Insurance Technology (Insurtech) & Its Impact on the Insurance Industry

 

What Is Insurtech?

Insurtech refers to the use of technology innovations designed to find cost savings and efficiency from the current insurance industry model. Insurtech is a combination of the words “insurance” and “technology,” inspired by the term fintech.

Understanding Insurtech

Insurtech is premised on the belief that the insurance industry is ripe for innovation and disruption. Insurtech is exploring avenues that large insurance firms have less incentive to exploit, such as offering ultra-customized policies, social insurance, and using new streams of data from Internet-enabled devices to dynamically price premiums according to observed behavior.

Regarding traditional insurance, some people pay more than they should be based on the basic level of data used to group people. Among other things, insurtech is looking to tackle this data and analysis issue head-on. Using inputs from all manners of devices, including geolocation tracking of cars to the activity trackers on our wrists, these companies are building more finely delineated groupings of risk, allowing products to be priced more competitively.

In addition to better pricing models, insurtech startups are testing the waters on a host of potential game-changers. These include using deep learning trained artificial intelligence (AI) to handle the tasks of brokers and find the right mix of policies to complete an individual’s coverage.

There is also interest in the use of apps to pull disparate policies into one platform for management and monitoring, creating on-demand insurance for micro-events like borrowing a friend's car, and the adoption of the peer-to-peer model to both create customized group coverage and incentivize positive choices through group rebates.

Importance of Insurtech

Insurtech plays an important part in changing how coverage is applied and paid for in a number of different ways:

Insurtech enhances the customer experience. By leveraging technology, customers are more engaged in selecting their coverage, understanding their needs, and getting personalized service. Instead of having to travel to a branch or speak to a representative, the future of insurtech is moving towards self-serve, online dealings where customers have their choice of engagement channel.

Insurtech promotes efficiency. Policy-seekers and policy-holders can often research and explore options using the internet and apps. Without having to wait for business hours or an available representative, many insurtech companies empower users to quickly access the information they need without being bogged down in processes.

Insurtech emphasizes individuality. Due to the innovative nature of information gathering and data processing, many new tools (discussed below) are now available to better understand each individual's true needs. This not only improves pricing but delivers more reliable, consistent coverage based on historical data.