Insurtech 101

A group of robots standing under an umbrella.

Hey there! Are you excited about the latest technology trends in the Insurance industry? If so, you're in the right place!

Insurtech startups are coming up with all kinds of clever ways to use technology to make insurance more affordable, accessible, and easy to understand. They're shaking up the traditional insurance industry and making it more modern and customer-focused.

In this blog, we'll explore the coolest trends and latest developments in the Insurtech space, and share our thoughts on how startups are making the insurance landscape a better place.

The Fintech Family

Have you ever wondered why the fintech sector is growing so rapidly? The answer lies in the unique combination of technology and finance that the sector brings to the table. One of the biggest advantages of fintech is its ability to address the needs of underserved or unbanked populations. Through mobile apps and digital platforms, fintech companies are reaching people who have been traditionally excluded from the financial system. People are increasingly comfortable with managing their finances online and using digital tools to save money, invest, and access credit. Also, the pandemic has accelerated the adoption of fintech. With people staying at home and businesses forced to go digital, fintech has become a lifeline for many.

Insurtech is like the cool, younger sibling of the fintech world. They're both in the same family of using technology to make financial services better, but Insurtech focuses specifically on the insurance industry. So, if you're interested in fintech, you'll definitely want to keep an eye on what's happening in the Insurtech space too!

Here you can see this 🔥 family by cbinsights:

What is wrong with the Insurance market anyway?

Let's talk about the insurance industry in general for a moment. While insurance is an important part of our lives, it's no secret that the industry is far from perfect. One of the biggest issues is the lack of transparency and customer trust. Many people feel like insurance companies are more concerned with their bottom line than providing quality service and fair prices. In addition, the claims process can be lengthy and confusing, leaving customers frustrated and dissatisfied. Another problem is the complex and outdated systems used by many insurance companies, which can result in slow response times and errors. Let's go back a bit to the fintech family, raise your hand if you don't have at least one bank account manager or investment app on your smartphone. I assume most of you do. Now let's see how many of us have some sort of insurance-related app on our smartphones? Now that's a tougher one and I guess most of you would answer that you do not have such an app installed.

If you think about it, digitalization is not new in the insurance market. Anyone can buy insurance online for at least 10 years. Well, of course, these services are mostly stuck at that level. But why is it that banking services have adapted to new customer needs much faster?

Last year, Mckinsey addressed nine imperatives for the insurance players that can help “how to play”. Apart from the general problems, which mostly concern all industries, I would like to highlight the specific ones:

  • Regain relevance through product innovation and coverage of new risks.
  • Enhance and personalize customer engagement and experience.
  • Engage with ecosystems and Insurtechs.
  • Scale impact from data and analytics.
  • Modernize core technology platforms.

So that's why we're talking about Insurtechs, these are the things that prove the existence of these companies. I don't blame the big old insurance players, think how difficult it must be for such huge companies to change their complex processes. Nor do I think that Insurtech should have the goal of beating these long-established but slow-moving insurers. The best thing for the market and for customers is to combine knowledge accumulated over centuries with fresh and flexible game-changer ideas and solutions.

What impact has the COVID-19 pandemic had on the industry?

According to the founder of wefox, one of Europe's hottest Insurtech companies, the insurance market is one of the most crisis-resistant markets. I would be a little more cautious than that, but the fact is that there has been a very rapid digital transformation in the insurance market in the last two years. Insurance companies have developed completely new customer processes and new digital services in just a few weeks, and this has certainly benefited customers. Deloitte research shows that the pandemic vastly accelerated claims transformation plans among insurers. A number of carriers noted that the percentage of claims being handled virtually (often with imaging technology over mobile apps) and digitally (with automated straight-through processing) skyrocketed last year from single digits to as high as 55% at one personal lines insurer interviewed. Meanwhile, J.D. Power’s 2021 US Property claims satisfaction study found that carrier acceptance of customer photos and videos for settling claims grew from 61% in early 2020 to 68% during the pandemic.

What is next in the Insurance industry?

Actually, not next, but already now. Because a lot of exciting things are happening in the tech world and this is actively affecting the insurance space. Let's take a look at some of the trends that are already transforming the world of traditional insurance.

AI (Artificial Intelligence)

Let's start with the hottest, of course. Do I have to explain what AI is in the first place? I don't think so. It was recently addressed by Bill Gates, who said that in his lifetime he had seen two technological demonstrations that seemed revolutionary to him: the graphical user interface and artificial intelligence. There is no area where AI hasn't kicked the door down recently. I think it's a foregone conclusion that AI will be the word of the year. The hype started with image-generating AI like Midjourney, and then peaked with the success of the ChatGPT language model. And now, a song that uses artificial intelligence to clone the voices of Drake and The Weeknd is going viral on social media. Not to mention how many new AI tools we suddenly have at our disposal to produce media content. But how is it present in the insurance industry and what opportunities does it open up?

It can be useful in many cases. I would divide the opportunities into two groups, one in customer service and one in insurance products. Let's look at customer service, where there are quite a few customer pain points, such as a lack of information or difficulty in dealing with processes. Think how much AI can speed up and facilitate these processes. As a customer, I can ask for information about anything in any language, I don't mind asking stupid questions, and I don't have to worry about being taken for a fool by a real person. I know, I know, there are no stupid questions, but let's face it, when you call customer service or chat with someone, you always think about what you want to ask, or sometimes you are even afraid to ask things, and I think that fear can disappear with an AI chatbot that can communicate like a real person. And then there is the customer support activity, how helpful it would be for customer service colleagues in the insurance industry if an AI could help them to answer specific questions immediately, and even help them with how to answer them to ensure the customer is satisfied. A real example is Lemonade's chatbot, which can investigate and make claims in seconds without any real human intervention.

Okay and then let's look at the products. I think that big data in the insurance sector deserves its own blog post. With big data and AI, we can completely reshape the way insurers offer. A database can build from IoT devices, recorded online activity, and financial information, it has a lot of potential for insurers. To process it, especially in real-time with human resources, is near impossible. This is where AI can help to identify patterns in the data, which can lead to better claims risk calculations or reveal new risks. Ultimately, the customer will be the real winner because they can get better pricing and more personalized insurance offers.

Thanks for reading this, we will continue from here in the next blog, which will focus on embedded solutions, among other things.

In the meantime, visit our website, where you'll find lots of interesting stuff like our super cool flight insurance solution:

🧙🏼 Insurwiz Technology - We make it smart - Quick. Safe. Simple.

See you soon!

Ádám Ferenczi