What is Insurtech?
What is InsurTech?
InsurTech is the combination of insurance and technology solutions for enrollment, insurance claims processing, underwriting, policy administration, data insights, fraud detection and more. InsurTech is disrupting the insurance industry by providing cost saving solutions and better customer experience for insurance companies.
Let’s dive deeper.
Insurance is an old business spanning back centuries: In fact, Ben Franklin founded the first insurance company in the United States. And while the industry has a long history of adapting and innovating to meet market needs, the inner workings of insurance can have their inefficiencies and dated technologies.
That’s where the benefits of insurtech come in. It’s designed to deliver cost savings, better processes and greater efficiency via new insurance technologies.
And it’s a booming industry. The global insurtech market was estimated to be valued at $1.5 billion in 2018. And on a global scale, the insurtech market is expected to grow 41% annually between 2019 and 2023.
But what is insurtech, who does it help, and why does it matter? This article will answer those questions, give insurtech examples, and cover insurtech trends.
So let’s dive into the world of insurtech to get you familiar with:
- The definition of insurtech
- Where the term “insurtech” came from
- Some examples of insurance technology
- What’s on the horizon for insurtech
You may be familiar with the term “fintech” – a combination of the words “financial” and “technology” used in the financial industry. So what is insurtech?
Insurtech works in the same way: It’s short for insurance technology. Insurtech, also known as “insuretech” and “instech,” was developed to bring disruption and innovation to the insurance industry.
At first, this technology movement was nearly invisible to consumers. Insurance companies were starting to use new technologies behind the scenes to create efficiencies that customers couldn’t see. But now, we’re seeing insurtech firsthand.
Cue chatbots, online policy enrollment, wearables, and software as a service (SaaS) platforms that manage insurance and payment coverage.
Ultimately, insurtech has transformed experiences for insurers, tech companies and customers – all in a good way.
Where did insurtech come from?
The insurtech phenomenon is backed by big data, artificial intelligence (AI), and the Internet of Things (IoT) – which we’ll get into in just a little bit.
But the term “insurtech” seemed to emerge when Germany-based Friendsurance created a peer-to-peer insurance community around 2010.
Inspired by Facebook, Friendsurance co-founders were looking for an industry to disrupt using a social networking business model. And the insurance industry provided that great opportunity.
Today, Friendsurance serves nearly 150,000 customers. The company partners with dozens of insurance companies and offers their products to customers through its online e-commerce platform.
Now that you know the answer to the question: What is Insurtech? Let’s see some examples.
New insurtech developments can be found in virtually every corner of the insurance industry. Here are 8 game-changers:
Blockchain is a digital notebook that records and stores unchangeable data history. It was developed to eliminate old school record-keeping to save money and streamline supply chains.
As an example, blockchain has become an invaluable tool to complete transactions. One company, Ripple, has set out to simplify international bank transactions in a safe manner.
Ripple has used blockchain technology to allow real-time transfers of currency between two parties worldwide. The company works with a network of banks to send money across borders in an instant and cost-effective way.
InsureTech companies are trying to use blockchain in a variety of ways, but blockchains still have regulatory hurdles to overcome.
#2. Internet of Things (IoT) technology
Insurtech companies use IoT technologies that capture and transmit data over the internet.
Internet of Things (IoT) allows insurance companies to receive insights and data about their policyholders’ behavior. Companies can then adjust their risk modeling and policy premiums based on that data.
For example, car insurers can price policies based on a driver’s behavior via telematic IoT devices installed in their cars. And health insurance companies use IoT technologies like wearable devices to gain access to health data (activity levels, heart rate, and more). The result is personalized insurance policies, thanks to IoT.
#3. Insurance Policy Administration Systems
Insurtech companies use blockchain technology to develop a single version of claim documents so that all parties can manage the claim in real time – a way to make insurance claims management easier and more cost effective.
Instech companies also use blockchain to develop paperless contracts in an efficient manner that is easy to authenticate.
#4. Artificial intelligence and machine learning
Artificial intelligence (AI) and machine learning (ML) refers to technology that mimics the cognitive functions of the human brain such as learning and problem solving. They do this using algorithms and mathematical models.
Insurance companies use artificial intelligence and machine learning to get meaningful insights into modeling risk, modeling demand, detecting fraud, processing claims, and underwriting. AI and ML can also be used to automate repetitive processes, optimize risk analysis, and improve customer interactions.
#5. Software as a Service (SaaS)
Software as a service (SaaS) platforms seamlessly connect various players in the insurtech industry.
This on-demand software is typically hosted by third-party companies on their own servers and delivered through the internet. Common SaaS examples include Dropbox, Salesforce, or Shopify.
#6. E-commerce Platforms
Comparison websites like Benefytt Technologies direct-to-consumer site, healthinsurance.com, allow consumers to compare and sometimes enroll in health insurance or Medicare policies.
After all, consumer behavior has rapidly shifted. So many people are turning to online comparison websites because they give them control, empowering them to compare options at prices that work for their budget and lifestyle.
#7. Smartphone apps
Simply put, smartphone apps just make life easier and are always available at your fingertips.
In the medical technology world, an app called MyChart gives patients the power to view their immunizations, medications, test/lab results and health conditions using information from their doctors and office visits. MyChart users can also confirm appointments and pay their medical bills.
Some insurance carriers have been using insurance drones over the past several years. For example, property & casualty insurance companies use drones to inspect rooftops, damage, and disaster areas.
How can insurance carriers and insurtech companies work together?
So should insurance companies be worried about the power of insurtech? The answer is no.
Insurers can tap into insurtech companies for their digital capabilities and omnichannel methodologies. If anything, the partnership can upgrade the business models of insurance companies and takes the technical burden off of their shoulders.
Insurtech companies like Benefytt Technologies have highly skilled technical teams that make the sale and enrollment of private health insurance products and Medicare plans easier and faster – a huge benefit to insurance carriers.
Insurtech companies are also flexible and adaptable. They can build their business models to address pain points customers have when choosing the right insurance product.
For example, insurtech solutions help insurance agents and brokers because they can glean insights and data from things like AI or IoT – technologies that insuretech companies use daily – to share with insurance carriers. That way, insurers can develop better, personalized products to meet the demands of consumers.
Looking Ahead: Insurtech Trends
As we’ve covered, insurance technology does not just speed up the old model – it’s reinventing the way of doing things, especially in terms of how insurance is purchased and how policies are issued, administered and managed.
Thanks to insurtech, getting an insurance quote can happen in seconds, managing your policy can be done from your phone, and you can get a lower premium for your healthy habits picked up by your wearable device.
Looking ahead, we anticipate 3 key insurtech trends:
- More and more partnerships between traditional insurance carriers and insurtech startups will form to help cut costs and improve business processes.
- Now more than ever, insurance companies are segmenting customers as individuals rather than groups. That said, there may be a rise in IoT as a way to continually access customer insights and behavior to refine insurance products and services.
- Insurance agents and brokers will be empowered with more digital tools and services to make their lives easier. Insurtech will play a big role in streamlining data and back-office functions, which is especially important to agents who deal with multiple carrier plans.