Insurtech — And The Way It Provides A Solution Towards The Insurance Industry
Back in the days, products simply provided solutions to generic needs. Maybe that worked then. However, this approach is now about to become as antiquated as a dial-up phone. Consumers today have more nuanced needs which simple cookie cutter solutions are unable to fulfill. The paradigm has decidedly shifted to product customization and user experience. Delivering customized services most efficiently has become the focal point for many organizations. Technology is abetting this change and helping firms customize their value proposition.
New World Technology
There is an acceleration in the pace of change in the financial services industry, and fintech firms are leading this change from the front. From banking and lending to payments and wealth management, we see fintech firms leverage technology to make financial service more customized and accessible to the average consumer. Insurance is an old business, encumbered by stringent regulations and complex products that find little consumer appeal. However, the insurance industry is now changing and slowly adapting to the new paradigm. Enhanced customer experience, developing new uses, mastering advanced technologies and an upgrade of the entire insurance value chain is changing the face of the insurance business.
Insurtech lies at the confluence of insurance and technology. It’s the technology that is being deployed to create, distribute and administer solutions in the insurance business in an effective and efficient manner. Smartphone apps, wearables, claims processing tools, online policy handling, customized premium pricing, and automated processing are all insurtech. Insurtech is well positioned to reflect the nuanced reality of a consumer’s everyday life and create products that are more intuitive and fit the customer requirement better.
Broad actuarial tables that assign a risk category to policy seekers are a mainstay of the insurance industry. People are grouped in certain risk baskets basis the broad level of data gleaned. Consequently, this results in some people ending up paying more than they should, based on their risk profile. Insurtech is looking to effectively tackle this issue of data assimilation and analysis.
Using inputs from all manners of devices, including GPS tracking of cars to the activity trackers on our wrists, these companies are building more finely delineated groupings of risk, so that the products can reflect the true risk of the individual customer and are priced more competitively.
For example, motor insurance can be tailored through GPS tracking telematic device that can provide micro information about the owners driving habits. The more responsible and risk-averse drivers can benefit from lower premiums or discounts. Insurtech empowers customers to take control of their insurance and make value accretive choices rather than settle for expensive products that don’t really fit their needs.
Insurtechs are also using artificial intelligence (AI) technology to provide a tailored and more customized user experience to consumers. Basis of the customers’ preferences and lifestyle, the technology can quickly summarise and present the most relevant and useful products to the customer. Internet of Things (IoT) can provide insurers with detailed data about customers to help them develop and offer the right products at the right time.
The Way it Has Helped
Insurtechs involvement has immensely helped the insurers view the business from a customer-centric perspective. The adoption of AI, IoT, robotic process automation (RPA) and machine learning has provided a new dimension to the insurance business as it allows for the automation of a lot of mundane and redundant tasks. Insurers, with the help of insurtechs, can develop products to better meet the ever-expanding and changing needs of customers. Emerging technologies will not only enhance customer experience but also introduce operational efficiencies to back-office operations. While technology brings with it myriad benefits, insurance companies must also be cognizant of the accompanying risks. Companies must have adequate safety and risk mitigation tools in place to ensure data security and sanctity.
The insurance business is notoriously characterized as being risk-averse, in contrast to the agile and disruptive methods of startups. However, insurance companies must view insurtechs as the harbingers of positive change and devise ways to mainstream technology into legacy cultures that are unaccustomed to the speed and agility of insurtech.