Insurtech: what is it?
by Heat Recruitment
By now, it’s likely you’ve heard of FinTech, a portmanteau term used to describe – you guessed it – the marriage of financial services and technological innovation. Last year, the fintech industry received a staggering $17.4 billion in investment and, according to EY’s Fintech Adoption Index, a third of consumers worldwide are now using two or more Fintech services.
Yet, it’s unlikely you’ve heard about the emergence of a new power couple:
Insurance and Technology – also known as insurtech. Like fintech, insurtech is simply the application of modern technologies to address long-running issues that exist within the industry. Considering the complex nature of insurance, it’s a welcome development for customers across the world. But how will it change the game?
The current landscape
While many industries have been quick to adopt the latest technology in innovating their products and services, the field of insurance has somewhat lagged in digital transformation. Whether due to heavy regulation, the nature of the industry itself or a combination of the two, Insurtech has taken a lot longer to get off the ground.
However, while existing firms have, on a whole, been reluctant to dip their toes in the water of emerging technology, a raft of plucky start-ups have been leading the way. Today, these smaller, leaner organisations are trying to rewrite the rules of how insurance is bought and sold. Their aim? To give the people what they want: positive, simple, transparent experiences.
As it stands, the insurance industry contributes over 25% of the UK’s total net worth. That’s a significant chunk by any definition – yet, only 47% of consumers claim to have had a good experience with their insurer. When the focus shifts towards the younger generation, the Capgemini World Insurance reportfurther revealed only 37% of Gen Y customers were satisfied with the level of service received from their insurer.
Finally, the combination of technological evolution and growing entrepreneurial spirit within the sector is starting to turn this around.
How insurtech works
Insurtech businesses vary in how they work, but on a whole, their primary function is to make it easier for people to get a tailored insurance quote and purchase the right policy. Some of these insurtech start-ups are leveraging data to gain a better understanding of the individual in order to create a personalised experience and on-demand, bespoke offers.
Of course, data has always been central to insurance – for example, car insurance is typically more expensive for young people as data shows a higher correlation between young drivers and accidents than with their older counterparts. However, thanks to the mass-adoption of smart phones and the continued expansion of the Internet of Things, insurtech companies today are presented with an opportunity to revolutionise the process of purchasing insurance altogether.
Already, in-car monitoring technology, wearable activity trackers, customer-facing apps and SaaS platforms managing payment and coverage have shown potential in transforming the industry: by harnessing the data drawn from these apps and devices, insurers can improve the coverage of an individual and make more accurate risk-related predictions.
Looking to the future
As the Internet of Things ecosystem continues to grow, it’s likely we will soon see a change in the way insurers assess risk. Considering the real-time data they will have access to through wearable technology, mobile apps and virtual assistants, insurers could advise and incentivise customers to reduce their overall risk profile in order to secure a cost-effective policy.
As it stands, insurtech is still in its infancy. However, as technology evolves, everything from how you manage your home to how many steps you take will be analysed to create a big picture of your risk level. In the future, dynamic pricing and customisable offers will be the norm; the days of uncertain policy purchases a thing of the past.
By Dave Dewey