Wallets are no longer confined to the pockets of consumers in today’s digital age; they are now available online. There is a growing internet economy, and insurance companies are attempting to get into it.
Traditional insurers have been compelled to improve their service quotient and general efficiency as a result of the rise of new-age insurers, yielding cost reductions for consumers.
However, all of this progress follows a curve, with different markets following different paths along with it. For example, while the Indian e-commerce business has advanced significantly in terms of cab aggregation and online shopping in general, it is still in its infancy when it comes to online insurance.
Online transactions have become a part of our daily lives because of tech-driven companies like Amazon, Flipkart, Uber, and Ola. Because insurance is not yet a wanted product and purchase frequency is low, it requires a market push, which data may provide.
According to a recent PwC survey, 90% of insurers are concerned about losing business to a tech company. The vast amount of precise risk data acquired over years that can be used for underwriting and pricing has long been one of the key advantages of established insurers.
However, as the types and quantities of alternative data important to insurance continue to grow, this advantage may or may not be sustained.
The traditional method of risk assessment relies on anonymized datasets. However, endpoint devices, social media, and basic personal information can now supply a tremendous amount of personalized data.
Both insurers and insureds benefit from this innovative approach. Customers benefit from lower premiums and more specialized services, while businesses benefit from more accurate risk assessments, stable margins, and delighted customers.
What happens if clients attempt to verify the status of their claims today? Several phone calls, emails, further documentation, or even a visit to the insurance provider’s office are frequently required.
This is pointless. The immediate problem statement of an InsurTech company is to solve this issue by providing speedy, painless, and transparent claim settlement.
Traditional insurers that previously took this step for granted will suddenly be forced to compete.
There are various examples around the world where new insurers have outperformed traditional players by bringing in this efficiency. SnapSheet, for example, provides end-to-end automated claims handling, while Claim Di’s’shake and go’ feature allows claimants to interact with their carriers on the accident scene just by shaking their phone.
InsurTech firms are unencumbered by outdated goods, procedures, or IT systems. They may create digital processes, products, and systems from the ground up using cutting-edge technology.
As a result, many redundant corporate operations can be made more efficient and cost-effective, which can be passed on to customers.
Consider a Chicago-based insurer that pays consumers for leading healthy lifestyles and tracks their activity using smart devices. Customers can buy an Apple Watch at a discount and pay for the remaining balance by tracking their physical activity thanks to their cooperation with Apple.
Artificial intelligence (AI), the Internet of Things (IoT), chatbots, blockchain, cloud computing, connected devices, social media use, drone evaluation, telematics, sensors, machine learning, and other concepts have all been introduced to the insurance industry owing to Insurtech. Moving to cloud-based platforms or implementing AI results in lower upfront costs as well as lower continuing operational costs. When compared to mainframe-based systems, only such innovation can significantly reduce costs.
Disintermediation, self-servicing, and core-function automation will result in significant cost savings. Companies that provide IoT-based dental insurance use a smart toothbrush to monitor how well consumers brush their teeth. All of this is achievable because insurers are beginning to see the benefits of these technologies.
There are already examples when the insured person’s driving behavior is tracked and analyzed to calculate vehicle insurance premiums. Based on the analysis, the person receives a discount or increased coverage.
However, the scope of Insurtech’s work extends beyond making existing processes more efficient to establishing new market opportunities.
Furthermore, the performance of digital channels and infrastructure (such as cloud computing) allows insurers to move even closer to more consumer-centric insurance offerings, such as greater product customization, shorter-term or real-time coverage, proactive risk management, and near-instant procurement options.
Getting Past Obstacles
Digitization is hampered by legacy software and infrastructure. For reforms, traditional insurers cannot rely entirely on their internal innovation teams or consultants.
It would be incredibly difficult for them to manage a transformational process on their own. They are not equipped to create or nurture cutting-edge technology; they are masters at assessing and managing risk, not innovating.
Furthermore, top tech talent is not drawn to the insurance industry, making it harder to lure them away from the burgeoning startup economy. Traditional insurers must realize their limits and develop a long-term strategy to address them.
P2P Insurance, often known as crowdsourcing, is a new type of business based on the sharing economy notion. Friendsurance, Lemonade, Guevara, and Inspeer are examples of peer-to-peer insurers that employ policyholder pooling to cut premiums while also creating a social contract with policyholders that many traditional insurers would envy.
InsurTech startups are undoubtedly exploring beyond traditional data. Data from IoT devices such as smart wearables and smart home devices, as well as insights from social media and online activity, are being collected, aggregated, and analyzed in new ways. This gives the insurance company a more complete image of the consumer, which will help it succeed in providing targeted, specialized, and personalized experiences to its customers. Traditional insurance companies are being pushed to innovate by InsurTech, which is not allowing them to rest. Consumers will benefit from cheaper costs and improved services as a result of this.
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