The insurance industry is one of the oldest financial industries. Insurance is often considered a dreaded and confusing task but it is an important aspect of everyday life and offsets the risk of unplanned or unfortunate circumstances. Insurance protects those that we love and things that we cherish, including our lives, family, pets, properties, tangible assets, travels, and businesses. In some instances, the law requires us to provide insurance coverage, an example being automobile insurance in the UK and US.
Historically, the insurance industry has antiquated manual processes and business practices. It is reluctant to embrace innovative methods that determine a consumer’s eligibility and pricing, often citing strict regulatory and compliance standards as the reason. For instance, a consumer is placed into a category based on common risk factors, and their eligibility and insurance premium is based on the risk to the company. Therefore, broad categories could result in a customer being categorized incorrectly, causing them to pay more than they should for insurance. So, the resistance is likely intended to sustain their current level of profitability and that of their stakeholders. However, insurtech is on the fast-track to initiate change, challenging the insurance industry to digitally transform.
Insurtech is a subset of fintech, designed to make the working model in the insurance industry more efficient and cost-effective by becoming digitalized. Insurtech uses data analysis and deep learning trained AI to complete administrative broker tasks and blockchain technology to access documents, facilitate authentication protocols, complete underwriting, and process claims. The pairing of AI and blockchain technology greatly reduces administrative costs, ensures security, and increases transparency. Data gathered from the Internet of Things (IoT), such as apps, wearable fitness & health trackers, and devices that monitor auto-driving behaviors are used to improve eligibility criteria, customize policies and introduce competitive pricing.
The pandemic in 2020 forced the average digital-resistant consumer to become digital-savvy and they have realistic expectations that were established by the transformation in retail and financial trends. They want self-service technology and one-stop shopping. They want more options, comparison pricing, and customized coverage to meet their needs. They want efficiency and expediency and the ability to communicate questions & concerns according to their scheduling availability. Insurers in the auto, home, health, and life industries risk being edged out by the competition if they do not capitalize on the insurtech revolution.
Written by Kourtney Manley, Business Analyst at OnlineApplication