Insurtech is revolutionising the insurance industry. With applications in almost all aspects of insurance, from underwriting to risk analysis and customer service, the rise of Insurtech is changing the way insurance packages are designed and delivered to customers.
Back in 2016, 32% of insurance companies didn’t work with Insurtech at all, according to a survey by PwC.
Fast forward a few years, and 73% of insurance CEOs agreed that they are personally prepared to lead their organisation through radical transformation to remain competitive, according to KPMGs 2019 Global CEO Outlook.
What is Insurtech?
Insurtech companies specialise in developing cutting-edge technologies for use in the insurance sector. These technologies are improving and in some cases replacing existing insurance services, making the entire insurance process simpler and more efficient for both brokers and customers.
There are many different elements and areas of specialism in Insurtech, including Artificial Intelligence, machine learning, drones, and the Internet of Things. Artificial Intelligence (AI), a term most of us already know, refers to the use of software and programs to perform tasks which previously required human problem-solving.
One of the most well-known examples of AI in consumer insurance is the use of chatbots, which can answer customer queries promptly and accurately, improving customer experience and freeing up valuable staff for more important tasks at the same time.
The Internet of Things (IoT) is a fascinating glimpse into the future of Insurtech. IoT is a network of ordinary appliances and objects which are connected to the internet for the purposes of collecting, retrieving, and sending data. Smart watches, for example, can now be connected directly to the internet without a smartphone and log near real time health data to the cloud that could be used to calculate health insurance premiums.
Telematics is another great example of how IoT is changing insurance; for example, telematics can be used to store and send data from a vehicle about a driver's habits, including speed, braking patterns, acceleration and distance driven, in order to inform policy-making and risk assessment decisions.
Why is Insurtech important?
Insurtech has applications across the entire insurance process from customer service to underwriting, submission triaging and risk analysis. The purposes of Insurtech innovations are not just to streamline work for insurers and brokers - they're also designed to make finding policies and making claims easier for customers.
Insurtech will allow insurance providers to offer tailored, secure and convenient insurance policies to customers who will have the choice of hundreds of insurance policies at their fingertips - literally.
The insurance industry is changing. Within a decade, telematics will drive car insurance policies and customers will be able to drop in and out of such insurance policies on a pay-per-use basis.
Wearable devices and smartphones will send data to brokers to inform policy decisions and risk assessments. Smart contracts will make managing customer policies and claims simple, transparent and secure.
Insurance providers who don't invest in Insurtech will slowly be squeezed out of a changing market, which is why it's important for forward-thinking insurers to recognise the role of Insurtech in their industry today.
How can insurance providers use Insurtech to their advantage?
Investing in Insurtech doesn't need to mean overhauling your entire process. Insurtech can be used to enhance or upgrade many aspects of traditional insurance brokerage one step at a time.
Customer engagement - Chatbots, social media and lifestyle apps can be used to improve customer engagement and promote brand loyalty in a way that has yet to be seen in the insurance sector.
Underwriting - Machine learning technologies can help underwriters to analyse data, flagging up inconsistencies and examining external sources such as social media for extra information. We wrote about AI in commercial underwriting recently.
Risk assessment & submission triaging - Insurtech methodologies can be applied to risk assessment to analyse and predict risk, finding previously unknown risk correlations and offering risk-adjusted prices to customers. Artificial’s software can help automate submission scoring and triaging with machine learning.
Fraud identification - According to the ABI, 1,300 insurance scams are uncovered every day with the average con costing £12,000. By analysing data from a wide range of inputs, machine learning and AI can make fraud detection more reliable and flag up potential concerns to brokers before a single file has even been opened.
Our cloud-based platform incorporates many of these technologies to fully digitise the quote, bind, and issue process for traditional insurance brokers. This includes sophisticated data collection and enrichment, automated intelligent triaging, and digital contract negotiation.
How fast is the Insurtech industry growing?
If some of the insurance industry has been slow to realise the implications of Insurtech, then the Insurtech sector made up for this lack of pace with unprecedented innovation. The global Insurtech market today is valued at $5.48 billion, and it's expected to reach $10.14 billion by 2025, almost doubling in less than five years.
Health insurance is thought to see the highest growth in terms of Insurtech uptake, although other markets will follow closely behind. Smart devices such as wearable health trackers and IoT technology will contribute to the way health insurance policies are designed and assessed, and incentivising customers to improve their lifestyles to improve their premiums.
Soon, other sectors will follow suit. Insurtech is no doubt one of the fastest-growing branches of Fintech out there; it has quickly become a global industry with new start-ups cropping up around the world every year.
London is unsurprisingly emerging as a hub of Insurtech in Europe, with UK Insurtech companies having received an impressive $2.6 billion in funding in 2018.
The Insurtech community is growing alongside the sector in London, with many organisations offering expert support to burgeoning Insurtech businesses in the City. One such outfit is InsTech London, who are working hard to build a community among the City's brightest Insurtech companies by supporting research and innovation and encouraging collaborative thinking across the field.
Another key player in London's Insurtech community is Lloyd's Lab, who offer mentoring, networking, and funding opportunities to Insurtech start-ups in the UK. Artificial were delighted to announce that we were recently accepted into the fourth cohort of the Lloyd’s Lab ten week accelerator programme.
Between them, organisations like InsTech London and Lloyd's Lab are contributing invaluable amounts to the progress, development and expertise of the UK Insurtech sector.
For more information, get in touch.