Basically, the InsurTech movement presents more technology-related opportunities than ever seen before, highlighting the need for traditional insurers to design a balanced strategy which ensures a return on their investments in innovation without a loss of focus.
The WIR report, published last week by consulting giant Capgemini and non-profit industry body Efma, found that nearly one-third (31.4 percent) of customers relied on InsurTech solutions, either independently or in combination with an established insurance company.
What is InsurTech?
Insurance is one of the oldest businesses in the world. Generally, insurance companies use actuarial tables to assign policy seekers to a risk category. A particular group is then lumped together to ensure that, overall, the policies are profitable for the company. In this method, some people end up paying more than they should based on the level of data used to group people.
This is where InsurTech comes into the picture. An offshoot of the financial technology (fintech) sector, it”s a rapidly evolving movement aimed at simplifying and improving the efficiency of insurance, making it more personalized.
InsurTech companies are utilizing a number of emerging technologies such as Artificial Intelligence (AI) and blockchain, along with the technology behind driverless cars, drones, and voice-recognition software. They act as catalysts for this InsurTech revolution and are driving a myriad of innovations in digitization, data and analytics, and insurance-as-a-utility.
InsurTech startups have introduced a vast array of products, from a system warning ships of nearby pirates to an app offering to buy sleepy drivers a coffee on the highway, all in an effort to save on the cost of insurance claims. As a result of this, the market has become highly competitive.
Continued reliability on technology
As a matter of fact, according to the WIR report, over 100 senior executives from various insurance firms in 15 markets were interviewed, and a strong majority (75 percent) said that developing InsurTech capabilities would help them better meet customers’ evolving demands. More than half (52.7 percent) agreed that having InsurTech capabilities would help them quickly design personalized products.
According to the report, AI, blockchain, and drones were among the driving factors of the InsurTech revolution. “The continued reliance of consumers on digital technologies that support mobile apps, social networking, on-demand services and the like makes it clear that the mass market has entered a new phase,” Vincent Bastid, secretary general at Efma, said in a press statement Wednesday.
“The insurance industry serves the masses and must adapt to the new terms of engagement. Collaborating with InsurTechs is an optimal way of incubating and accelerating digital innovation.”
The risks in using InsurTech methods
Interestingly, there has been some backlash, despite the rapid growth of InsurTech in the U.K. and Europe. The biggest growth was seen in Britain, where despite the vote to leave the European Union, it hit $279 million in the six months to end-June, from $9 million a year earlier, an analysis by Accenture of data from CB Insights showed.
In the rest of Europe, investments in InsurTech grew from $97 million last year to $134 million. Some insurers are even forming partnerships with InsurTech firms.
In Britain, InsurTech firms put their focus on social media to assess the probability of claims, fueling concerns about data security. Last year, Admiral, an automobile insurance company in Britain, had to abandon its plans to take data from Facebook to set insurance premiums following objections from the social media company.
The Federation of German Consumer Organisations (VZBV), also sees big risks from using big data in fixing insurance rates, fearing the trend will end up assigning risk based on social media norms, something many people see as discrimination. Needless to say, insurance companies are being told to consider the legal implications of using social media data.
