What is InsurTech? What needs to be known about the merge of technologies in the insurance sector

The tremendous growth in the digital world not only creates breathtaking opportunities but also demands certain brand new ideas in all spheres of life. There’s no exception to that, and a landscape of the most conservative and rigid business environments have no other option but to adopt fast changes.

The application of insurtech covers more and more areas of everyday life

Despite the fact that insurance is one of the most conservative realms of business activity, the 21st century made it face some serious challenges. The upturn of new technology in the insurance industry is one of the brightest examples, which illustrates the response to such requests—and Insurtech insurance is that much needed innovation in the insurance industry to revitalize it.

Definition of Insurtech

Insurtech is a game changer in the insurance sector; it has a very successful combination of insurance and technology. The most complete definition of insurtech is as follows – it is a set of developing tools, models, and technologies aimed to transform the insurance sector in order to respond to the needs of modern business via tech decisions. It should be taken into consideration that insurtech is a variety of fintech.

Insurtech market size

It is obvious that there’s no such thing as absolute market homogeneity and market size for insurtech business as it varies depending on the country. But there are overall tendencies that give a lot of reasons to be optimistic about it. 

Insurance technologies become modernized through the merging of long-lasting traditions and breakthrough IT solutions

For quite a while, investments into insurance were not the primary choice for business, especially in comparison to banking. The use of technology in the insurance sector was a key solution for growing investment options.

If we take a quick look at the market map, we’ll see that five years ago, the overall investment in the insurtech industry consisted of $870 million. In 2019, the estimated annual up-growth rate consists of 45.66%. Moreover, it is expected that 51% of the abovementioned growth will come from Europe.

KPMG states that the USA obtains 60% of insurtech, followed by Germany and the UK.

According to financial forecasts, 4 years from now, the insurtech industry will grow 41% annually. It is expected to happen because of further implementation of Big Data and AI into the insurtech business.

How insurtech is changing the insurance industry

The insurtech overview explains the changes it introduces to the insurance industry. First and foremost, implementation of high tech left no opportunities to continue working in the old waynd the role of technology is hard to overestimate. 

Use of technology in the insurance industry is becoming a must for the competitive market player

Insurance technology cannot afford to remain unchangeable in a fast-developing digital world. Insurtech insurance uses the following approaches to improve business processes through using new technology in the insurance industry: 

  • Economy sharing. Major marketing specialists consider it to be a crucial idea for the changing insurance sector. This approach supposes a total rethinking of the value chain, which results in the development of a finely-customized contemporary product for the insurtech business. The brightest example of this is Lemonade, fast and furious startup from New York, which literally broke the record for managing claims.
  • AI, robotic advisors. One of the problems of customer service is the availability of an agent. No human being can work 24/7, so tech insurance development arrived at a solution–using chatbots and robotic advisors. These solutions give the possibility to provide service whenever it is needed; moreover, it provides a considerable reduction in support costs.
  • Microinsurance. This approach in tech insurance makes it possible to cover areas with low income, which in total makes it quite profitable due to quantity. Additionally, it helps to customize the product, e.g. car insurance can be paid only per miles or per hours of usage.   

Use of emerging technologies in the insurance sector

Technology in the insurance sector gives a customer all the possibilities to have all life controlled via smartphone apps

Here’s a brief description of the technologies used in insurtech business in terms of insurance:

  • AI, i.e. artificial intelligence. It successfully solves the problem of availability for the customer. Chatbots, created on the basis of AI, can respond to customer’s needs, answer questions 24/7. Typical application forms and files can be also processed by a chatbot;
  • IoT, the Internet of Things, is another technology used in the insurtech industry.  IoT means regular machines such as TV sets or GPS devices with access to the Internet. These devices help to measure a customer’s activity, for example, in the case of driving a vehicle;
  • Machine learning, which is used in terms of fraud detection, risk assessment, modeling of demand, and the like;
  • Smartphone apps, both for individuals and businesses, are an efficient use of technology in the insurance sector. Their functions vary from providing information about the nearest hospital to potential threats in the area being visited.
  • Drones are mainly used for checking objects that are not easily available for people, especially if there’s a need for photographic evidence.
  • Via analyzing large pools of data, insurtech businesses successfully customize their services and make the most informed decisions in terms of investment.
  • Cybersecurity is a crucial tool for protecting customers’ personal and financial data.

Challenges and the future of Insurtech

Several major challenges can be defined for insurtech insurance.  

The insurtech meaning itself supposes that it is not simple technologically, therefore the average customer may find it difficult to understand and use. 

The technological aspect of insurtech appeals to youngsters, although the idea of insurance is not a priority for them. Older individuals have a better understanding of the need for insurance, but they can be easily scared by applied technologies. Middle-aged customers sound like the perfect target group for this service.

If this difficulty with targeting is overcome, insurtech has all the opportunities to thrive.

Every cloud has a silver lining, so the insurtech overview isn’t complete without its numerous advantages:

  • The insurance product is finely customized to suit any need due to micro-insurance, a new technology in the insurance industry.
  • Insurance providers have any information of any precision that they need faster than ever before.
  • IoT and Machine learning enable data interpretation, which leads to irrevocable industry transformation.

Leaders and Influencers

These companies are the best illustration of what insurtech is in its finest form: 

  • Sureify presents itself as the link between the client and service provider. Its main priority is to take up a notch in underwriting and transferring data from the policyholder to the insurer via IoT devices. 
  • Tyche widely uses machine learning in risk assessment, which helps to lower the major risks.
  • Senteri helps customers manage their home security systems via mobile apps. 

Criticism of Insurtech

Insurance is one of the most strictly regulated areas of activity. It is one of the major reasons why it is so resistant to new technology ideas for insurance. The use of technology for the insurance sector faces a great deal of legislative documents, which makes it more challenging to implement insurtech.

Despite all the criticism, insurtech has all the possibilities of becoming the best, if not the only, solution for insurance in a digital society

Conclusion

This brief insurtech overview provides vivid examples of what can be done to the most conservative business sphere with the implementation of merging insurance and technology.

It is pretty clear what insurtech is nowadays, and statistics gives quite an optimistic forecast on the further development of insurtech insurance.

Bio: Alex Gayduk is Founder & CEO at Fortifier & Panzly, Hartford Insurtech Hub mentor. His main focus is on the insurance industry digital transformation.

Author: Yash Hirani

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