The financial services industry is undergoing a tech-infusion, and the insurance marketplace is experiencing its share of digital innovation. While a little late to the fintech game, thanks to a heavily regulated environment and firmly established traditional business practices, “insurtech” is breaking through—quickly and lucratively.
A Bit About Insuretech
The latest and greatest technology is helping insurers by streamlining day-to-day operations like underwriting; supporting ecommerce with price comparison, listing and bidding tools; and changing the customer experience via robo-advising and self-service capabilities. It’s also enabling insurers to collect, manage, and use data in new ways—gleaning intelligence through customers’ wearables and in-car communications devices, for example.
DailyFintech.com takes us through the various ways technology is changing the face of the industry in The InsurTech Spectrum–the Seven Colours of Digial Innovation:
- Distribution— taking a customer-focused approach to make insurance easier to understand, buy, and use
- Enterprise—introducing enterprise-class SaaS platforms with consumption-based pricing models
- Mutual—recharging peer-to-peer business models to take insurance back to its community roots
- Consensus—experimenting with blockchain technology (link to Wex Blog post URL) to (potentially)change the way financial services will work in the future
- Engagement—integrating products and services into consumers’ lifestyles
- Experience—improving the value of insurance through an enhanced claims process
- Data—using data in its many forms, from its many sources, to improve every aspect of business
These overall insurance technology themes are echoed in a Digital Insurance Agenda article examining what it will take for an insuretech venture to be successful. Included on the menu of their Seven Flavours of Fintech in Insurance are supurb customer engagement, sophisticated underwriting and risk reduction, disruptive business models, and new roles in the value chain. The insurance industry—as a part of the larger financial services landscape—is ripe for progress, and entrepreneurs are leading the charge.
Insuretech: A Hot Investment
In Insurance-Tech Startups Are Invading The Multi-Trillion Dollar Insurance Industry, CBI Insights shares the numbers behind funding for insurance-related financial technology between 2010 and 2015. Not surprisingly, investments in health insurance tech companies have risen dramatically since the Affordable Care Act was passed in 2010. While over half (56%) of investment funds went to the health insurance sector, the remaining 44% landed across a range of markets and included auto insurance comparison engines, insured storage services for bitcoin, and crop insurance tools.
Here’s a look at some Insuretech companies and their offerings:
Gravie – Provides employers and individuals with an alternative to traditional group-sponsored insurance
Stride Health – Serves as an alternative to Healthcare.gov for freelancers and contract workers
Navera – Offers a tech platform for education and decision support tools
CoverHound – Offers auto insurance rate comparisons
Pokitdok – Pioneers a cloud-based API platform helping to streamline the business of health
BizInsure – Manages a comprehensive online portal for business insurance products
Established Carriers Seek Progress
Indeed, the presence of new market entrants puts additional pressure on traditional insurers who are already building in-house capabilities to remain competitive in today’s marketplace. A.T. Kearney recently completed a study of emerging technologies presenting opportunities for insurance companies, identifying social networking, telematics, service-oriented architecture (SOA) as key areas for internal investment. Most insurance companies have put significant resources into transitioning to paperless, electronic processes and boosting direct-to-consumer, web-based marketing and sales efforts—and they’re looking for what’s next.
But developing new technology can be cost-prohibitive and take focus away from core business competencies. Legacy systems and processes can be barriers to progress as well. That’s why some insurance carriers are partnering with non-insurance start-ups to develop new sources of customer value. Accenture discusses this trend in Insurers and Fintech Startups: A Smart Investment. Eighty-two percent (82%) of respondents in their Digital Innovation Survey for Insurance 2014 expect to make acquisitions to position themselves more competitively in the digital landscape over the next three years, primarily through new digital startups (59%) and telematics-related companies (47%).
Technology is redefining insurance, bringing fresh ideas and welcome change to an industry once known for door-to-door sales and cumbersome operations. In the payments space, fintech will drive change from ecommerce through claims processing—and we’ll be watching for its impact. For more insights, read Fintech: Reinventing the Financial Services Industry.