The insurance industry has been slow to embrace new technologies. But that’s changing thanks to insurtech.
According to a Salesforce-sponsored Harvard Business Review pulse survey, 70% of insurance executives agree that newer tech-based companies are driving their organisations to advance the use of technology in their distribution channels. And 64% expect their organisation to increasingly adopt a direct-to-consumer (D2C) model for the distribution of their products and services.
Insurtech is disrupting the status quo and driving digital transformation in the insurance industry. Its impact can already be felt and will be even greater in the future.
This guide explores insurtech, how insurers use it, and how digital innovation in insurance is changing a once paper-based industry and expanding D2C insurance.
What is insurtech, and how are insurers using it?
As its name suggests, insurtech refers to insurance technology. Think fintech, but with insurance rather than finance.
Insurtech is the use of technology to maximise efficiency and disrupt the current insurance model. Insurtech businesses, known as insurtechs, are firms that specialise in this innovative technology.
Examples of insurtech in-action include using data to offer ultra-customised policies and dynamically update price premiums, and training artificial intelligence (AI) to handle the day-to-day tasks of brokers.
Some insurtech startups sell insurance directly to consumers, such as Cuvva, which offers temporary car insurance via an app, and Superscript, which specialises in providing insurance that small to medium-sized businesses can take out in less than 10 minutes. Other insurtech companies focus on increasing efficiency for brokers, who can then pass on the benefits to consumers.
Insurtechs can be either independent, or in harmony with the traditional insurance industry. And as the role of technology in the industry continues to grow, some long-standing industry players are looking to drive forward their own innovations. Traditional insurers need to modernise their operations, embrace insurtech, and improve their offerings to keep up with the competition. And if they don't use an existing insurtech platform, they need to build the technology themselves.
One example of a traditional insurance company using insurtech to further its digital transformation is Lloyd’s of London.
Lloyd’s has launched Ki — a fully digital and algorithmically-driven syndicate available 24.7, on-demand, on the go, and on mobile and laptop. This Google Cloud-based solution, which can be accessed by brokers directly, uses algorithms to evaluate Lloyd’s policies. Ki aims to significantly reduce the time and effort spent by commercial brokers and improve efficiency, responsiveness, and competitiveness.
Lloyd’s of London was established in 1686. When industry stalwarts as old as Lloyd’s invest in insurtech, it’s a clear indication that it’s something no insurer can afford to avoid.
Insurtech is accelerating industry innovation, putting increased pressure on carriers and brokers to be more agile with operations, simplify their approach to distribution, and be more imaginative about reaching communities when marketing. Insurtech is the competition that the traditional industry needed to drive itself forward.
Digital transformation in a paper industry
Historically, insurance has heavily relied on paper — e.g. forms, signatures, printed out policies. And because of this, it was initially reluctant to switch to digital.
But when the COVID-19 pandemic hit, the industry was forced to adjust overnight — and the move away from paper stopped being a discussion and became immediate action. Existing mobile and digital technology was vital in enabling businesses to continue while remote.
Another insurer that saw the value of its digital transformation was Seguros Monterrey New York Life, which had a long term project to implement digital signatures for its life insurance customers. It took 100 internal meetings to introduce this, but it instantly empowered them to continue business when the pandemic arrived. Physical proximity was no longer a limiting factor for its insurance agents, and nobody needed multiple signatories to be in the same location.
The pandemic accelerated adoption as it was no longer a choice to go digital; it was a need. And once insurers saw how beneficial this technology could be, many changes became permanent.
However, the industry still has a long way to go. Much of insurance is still steeped in paper, email correspondence, and follow-up calls. Insurtech has helped make things easier in D2C lines, with customers filling in information online, either for quotes or submitting a claim. But using the same technology for the commercial market is still difficult. Commercial insurance involves more complexity because the risks are usually more complicated. As the current technology doesn’t allow for nuance, brokers still have a heavy commercial workload, including paperwork.
Many insurers are still in the early stages of digital transformation. But now that customers have switched to digital (even if by force), the expectation for exceptional digital service is growing. And the main challenge for the industry is keeping up with change.
Digital transformation expands D2C insurance
One of the primary growth areas for insurance driven by insurtech is the expansion of D2C.
64% of insurers expect their company to increasingly adopt a D2C model for its product and service distribution, while 59% agree that insurtechs are driving their organisation to adopt more of a D2C approach, according to Harvard Business Review Analytics Services Survey, June 2020.
Technology offers many opportunities for insurers to deal with consumers and empower customers to become do-it-yourselfers. Insurtech provides the ability to conduct business via mobile and remotely, increases the touchpoints that customers can manage their insurance, and enables more direct contact between the underwriter and the customer.
Insurtech has helped the insurance industry reimagine how they interact with customers. And although the growth of D2C may concern some, with the threat of disintermediation — other insurers are ready to respond to the rapidly changing market.
Moving away from paper and D2C are just two of the insurance industry's changes since embracing digital transformation. Insurance has also used insurtech to leverage the cloud, tap a wealth of data, challenge the symbiotic broker-carrier relationship, and mix models and channels.
Accelerating Change in Insurance Distribution.
Find out more about how insurtech is driving digital transformation in the industry.
