Most of our readers are well aware of the impact technology has had on the financial services industry, but what effect does it have on the world of insurance? We review the state of insurtech, including an overview of the dominant technologies, services, and research.
What is insurtech?
As its name suggests, insurtech stands for ‘insurance technology’ and refers to a broad range of innovative technologies that aim to improve business performance within the insurance industry.Why does it matter?
Innovative technologies are improving the industry by helping to create new methods to provide better service, and by bringing about more opportunities for data collection and fraud detection. These improvements have allowed for better risk identification and mitigation measures to be implemented. They have also improved the customer experience, making it easier for people to choose insurance products, understand what they’re covered for, and submit claims. Technological advances have left an impact on practically every component of the insurance value chain, from marketing, to underwriting, to sales and claims. Some innovators seek to enhance and further digitalise operations within the existing insurance ecosystem, while others aim to create new tools to facilitate increased consumer engagement.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_column_text]Benefits
- Better & cheaper data collection & analysis
- Greater risk insight
- Simplified underwriting of policies
- Personalised insurance products lower premiums for consumers (usage-based insurance)
- Digital channels make it easier to reach consumers & improve user experience
- Streamlined claims processes
- Enhanced fraud protection
Limitations
- Privacy issues resulting from data collection techniques, which can be invasive
- Protection of personal data stored online or offline
- Different regulations across jurisdictions can make compliance difficult
- Consumer reluctance to adopt some technologies, e.g. IoT devices
- Greater availability of data to companies could result in high-risk individuals or populations being denied insurance
Technologies | Applications |
| IoT | “Smart home” connectivity can help insurers to offer more tailored products |
| Wearable technology | Personal health sensors record health indicators, permitting insurers to lower premiums for individual users |
| Sensors | Depth sensors assist in assessment of property damage, e.g. after a storm |
| Geographic Information Systems (GIS) | Build better predictive models based on a variety of inputs |
| Satellites & drones | Map property to prepare policies or assess claims; alert customers of pending storms so they can protect their property against damage |
| Black boxes | Use driver behaviour to set individual premiums; build better risk models |
Market facts
- Since 2012, insurance-focused technology startups have raised over USD 7.1 billion across more than 600 deals (CB Insights)
- In 2016, the IoT and AI combined accounted for 44% of all insurtech investments (Accenture)
- 44% of insurtech companies have 1-10 employees (Statista)
- Customer satisfaction levels for insurance services remain very low (Geektime)
- About 60% of auto insurance in the UK is purchased online, but only 25% in the U.S. (CB Insights)
- The U.S. is the top domestic insurance market with a total of USD 1,352 billion, but China is booming with respect to funding (CB Insights)
2017 research reports
- Insurance CEOs Outlook 2017 at a Glance (KPMG)
- Global InsurTech Report 2017 (PWC)
- Digital Transformation in Insurance (EY)
- Insurance Banana Skins 2017 (PWC)
- Insurance Nexus Global Trend Map (Insurance Nexus)
- InsurTech Disruption Trends 2017 (Tallt)
- The Rise of InsurTech (Accenture)
- CB Insights_Insurance Tech Q3 2017 (CB Insights)
