Insurtech is beginning to bring policyholders inside the “black box” of insurance to understand how their decisions are influencing their costs.
Insurtech has increased access to real-time data and improved transparency in tailored pricing. Taken together, this has begun to positively inform and shape policyholder behavior by linking actual behaviors and decisions directly with risks and costs.
Historically, pooling capital and sharing or transferring risks for occasional and unpredictable losses was a natural response to everything from auto accidents to employee injuries to weather-related crop loss. But today, insurtech is fundamentally changing this foundational concept of responsive insurance products.
Through real-time data capture, narrowly designed coverages, usage-based insurance (UBI) and newly enabled transparency with the policyholders, insurance is moving into a stage of shaping and shifting consumer behavior.
Transparency and timeliness, linking actual behaviors and decisions directly with risks and costs, are beginning a fundamental shift in how insurers interact with policyholders.
The implications of these are far, and nowadays, insurance is no longer just a standard market cost that a consumer needs to occasionally shop for new policies. Insurtech now is beginning to bring policyholders inside the black box of insurance to understand how their decisions are influencing their costs.
The early phases of this market-shifting transparency and communication are most immediately notable in segments such as wearables shaping consumer health choices or telematics shaping actions of drivers and fleet managers.
However, the implications of this shift are only just beginning to be realized and that from the policyholder’s perspective, Insurtech is increasing transparency in a historically opaque and asymmetrical marketplace.
Much broader consumer engagement and awareness are enabling informed decisions as well as more affordable and on-demand products, allowing policyholders a broader range of options for protection from, or mitigation of, risk.
For example, drones and other similar data capture devices are revolutionizing agricultural insurance products through several layers of technological innovation. With the aid of drones, low-cost sensors, visual pest identification, autonomous machinery and Internet of Things-based devices, insurers are beginning to bring to market agri-insurance products that are tailored to a farm owner’s risk profile. Big data and real-time feedback allow many carriers to adopt this coverage dynamically based on factors such as changing weather risk and risk-mitigating actions taken by farm owners.
Other startups allow consumers to seamlessly engage with insurance products through text, voice, and images. Some companies go a step further as “true mobile claims solutions” that enable customers to settle claims with virtually zero manual intervention.
Besides influencing and shaping policyholder behavior, here are some identified impact of insurtech:
- Insurance for all — The growth of hyper-specialized, just-in-time and parametric insurance products is reducing barriers to consumers accessing tailored risk reduction coverage. This shift is particularly important for historically underserved customers such as small businesses, independent contractors and lower-income consumers
- Micro-transformation to meet macro-risks — Insurtech is being driven by two ends of the insurance industry spectrum. One is an explosion in millions of new sources of predictive data inputs and processing tools, allowing tailoring and segmenting of coverages and pricing. The second is large-scale systemic and emerging trends like climate change, geopolitical and macroeconomic instability, and cyber risks. Some of the most promising and high-impact use cases of Insurtech are emerging from the intersections of these two scales of activity.