Innovation often lies at the intersection of two or more already existing fields. A ground-breaking invention is never born out of the ether. It’s built on dozens of other inventions that came before.
Insurtech, being at the crossroads of technology and insurance, is one such example. It’s not a reinvention of the wheel, but it’s still a new way to approach the insurance industry.
Let’s delve into the topic.
Insurtech In A Snapshot
Insurtech is a market with products that use technology to improve insurance services, reduce costs in the insurance market, and find new ways to help customers get better insurance.
Insurance is one of the oldest markets in the financial sector, so the prominence of insurtech is derived from the field’s opportunities for technological innovation. Insurtech existed as a niche since about 2010, and in the span of almost 12 years, insurtech businesses have focused on:
- Improving business processes in the insurance market with the help of technology.
- Cutting costs for insurance providers.
- Document and application process improvement.
- Implementing better pricing and business plans for customers.
- Improving customer service.
- Implementing Artificial Intelligence technology in customer service, product development, and data analysis.
- Using blockchain technology to improve data storage practices.
- IoT (Internet of Things) applications help track insured assets better.
This is what insurtech is focused on. Is there any more room in the market?
Insurtech In Numbers
Last year, the insurtech market was estimated to be worth $2.72 billion. Since the entire insurance market’s worth is in the trillions of dollars, this number alone shows that insurtech is still ripe with opportunities, and potential for growth.
But the market has doubled in the past three years, and investments in insurtech are worth over 7 billion dollars across all verticals. So the competition is active in the scene as well.
And it’s no wonder. Insurtech technologies can reduce application processing times by ridiculously high margins.
And business or investors aren’t the only happy participants in the market. 44% of customers say that they’ll switch insurance providers if the alternative is more digitized.
It’s safe to say, insurtech is a strong disruptive force, one that’s expected to grow in the coming years. For entrepreneurs and startup owners that want to capitalize on the opportunities of insurtech, it’s crucial that they hop in the market as soon as possible.
The latest trends in Insurtech
The best way to understand insurtech as a market today is to look at the dominant trends in the industry. We’ll list some of these trends below, but it’s important to remember that a disruptive market like insurtech is developing at a very rapid pace. New technologies can hit the market really quickly, and change its layout considerably.
Artificial Intelligence and Machine Learning
AI is one of the biggest trends going around in the insurtech niche. To be fair, it’s a big development that’s taking over any tech-oriented space. But in insurtech specifically, AI has a few very helpful applications.
AI helps with repetitive tasks that insurance agents have to perform, like support, site assessment, and application processing.
In turn, machine learning algorithms can analyse these tasks, and figure out ways to improve them.
A subset of machine learning and AI data processing, predictive analysis helps insurance companies predict customer behaviour and needs. By processing huge sets of data, computers can notice patterns that would otherwise elude us humans.
While this has applications in customer service, it’s also a great tool for security. Predictive analysis helps improve fraud detection, and stop security threats in their tracks.
Blockchain is a specific type of ledger that stores data in a decentralized fashion. This way, all transactions are transparent, and virtually impossible to hack. It’s the basis for cryptocurrencies, and it gained some notoriety in the insurtech market.
To be more specific, blockchain helps insurance companies create and execute contracts instantly, while also protecting data from prying eyes.
Internet of Things (IoT)
Internet of Things refers to physical objects that are embedded with sensors, processing ability, software, and other technology that connects them to a wider network. IoT devices are used to enhance homes, vehicles, or even warehouses.
In insurance, this can help agencies and insurance holders track their assets better. The best example is for a fleet of vehicles that can now send real-time information about their whereabouts and status.
Mobile traffic has swept the internet in the past decade. 6.4 billion people own a smartphone worldwide. The average US adult spends almost 4 hours on their phone everyday. Needless to say, mobile is a huge medium for businesses of all shapes and sizes.
Mobile applications are the cornerstone of business development in this medium, and in the past years they have made an entrance in the insurance market as well. So far, mobile applications have helped with:
- Easy access to premiums for customers.
- Better data collection for insurance agencies.
- A deeper understanding of customer needs and engagement behaviours.
- Better communication with potential customers.
Mobile applications act as a bridge between insurance agencies, and customers. And at this point, they’re not a luxury - they’re a necessity. But true innovation in insurtech can only come from mobile applications if agencies break outside the norm, and find more ways to leverage mobile device usage.
The merge of insurance with technology has brought about a ton of new opportunities. But with it came even more security threats as well. In a world where technology capitalizes more and more of the market, hackers, cybercriminals, and fraudsters also find new ways to capitalize on vulnerabilities.
That’s why sustainable growth in insurtech only exists along with a strong cybersecurity strategy. Without good protection, insurtech companies are constantly at risk.
But that’s not the grim note we should end on. Because cybersecurity is not a far-removed magic, inaccessible to all start-ups. It’s just a box to tick. And once entrepreneurs take care of it, they can focus on driving innovation in the insurance market.