AI, machine learning, and other tech tools will make getting insurance faster—and cheaper—than ever before.
“Insurtech” — this buzzword is on everyone’s lips right now, and it’s no surprise with the tremendous tech advances happening within the insurance industry. In an epic display of growth, the insurtech global market revenue was valued at 5.48 billion in 2019 and is expected to reach 10.14 billion by 2025. So yeah, it’s kind of a big deal. But, while that’s all cool and interesting, you’re probably wondering what insurtech even is and how it affects you. Well, lucky for you, we’ve got some of those answers. Read on to learn more about this growing industry and how it’s transforming the insurance landscape.
- What is insurtech?
- How has insurtech reshaped the insurance industry?
- Why should you care about insurtech?
- Who are the key players in the financial revolution?
- In conclusion
What is insurtech?
Insurtech is short for “insurance technology.” It’s an amalgamation of the words “insurance” and “tech,” which makes sense since these two worlds have been colliding for a while now. At its core, insurtech is any technology used by an insurance company to streamline it’s day-to-day processes and the industry as a whole. Wearables, smartphone apps, and even drones are examples of insurtech.
By taking an old and time-intensive process and streamlining it, insurtech has made getting insurance as easy as ordering paper towels on Amazon.
But how? Well, If you’ve ever had to purchase insurance, you know it can be a hassle. You usually have to call one or more insurance providers, wait to speak with someone. Once you finally get through, you have to share your life story—from detailing your living situation and describing various insurable items. And you’re probably looking at a minimum of an hour or so on the phone. Not ideal. With insurtech, you can get a quote or submit a claim directly from your phone or computer without having to interact with any pushy salespeople or annoying claims processors.
So, If convenience is your thing, insurtech is where it’s at. It’s truly made navigating the insurance world easier than ever. Some cool examples of insurtech companies include home and renters insurance provider Lemonade—they let you file a claim via video chat. Yep, you read that right—VIDEO CHAT. Then there’s Root, which is “car insurance for good drivers”. The company monitors how you drive through an app on your phone. The safer you drive, the more you save. Pretty awesome. It seems like having a bot with a cool name and an even cooler look running the show is a genius concept.
How has insurtech reshaped the insurance industry?
We live in the age of data. Today, tech is progressing at a rapid rate, and many industries are straight-up being disrupted. And that’s exactly what’s happening with insurtech and the insurance industry. Traditionally, insurance companies had been slow in adopting the latest technologies. And for the customer, buying insurance has long been viewed as a dread-filled experience with annoying salespeople, piles of paperwork, and overall uncertainty in what is actually covered.
Until recently, insurance companies used basic data to group people based on individual risk factors. While an easy and of course profitable way of providing insurance, using such basic info meant that some people would be paying more than they need to. Not exactly fair or enticing to customers. Recognizing a need to tackle this issue head-on, traditional insurers found themselves scratching their heads while thinking of ways to simplify their processes.
Insurtech companies are a relatively new thing. They exist thanks to this cultural shift within old-school insurers looking to keep up with a more connected and streamlined world and stay competitive. With this in mind, many of these companies took it upon themselves to launch more innovative products and really build tech into the core of their offerings. Tech to not only keep up with the digital transformations happening all around them but tech that would also entice an entirely new generation of younger, more savvy customers. The winning model, they discovered, was to combine the traditional strengths of established insurers (like themselves) with newer solutions from insuretech companies. With that, they were able to offer more streamlined products that would be more accessible, and lower in cost to both themselves and the policyholders. Seems like a win-win for all involved.
Why should you care about insurtech?
Now that you’re getting the gist of what insurance tech is all about, you’re probably wondering how this affects you. Well, If you have any sort of personal insurance policy or you’re thinking of getting one, keep reading. The most visible examples of insurtech come from the world of personal insurance—life insurance, health insurance, auto insurance, that sort of thing.
Long gone are the days when your insurance policy would only reflect the demographic you belong to or what you look like on paper.
Thanks to insurtech like wearables that track your fitness activity and sleep patterns, smartphone apps that monitor how you drive or how often you work out, and EKG monitors that keep tabs on your cardiovascular health, insurance policies are now more reflective of the risk posed by the individual instead of factors outside of their control. And while age, assigned sex at birth, and other bio info sometimes plays a part in what a policy may look like, it’s nice to live in a world where you can potentially negotiate lower premiums by adopting healthy behaviors and living more of a health-conscious lifestyle.
But, the wonders of insurtech don’t end with ultra-customized policies. From predicting and planning for uncertainty to speeding up the claims process to planning for natural disasters, insurtech can be found in all areas. For example, Insurtech has also allowed insurers to create opportunities from threats—this has been recently evident with the COVID-19 pandemic. Such a rapid acceleration of the pandemic has brought to light the need for faster innovation in the healthcare and insurance industries. From general telehealth to personalized at-home testing kits for high-risk diseases to virtual home inspection software—the onset of COVID-19 gave insurtech companies the opportunity to step up and use their innovations to help solve the needs created by the outbreak.
And when it comes to claims, some companies have been able to fully automate the process using AI and more specifically something called a Robotic Process Automation (RPA). This RPA can be used to automatically flag fraudulent activity or anything that looks inconsistent and bring it to the attention of a human. It can even automatically approve your claim. For example, let’s say you were driving along and unfortunately got into a car accident. If you had any insurtech linked to your car, that system would automatically send all relevant info directly to your insurers. From photos of the accident to your driving behavior to even the route you took. AI would assess it all and then potentially approve your claim in an instant. Free from manual labour, the whole process would be simple, easy, and stress-free (minus the actual accident part, of course). So essentially, this speeded up claims process allows for the policyholder to save some precious time and the insurer to cut down on admin costs. Once again, a win-win. Pretty cool, right?
Oh, but there’s more. Some insurers go even as far as using data mapping to predict natural disasters and assess risk. By using catastrophe modeling tools, they can manage any risks associated with, let’s say, a hurricane or an earthquake. And by keeping a tally of said disasters, insurtech companies can start tailoring the portfolios to these weather events and also help customers like you in a timely fashion. So yes, when it comes to the future of insurance, you could say the winds of change are quite literally blowing.
Who are the key players in the financial revolution?
Now that we’ve explored the nooks and crannies of insuretech, let’s get to know a few of its cousins. So, with the global financial crisis of 2007, the financial world saw some crazy reforms. There was a flurry of new business models, products and services based on tech innovations—most of these living under the financial technology (fintech) umbrella. In fact, there is an entire subset of different types of tech that lives under fintech— regtech, proptech, and of course, insurtech, to name a few. So here are some brief explanations of these terms in case any pop quizzes come your way:
A play on the term regulatory technology, what regtech does, in a nutshell, is that it allows companies to automate their regulatory compliance in a world of ever-changing rules. An example of regtech in play would be a company using AI to find and house any regulations that affect them in real-time. Or, a company using blockchain tech to stamp out fraudulent activities like money laundering. However, regtech is not just one tech solution. It involves a number of things from machine learning to electronic forms, fraud detection to risk management—basically anything that has a regulatory purpose. And it uses AI, data, biometrics, and more to minimize human error. But why are we telling you this? Well, we thought you should know since regtech exists to deliver fairness and trust to consumers like you. It allows for greater transparency and ensures that you get as close as possible to a compliant experience in your financial dealings. Pretty sweet, right?
Proptech, aka property technology, is another fun buzzword, and also another subset of fintech. It defines startups that offer cool or interesting tech products or business models for the real estate industry. From splitting bills instantly to booking contractors to receiving email receipts for expenses and more—some say Proptech has revolutionized the way people handle their finances on a day-to-day basis. But how does it relate to insurtech? Well, the insurance, financial and real estate industries have always been closely linked. And any disruption in those respective fields is bound to spill over to the insurance sector. It’s just something to be aware of.
Bonus term: SaaS
So although Software as a Service (aka SaaS) is not a subset of fintech, it’s a good piece of jargon to know as we get into the insurtech story. So what is SaaS? Well, it is simply the process of accessing software and apps via the internet, vs. directly buying and downloading them onto your computer’s drive. For example, social media apps such as Instagram or Facebook are SaaS at play in everyday life. They allow users to access the platforms via an internet-connected device (e.g., phone, tablet, or PC) simply and swiftly. In the insurtech world, SaaS platforms streamline the whole process and make it easier for you to get and manage your coverage.
The global value of the different tech markets
Fintech: Global Market Valued at 309.98 billion in 2019
Insurtech: Global Market Valued at 5.48 billion in 2019
Proptech: Global Market Valued 14. billion
Regtech: Global Market Valued at 4.3 billion in 2019
Femtech (female technologies): Global Market Value at $820.6 million in 2019
Biotech (biology technology): Global Market Value $28.64 billion in 2019
So, there you have it, that’s how insurtech, while once a threat, became an inspiration for an entire industry.
Welcome to the future.
Insurtech is here to stay, bringing with it some tangible benefits to help improve the way the industry operates. As insurance companies start reimagining the way they do business, they’re providing additional value while also allowing for their products to be priced more competitively. Additionally, by allowing health data to be shared directly with health professionals and insurers, an entire world of middlemen got removed—poof, gone with the wind. So once again, flexibility and savings come into play and insurtech gets more brownie points.
And finally, although the industry is rapidly growing, we’re well aware that there’s always an issue of trust when it comes to the adoption of something new. Naturally, a lot of people are split on the issue of sharing their personal and behavioral data. The good news is that insurance is a highly regulated industry, and industry groups frequently advocate for new regulations that are catching up with technology related to privacy and cybersecurity, for example. At the end of the day, it’s a matter of ethics. Trust works both ways, and so it’s important that the systems that prevent misuse from both parties—the insurer and the insured—exist.
Once you find an insurer you trust, you might find that you can potentially get greater control over your policy in exchange for personal details such as fitness levels, sleep activity, etc. And as mentioned, sharing of this data sometimes translates into insurance discounts and other benefits. Although not a one-size-fits-all deal, insurtech is an exciting chapter in the story of insurance.