Insurtech is becoming increasingly popular within insurance companies, and its growth shows no signs of slowing down. Unsurprisingly perhaps, the Insurtech sector brings a large number of advantages to insurers and their customers alike. This article guides you through all you need to know about insurtech, including its history, future trends, opportunities, and challenges.
Insurtech, short for insurance technology, is a subsector of Fintech that refers to the use of technological innovations in the insurance industry. Insurtechs aims to digitalise and optimise processes, such as automating claims, digitalising policy handling, or adopting faster and more efficient claims processing tools. Ultimately, this results in cost reductions and increased sales and customer satisfaction. Some technology that can be leveraged to optimise processes includes digital platforms, apps, wearables, big data, and machine learning.
Customers expect fast and straightforward customer journeys, with less paperwork and complexity, and a product and experience tailored to their individual needs. Insurance policies are products that can be personalised because each customer has unique requirements depending on the type of policy, what they want to cover, and how long they want the coverage. This investment in technology, and the opportunities to partner with insurtechs that can solve their biggest hurdles, can make insurance more customer-centric, personalised, and more appealing to customers.
Even though the term emerged around 2010, it has become popular and widely adopted in the past few years due to the significant adoption of technology worldwide. Customer demand encouraged insurers to follow the banking sector’s steps with fintech and embark on their digital transformation journey. Like in other industries such as banking and eCommerce, with the rise of mobile banking apps, savings rules, and one-click checkouts, insurance needed to invest in product and customer experience innovation.
The global market size for insurtechs was valued at $3.85 billion in 2021 and is expected to expand at a compound annual growth rate of 51.7% from 2022 to 2030 (Grand View Research).
Insurtech as a sector is broader than we may realise. There are various subsectors of Insurtech that play an essential role in digitalising the insurance industry. Let’s have a look at some:
Insurtechs within the data and analytics space enable insurers to gather better data and gain mechanisms to transform this data into valuable insights. Data is incredibly powerful and can be used to improve various services, including improving claims underwriting processes, pricing, and customer services through more personalised approaches.
Online brokers or insurance advisers enable customers to make more informed decisions and help them navigate the insurance world to find the policies that best match their needs. It is more convenient for customers and provides educational support on insurance topics.
The Internet of Things or IoT enables connection between hardware and software. It connects IoT devices that share essential data between them. IoT has various use cases in disparate industries, but it is also used in insurtech to, for instance, measure vehicle speed and customers’ driving habits. This data shared between devices helps the insurer improve customer insight and launch more personalised products and services.
Artificial intelligence enables, for instance, the use of chatbots on websites so that customers can have their questions answered much faster and more efficiently. Machine learning is a subsector of AI and can extract data and put together predictive models.
Payment middleware like Imburse enables insurance companies to access all payment providers and payment technologies through a single platform. Payments are a crucial customer touchpoint, and insurance companies need multiple integrations with various providers to fulfill their customers needs in different markets. Imburse enables insurers to connect to any payment provider or payment technology in any market, for both collections and payouts, to deliver an excellent customer payment experience that exceeds customers’ expectations.
The main impact of insurtechs on traditional insurers is a drive to change processes and products that haven’t been updated to match today’s customer requirements through technology. Insurtech is disrupting the insurance industry as we know it and creating a new system for insurers to thrive in the digital age. Here are some of the core areas that insurtechs are transforming:
Nowadays, the more tailored the products and services are to customers, the more likely customers are to engage with the brand. Based on an Accenture study, 32% of the respondents named fast and efficient service their biggest priority, followed by quick issue resolution. Efficient services come before products and pricing, reiterating the need for investment in this area and the importance of insurtechs’ participation.
Many insurtech startups offer innovative solutions that traditional insurance companies can adopt. AI and machine learning are especially beneficial to understanding customers’ interests, habits, and behaviours and customising the buyer’s journey according to what each customer is interested in.
Personalisation can be present at every stage of the customer experience, including payments. Paying out to the customer’s favourite channel and using the customer’s preferred payment method is essential because this is a crucial moment when customers expect their policy to work.
Insurtechs like Imburse are changing how insurers collect money for premiums and pay out to their customers by offering connectivity to the entire payments ecosystem. This enables insurers to integrate with any provider and technology in any market for collections and payouts. Insurers can add or change providers, making sure that their customers’ payment preferences are available to them and that they offer a seamless and quick payment journey, especially when customers need it the most.
There is a focus on mobile experiences because customers are turning to digital for their everyday tasks, so insurance is moving to mobile and enabling customers to onboard, make claims or view their policy on their phone. As the business volume increase and customer demand changes, a one-size-fits-all solution won’t be enough.
This imposes high requirements on technology, so insurers need strong and stable core technology to power these operations (KPMG report). These technologies include cloud computing, big data, the Internet of Things, and Artificial Intelligence. Cloud computing, for instance, delivers all kinds of computing in a cloud environment that is safe, accessible, and scalable. Insurers can get it on demand on a pay-per-use model, depending on how much space they need for their processes, applications, software, and databases. This gives them increased business agility and enables them to reduce costs (IMB report).
Embedded insurance represents bundling insurance services with other products. For instance, customers could rent a car and pay for their car insurance on the same website, with no redirects and further research. This concept has already been put into action in various industries. It is common to book flights and get travel insurance simultaneously or buy a new phone and be presented with multiple insurance coverage options. Embedded insurance enables insurers to expand their customer bases and explore new revenue streams while equally becoming more appealing to customers.
The Insurance Protection Gap represents the difference between economic losses and insured losses. In other words, it means the uninsured losses in a particular country. This gap is affected by many factors, including financial strength, GDP and population changes, and other risks such as climate change, the development of technology, or even pandemics. According to a 2019 Swiss Re report, the global insurance protection gap is valued at $1.2 trillion and includes three main risk pools: natural catastrophe, mortality, and health care.
Reducing the protection gap is important because it means that more and more people are protected from misfortunes, whatever those may be, through financial compensation. Insurance provides support to people, societies and businesses through monetary compensation when there’s a misfortune, like a natural disaster or a health event. Insurtech and digital technology can help close the Insurance Protection Gap as they can reduce transaction costs for insurers, reduce the cost of premiums, and accelerate insurance adoption.
Insurtech enables customers to take control of their insurance and choose products that truly cover their needs. Equally, insurtechs prompt a faster and more seamless customer experience from when customers select their policy and onboarding to when they receive a claims payout. Insurance is becoming more convenient, easy to understand, and enticing to customers. With the help of insurtechs, customers can get a policy that matches their needs, more personalised support, and quick and easy access to processes such as updating policies and making claims.
Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using various payment technologies and providers around the globe.
In a world where consumers’ payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.
Reach out to our team should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.