The insurance technology industry is undergoing a rapid transformation. This change is being driven by insurtech firms who are upping the game by moving beyond merely aggregating policies, and driving innovation using technologies like blockchain, internet of things (IoT), and artificial intelligence (AI). According to a Research and Markets report, the global InsurTech market revenue was valued at $532 million in 2018. It is projected to reach $1,119 million by 2023, growing at a CAGR of 16 per cent during 2018-2023. The numbers assert that the urgency to embrace digital is accelerating and those who continue to wait may miss opportunities to benefit from this wave of transformation.
As a first step, traditional insurance companies should become more familiar with the business areas where other InsurTechs are concentrating their efforts. Armed with this context, insurers will be capable of prioritizing their engagement with InsurTechs in ways that can add a greater value to their businesses. Such strategic collaborations will help incorporate tech-enabled approaches that will accelerate the digitization of their enterprises.
InsurTech Trends: Forging the Future through Innovation
The increasing excitement in the insurance industry surrounding the InsurTech revolution indicates that this year will be a game-changing year. Following are the top three disruptive trends you should keep an eye out for in 2019 and beyond:
- Ecosystem models and platforms
The conventional passive role played by a majority of insurers is now changing with InsurTechs establishing their own platforms. The Chinese digital insurer, ZhongAn, for instance, has collaborated with some of the biggest internet groups in China. The aim is to create a vast insurance ecosystem that empowers users to purchase insurance products directly through retail sites. The Shanghai-based group was launched in 2013 and today has 460m customers – an almost unfathomable sales record for any traditional insurance group.
Participating in ecosystems helps insurance leaders add greater value through network effects—for instance, by leveraging the capabilities of their allies’ already-established platforms—and to integrate insurance services with related products. For instance, InsurTech giants like Cytora offers an AI-powered solution for commercial insurance underwriting. The company looks to bring down the seven-day underwriting process to 30 seconds via its API. This will enable insurers to underwrite programmatically and create workflows that offer faster and more accurate decisions.
- Artificial intelligence
Artificial intelligence (AI) tools are poised to reshape claims, distribution, underwriting, and pricing. Natural language processing (NLP) and computer vision tools are becoming increasingly relevant in the insurtech space.
For instance, Pixoneye, a data analytics SaaS firm, leverages computer-vision technology to analyze customers’ public online photo galleries and build personal risk profiles for them.
Lemonade, a US-based start-up, is shaking up the insurance landscape through the better use of insurance technology. The company has digitized its insurance process, replacing brokers and paperwork with algorithms. Lemonade now provides policies in as little as 90 seconds and payment of claims within three minutes. It also uses an AI bot to deliver personalized insurance policies to renters and homeowners, starting from $5 and $25, respectively.
- Item insurance
Emerging players aim to provide customers with transparent coverage and the flexibility to decide what to insure, when, and how often. This idea of insurance-as-a-service enables individuals to insure items only when they are in use, marking an increasing trend toward policies being tailored for the customer.
Companies like buzzvault offer an easy way to make an inventory of possessions via photos or videos to give users an accurate picture of what they own. The company’s hyper-personalized home insurance app offers customers an overview of their possessions. Additionally, it gives them the flexibility of adding and/or removing items from the insurance policy whenever required.
The Promise of the InsurTech Revolution at a Glance
The innovations spurred by technological breakthroughs are revolutionizing insurance services. A McKinsey report suggests that by 2030, AI and related technologies will have a substantial impact on every aspect of the insurance industry, including:
Distribution: The cycle time for completing the purchase of different kinds of policies is projected to be within a few minutes to seconds. Blockchain-enabled smart contracts will instantaneously authorize payments from a customer’s account. Highly dynamic, usage-based-insurance products will be tailored to the behavior of individual consumers. And the role of agents will soon change to product educators and process facilitators.
Underwriting and pricing: Manual underwriting will cease to exist for most small-business and personal products across life and P&C insurance. Processes leveraging the power of machine and deep learning models will transform underwriting to a matter of a few seconds. Intelligent proprietary platforms will connect customers to insurers, offering top-notch experiences.
Claims: Carriers can expect to achieve a remarkable straight-through-processing rate of more than 90 percent and reduce claim-processing times from days to hours or even minutes. IoT sensors and a wide array of data-capture technologies like drones will replace conventional methods of first notice of loss (FONL). Customer interaction with insurance-claim enterprises will emphasize on avoiding potential losses.
That said, we can only expect these trends to grow stronger with every passing day.