators for the adoption of InsurTech:
- Empowered by technology, consumers are more likely to consolidate into smaller insurable groups that will enable tighter insurance product offerings and better risk management
- With the assistance of technology matching systems, consumers will be able to interact directly with insurance providers, in many cases disrupting middlemen and make coverage more affordable for consumers and more profitable for providers
- Increased sophistication of automated data collection methods will empower insurance providers to better tailor products, better serve their customers and increase the long-term viability of their companies
- Governments, with help from insurance groups, will begin to see that favorable legislation will lead to innovative solutions that will have positive outcomes for consumer quality of life and insurance industry strength