Insurtech is vital for making insurance relevant again. Of course, few would ever argue that insurance isn’t a necessity – it’s often a legal requirement. Yet, many view it as an administrative cost, rather than a premium service with real value. Insurtech can change that.
Insurance is seen as an annual premium that people grudgingly pay and never intend to use, even when they experience a loss. Insurtech can transform insurance into a monthly subscription for a tool you use every single day, like your Netflix or Amazon Prime subscription.
Let’s look at how you can do this and why it’s so important for insurance providers.
The insurance industry as a whole has an image problem.
Firstly, it all seems a bit boring. Organizing insurance, of any kind, requires a lot of paperwork. We might have moved away from the days of pen and paper, but even online forms and emails can feel like a tedious chore.
Secondly, insurance isn’t always affordable and in some cases, it’s prohibitively expensive. New drivers can often find that their insurance is more expensive than the car they are driving. Having access to off-street parking, your postcode, and even your job title can make a difference to your premium.
Thirdly, 79% of customers feel that insurance providers aren’t trustworthy and believe they will try to get out of paying a valid claim. This verifiably false assumption means that a large majority of people will only take out insurance to cover the bare minimum needed to legally protect them from the cheapest provider possible. Then they avoid lodging a claim when warranted for the fear of premium hikes as a result.
This has created a race to the bottom environment. Being the lowest-cost insurer is more likely to see you hitting revenue targets.
In an industry where the status quo has been set in stone for a long time, it pays to be a disruptor. To escape the race to the bottom and win back the trust of customers, insurers need to find new and innovative ways to provide products and services that serve the needs of the modern consumer.
That innovation comes in the form of insurtech.
Insurtech is technology that provides innovative, cost-effective insurance solutions that help companies to escape the outdated legacy systems they’ve been tied to.
The growth of the insurtech industry has been spectacular over the past few years. According to a study by InnovateUK, the insurtech sector will be worth USD 556 billion by 2025. This growth is attributed to several factors, including the increasing awareness of cyber security threats and global volatility affecting both traditional insurers and reinsurers.
Insurtech can provide innovative insurance solutions that are tailored to meet the needs of clients. Data analytics and machine learning algorithms can be used to identify trends in customer behavior. They can assess risks associated with various scenarios. They even recommend appropriate coverage for customers on a much more granular scale than ever before, meaning customers can get a tailored premium.
Best of all, insurtech opens up the world of embedded insurance. This allows providers to offer value-add services, like discounts and exclusive benefits, along with bundled packages of cover for a lower, total premium.
When the lockdowns occurred during the pandemic, accessing in-person healthcare became nearly impossible.
Life insurance claims rose during the pandemic, but claims on critical illness policies actually fell as people were simply unable to get a diagnosis of a serious illness, such as cancer, and sadly passed away before being able to receive any treatment or even make a claim. One has to think that technology must be able to play a part in expediting diagnosis in this kind of environment without the need to visit a physician to undertake a physical assessment.
Insurtech makes it possible to build adaptive hybrid systems that allow for both in-person and virtual diagnostic tools to help customers.
Medical treatment waiting times are still high and many are struggling to get doctors’ appointments at local surgeries. As such, younger generations are investigating the costs and practicalities of private health insurance. Companies that can offer a more-digitized approach to health services will be much more likely to win younger customers. So would companies that work with employers to offer a comprehensive service as part of a workplace benefits package.
99% of UK companies are small- and medium-sized enterprises (SMEs). This is a huge market for insurance – yet the majority of SMEs are underinsured. Insurance sectors, such as car and home insurance have started to move into the digital age. Yet, most SMEs are insured through brokers who offer blanket policies aimed at certain industries.
The pandemic highlighted just how inadequate a majority of the current market SMEs’ insurance models are. Many companies believed they had comprehensive business interruption insurance. Yet, they soon found that it didn’t cover them in a way that meant they could ride out the issues that COVID and furlough caused.
Many SMEs also cut down on their insurance coverage during the pandemic as they didn’t need to cover a workplace that wasn’t being used. Very quickly, the insurance they were sold stopped meeting the needs of modern industry.
SMEs aren’t worried about their insurance; they’re worried about running their business. Insurance is something SMEs purchase from a broker when they set up their business and never think about again. There is no omnichannel distribution in this sector. This means there’s a lack of competitive pricing or an incentive to add value.
With the implementation of insurtech solutions, SMEs would be able to get bespoke insurance packages that relate more closely to the range of services they provide. This offers better value.
Disruptor banks such as Starling and Monzo made massive waves in the business banking sector when they launched, leaving traditional banks struggling to keep up. They made it simpler to manage the financial day-to-day for SMEs and added extra protection for issues arising around open banking, making it an easy decision to switch for many companies.
Insurtech would make it possible to offer insurance as an add-on or partner service to popular SME baking platforms. This would be a surefire way to break into a market that is chronically underinsured. It just needs an insurance company willing to be as much of a disruptor to the insurance ecosystem as the challenger banks were to traditional business banking.
The wide adoption and integration of fintech demonstrates the need for other industries to follow. The implementation of innovative technologies is the only way to grow – or possibly even survive.
Finance and insurance are so intrinsically linked that it makes sense to focus on ways that the insurance industry can implement insurtech to create complementary or add-on services that work alongside modern financial institutions.
The FintechOS platform has been designed to help restore consumer trust in insurance providers by unlocking the valuable information already stored in legacy systems. This can be used to give more tailored and personalized quotes for cover. It can help to better integrate systems and platforms so customers have a seamless experience whether they deal with a company online or on the phone.
Insurtech can also demystify some of the complexity around underwriting. Tools such as chatbots or robo-advisors, and make the whole insurance process more transparent so customers understand how different situations and factors affect quotes and claims.
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