The Future of Insurtech
This can be linked to Insurtech; the catch-all term used to describe this thriving, dynamic space, where the latest developments in machine learning, wearable technology and data analysis are being used to tackle new challenges, improve lives and provide better service in the insurance industry. Mobile devices, increased connectivity, and big data and AI are all driving the change—from the proliferation of mobile devices, which has revolutionized the way consumers interact with businesses; to the rise of the Internet of Things (IoT), which allows data to be captured with sensors from more points than ever before; to the emergence of increasingly sophisticated forms of big data and machine learning, to digest and visualize information, and to automate ever more complex processes.
Innovation: The Customer at the Center
Analytics and technology advances have set the tone for insurers to have increased opportunities, as it relates to Insurtech. Insurers can address new and emerging risks. The same technological forces that are giving rise to Insurtech are also producing new business models that need insuring. For instance, how do you insure a private vehicle being used for commercial purposes in the ride-sharing industry? Insurtech is providing these solutions in the form of on-demand, pay-per-ride insurance products.
Insurers have the opportunity to provide increasingly personalized solutions. Different people pose different risks to insurers. Someone with poor eating habits or reckless driving habits is likely to get less favorable insurance rates than a healthy, safe driver. More ways to collect data on consumer behavior in real time from wearables or “black box” telematics, and better ways of analyzing that data, will pave the way for personalized insurance solutions.
Additionally, the emergence of digital insurance marketplaces will give consumers greater choice about what insurance they buy and how they buy it, leaving insurers the ability to transform transactions. Increasing transparency around pricing and data could reduce the role for intermediaries, such as brokers, in small-scale products. On the other hand, sophisticated new data tools will expand the power of brokers to build new, innovative products.
Finally, this disruption is allowing for possibilities for insurers to reduce friction. The processes involved in insurance can be costly for companies and complicated for customers. Reducing this friction and improving customer journeys is a big opportunity. On the consumer side, this could include using chatbots. At the backend, it could mean the use of technologies like blockchain, which was originally built to record bitcoin transactions, to handle customer records or claims processing.
The Collaborative Future of Insurtech
Startups, entrepreneurs and industry disruptors are impacting nearly every industry, and they will affect risk management as well. Major innovation in our industry will happen as partnerships that include large organizations, research entities, such as universities, and new tech startups create platforms that tackle today’s ‘stubborn’ risk problems, such as cyber and pandemic. These Insurtech startups are focusing on transforming certain steps of the insurance process, rather than disrupting the whole industry. They will find that commercial success will involve partnering up with incumbents rather than attempting to bring down traditional organizations.
There can be radical innovation in collaboration. Blockchain has been seen as a highly disruptive technology, but one of the leading players investing and implementing innovative bitcoin solutions has been R3, a consortium made up of some of the biggest names in the financial sector including Barclays, Deutsche Bank, and JPMorgan.
Consortia and large companies can implement their own accelerator or incubator programs. These give startup teams the opportunity and resources to develop their ideas, and give incumbents easy access to the cutting-edge technology that is developed. If an incubator is being run by a corporate firm, senior executives can meet with those startup firms and collaborate with them. It helps some of those startup firms build out a business plan.
These partnerships will take time to bear fruit. This may be exacerbated by friction between slow-moving, cautious incumbent firms, and move fast startups.
But if Insurtech and other disruptive industries are to deliver on their promise of improved customer experience—both opportunity and risk will need to be reimagined. The key to collaboration will be embracing disruption and working for a common outcome. The true transformation of industries will happen as we reimagine risk altogether, exploring the synergies between evolving societies and technology.