TLTR: In this blog we will examine the impact of technology in the insurance industry. We will also look at technology’s stronghold in all aspects of client centric businesses. Lastly, we will explore the latest findings of insurtech in relation to customer service.
Insurtech, a portmanteau of insurance and information technology, is the key to reinventing traditional insurance companies into cutting-edge powerhouses for risk management. According to a quarterly insurtech briefing report by Willis Towers Watson, insurtech funding reached $2.55 billion in 2021. Today, an insurance company falls in danger of lagging if clients don’t get easy-to-use digital services. Insurtech is used to transform the insurance experience for clients and service providers.
What had long been an industry buzzword turned into a key requisite in the post-pandemic world. Managing and renewing insurance is set to go completely digital through mobile apps, and you can get your clients significant coverage discounts if they opt for paperless payment. Insurtech reduces costs, increases efficiency, manages risks, and improves industry relationships.
History of Technology in Insurance
Insurtech emerged in 2010 shortly after fintech had started revolutionizing the finance industry. Long before insurtech was synonymous with big data and machine learning, its purpose was to automate the insurance value chain through simple transformations in customer experience and marketing.
As the internet data pool began its exponential growth, customers began expecting enhanced service. The global demand for seamless solutions reverberated quickly in insurance. Luckily, data analytics was on the rise around the same time. As a result, these series of developments resulted in insurance carriers being able to streamline their organizational structures, double their profit and reduce operating costs. There has been no looking back for insurance technology companies.
Here are some ways insurtech has transformed the insurance sector.
Cloud Technology In Insurance
Cloud computing enables businesses to operate completely from the internet. In recent years, this has led to better business management and the practice is seeing a steady rise. The success of cloud-based models is a testament for existing industries to adopt cloud technologies.
For insurance, moving all processes into cloud should be the first and foremost step to digitization. Companies are discovering that, while cloud systems originated for specific purposes such as transforming data centers, minimizing technical debt and freeing tight budget spaces, insurance can leverage cloud technology for new and innovative solutions.
Insurance companies that have adopted cloud are able to accumulate and analyze larger sets of data. This leads to efficient identification of actionable leads. In addition we have enhanced digital interaction, and customer satisfaction with policyholders who are mostly on their phones. Most importantly, insurance companies are discovering optimized risk management results. As an insurance company trying to utilize all aspects of insurtech, adopting cloud systems is the first step.
If anything in insurtech is disrupting the entire insurance ecosystem for the better, it is on-demand insurance. This insurtech tool allows customers to purchase insurance e-commerce style- you select an insurance policy, then add to cart. According to a KPMG insight report, on-demand insurance currently represents less than 1% of the global insurance market. This large opportunity means that insurance companies that are seeking an edge over traditional insurance companies must offer on-demand insurance services, and tools like insurance shopping apps to their clients and policyholders.
Flawless Policies Through Insurtech
Today, policies and pricing are at a risk of failing without insurtech tools. These tools include data mining, telematics, and even social media. Cryptocurrency insurance coverage for example, relied heavily on predictive analytics to determine the insurance’s premium, risk selection and fraud detection.
Thanks to technology, new-age insurance policies like cryptocurrency insurance can anticipate trends and retain consumer trust effortlessly. But this is not all, insurtech has managed to assert influence in traditional policies such as car insurance. Moreover, thank to telematics, more insurance companies are insuring data driven vehicles from the traditional route of insuring individuals, causing enormous disruption in the auto insurance market.
Strong Client Relationship
Insurance companies were one of the last remaining to incorporate information technology as a business strategy pillar. Customer retention now falls above operational efficiency in an insurance startup’s key performance indicator. In the past, insurance companies remained afloat through trusted brand perception and existing agent networks. However, these strategies led to prolonged gaps in customer satisfaction.
Insurance startups are discovering better investment spaces and sophisticated claims practices through insurtech tools. So, as a result there are happier clients. The relationship between insurers and policyholders are no longer transient and technology has instilled new-age value systems in client relationships.
Application Programming Interface (API) and Artificial intelligence (AI)
The 2021 World Insurance Report by Capgemini and Efma surveyed agents and brokers out of which 44% claimed that insurers don’t provide enough data about policyholders. So, the data gap makes it hard for agents to turn in insurance sales. However, a simple solution lies in insurtech API and AI tools which helps agents understand customer preference, leading them to offer specific policies that adds value to their customer’s lifestyle.
According to the report, the most successful insurers will incorporate digital tools to their channels and the challenge is to invest in the right technologies. As a result, these technologies will empower agents, leading to deepened relationship with clients.
Data Is Everything
While data provides invaluable insight in consumer behavior, data is important for insurers to reduce risks and drive engagement.
- Claims settlement: According to Insurance Business, data analytics solutions are invaluable to premium and claims management. An average insurance company spends one third of its total expenses on manually settling claims. Automation helps avoid this problem.
- Understanding policyholder behavior: Insurtech firms can analyze which policyholders are headed towards a claim through data analytics. For example, insurers are learning to assess cyber insurance policyholders by providing them with Internet of Things (IoT) tools such as tracking and monitoring devices.
What are the Findings?
Insurtech has long remained client-oriented. Likewise, according to PR Newswire, this focus was enhanced as millennials took over the purchasing space from baby boomers. The shift of focus has led to drastic differences in consumer behavior and companies had to act fast. A few things about millennials’ consumer patterns has evolved:
- Millennials had less brand or company loyalty.
- Their preferences are ever-changing and millennials have no problem switching services frequently, as long as the competitor was catering to their personal needs.
- Millennials preferred to do all business transactions remotely. It was impossible to maintain significant interaction with a generation that was raised in the digital age.
- They were also found to possess reduced attention spans.
Insurtech is complimenting this client demand through innovative solutions, such as on-demand insurance. Firstly, branch visits are thing of the past as a consultation or receiving a quote can be done digitally. Chatbots were a significant hit in this regard, both for internal and external use. Technology in insurance and the quest for solutions eventually led to the emergence of three categories of insurtech.
The Three Facets of Technology In Insurance
- Insurtech enablers: This is the process of partnering with incumbent insurers instead of competing with them and building solutions for specific value chains within the insurance industry.
- Insurtech marketplaces: Insurtech marketplaces occupy the e-commerce insurance space. As a result, they have helped facilitate policy comparisons and ease of purchase.
- Full stack insurtech: Companies that use data driven tools to produce flawless customer service
The Race for Customer Satisfaction and Challenges
The rise of enhanced customer experience was propelled by technology corporation giants like Amazon and Apple. According to Insurance Business, Amazon is set to venture into insurance with a new partnership with Next Insurance. Similarly, car manufacturing companies like Tesla have started launching their own auto insurance companies. So, what all these companies have in common are immensely data-centric tools, and customer-focused business plans.
It should come as no surprise that companies who have excelled at understanding their clientele through purely data centric approaches would eventually find their way into insurance. So, the interest peaked at the right time. Consumer behavior was changing rapidly in insurance, and innovation was the need of the hour. Experts account this change in consumer behavior to the technological watershed occurring outside the sphere of insurance.
As a result, innovation is central to transformation in insurtech. Innovation drives growth, revenue, and partnerships. Companies who have achieved the highest level of connectivity through innovations will eventually be the winners of the customer experience ecosystem.
Technology in Insurance Creates Value
Insurance, combined with technology was quickly discovered to be a value-creating mechanism. The value lay in building connectivity, both with clients and within the industry insurers. To clarify, a Financial Services Practice report by Mckinsey recommends carriers to rethink their approach in 6 areas of insurance digitalization.
- Strategy: A successful strategy adapts to robust industrial trends and practices.
- Customer centricity: The center of all digital innovation is improving customer experience.
- Business processes: Processes must boost customer experience and reduce operational costs.
- Organization: All organizational models, including corporate culture must support digital tools.
- Technology: Technology ought to maintain transactional systems.
- Decision making: Big data resulting in actionable insights.
Where Does This Leave Us?
The Covid-19 pandemic seeped into 2022 and 2023 as well leading to insurance companies racing to digitize business operations and client relationship management as a result. So, scaling down is the new strategy for insurance agents who have now resorted to remote working. This has increased their flexibility.
Most importantly, the insurance industry may evolve more in a world of continuous and stead-fast change. Premium rates are also increasing as risks elevate on a daily basis. As a result, people face risks of no longer being able to afford insurance in a post pandemic world. Similarly, the government’s role in insurance has been traditionally limited, but there are no renewed government policies in the pipeline that can alleviate policyholders’ risks today.
Insurtech is the driving force behind filling such institutional gaps, and the result can be observed in insurtech companies increasing their total revenue year after year. However, the good news does not end here, the future of insurance is bright. Insurance companies now have digital tools in their arsenal which innovates new-age solutions for new-age problems.
Moving forward, insurtech is set to transform the manner in which insurance is produced, structured, priced, and sold, ultimately transforming the way it is perceived.
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Frequently Asked Questions
What does insurtech mean for agents?
Despite any advancement in insurance technology, an insurance agent’s role is secure, especially in purchase. The change in job functions however, might be the shortened duration of one particular sale. For example, customers are seeking agents towards the beginning or end of their shopping experience instead of throughout. Also, its valuable to maintain agent-client relationship so that the insured will stick to renewal from the same carrier. The challenge for agents now is to seamlessly participate in the insurtech ecosystem.
What are the major opportunities for agents in insurance now?
Find out the gaps in insurance coverage requirements. In most cases, they are only resolved by a qualified agent. Make sure you are well verse in market demands. You should always have impartial advice, coverage options at your fingertips and working on customer retention is the key.
June 6th, 2023 · 6 mins read
- History of Technology in Insurance
- Cloud Technology In Insurance
- On-Demand Insurance
- Flawless Policies Through Insurtech
- Strong Client Relationship
- Application Programming Interface (API) and Artificial intelligence (AI)
- Data Is Everything
- What are the Findings?
- The Three Facets of Technology In Insurance
- The Race for Customer Satisfaction and Challenges
- Technology in Insurance Creates Value
- Where Does This Leave Us?
- Frequently Asked Questions
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