Banking sector is revolutionized by the rise of fintech forcing incumbents to innovate and rethink their business model. Similarly insurtech is the next big thing in the insurance sector. In a world where smartphone penetration is on the rise it can uberize insurance ensuring efficiency and profit.
Insurtech firms seem to tackle issues which the incumbents have not yet ventured into like offering personalized products that caters individual needs of consumers or using data from personal gadgets to customise policies etc. All these are enabled incorporating technologies like AI, Machine learning and Blockchain.
Insurance industry is one dominated by traditional players which have not seen considerable innovations to meet the demands of tech savvy customers and is suited for disruptions by the rising insurtech startups.
InsureTech concept
The insurance sector is considered as a slow growing industry lacking technological adoption and innovation. It has a long history and is dominated by huge players enjoying major market share. Thus the sector was all set for new tech driven firms for disruption through their innovative products. This was realised by companies and investors, which led to the growth of insurtech.
The word insuretech is a portmanteau of the term “insurance” and “technology” in which technology is adopted to optimally satisfy the requirements of customers. Here technology is used as a driving force to expand and reinvent the business model and identify value pools. There is a syncornisation of technology, coupled with innovation that can disrupt the sector.
Similar to fintech in the banking sector, insurtech is disrupting the insurance industry through incorporation of technology. Incorporation of technology to any setor can make it more efficient, accessible and profitable. In the insurance sector the incorporation of technology allows it to modernize, digitize and innovate.
The rise of startups that use developments in technologies like AI, big data, machine learning and blockchain disrupts the insurance sectors through innovative products penetrating unexplored areas and underserved groups.
Technologies like AI are being used to perform brokering and in finding the right combination of policies which are suited to each individual. These can be done analysing tons of data from social media and personal gadgets like smartphones, wrist bands etc.
Companies can effectively price their products by analysing risk categories such as sedentary lifestyle, PED (pre existing conditions) and give incentives for having a healthy lifestyle or for ensuring adequate safety measures etc.
Apps are being used to organise policies for effective management and analysis; they can ensure instant dealings and regular updates. Policies can be canvassed, underwrite and claims can be settled virtually making it cost effective, fast and less frustrating to both parties.
Insurtech firms can be operated in a cost effective way than the incumbents as they can automise many of the services and deliver them within no time.
Thus they are inroads to the insurance sector occupied by traditional giant players. Thus innovating the sector, challenging it, disrupting it and puts the incumbents at risk.
InsurTech disrupting insurance sector
Insurance is one of the industries which is most open to disruptions at present. With the advancement in technologies like AI, Machine learning, Cloud and Big data more insurtech firms are on the rise. They can bring innovative products and services in brockering, underwriting and fraud detection.
Insurtechs are pitching products which are convenient and efficient making it appealing to plugged in cohorts who seek convenience of a click and go. Thus they are integrating technology to produce products and services to satisfy customers by providing digital solutions. Driven by technology they can satisfy digitally savvy customers.
By innovating the sector they are challenging the incumbents who are not open to innovation and in adoption of technology. They can satisfy millennials by making transactions digital which is fast and less time consuming. For a technology dependent society the convenience insurtech brought by virtually settling claims and receiving quotes is much preferable than visiting a physical branch.
Young customers prefer interchangeable products and services as they tend not to stick with a company. Insurtech provides them with such products which can be purchased and claimed remotely.
Much of the focus is now on the retail segments by using smartphones and digital technology, providing services that can attract young customers who were under served by the incumbents.
They are targeting value pools through innovative products which can increase the profit. They can generate customer engagement and retention by incorporating technology like AI and IOT (Internet of Things) in areas like motor, home and health insurance. They are using state of the art technology by incorporating personal gadgets to reward risk minimising behaviour to incentivise their products.
They are active in distributing innovative products throughout the insurance value chain. They are disrupting the sector by making their products accessible to consumers in a click, allowing comparison of products and instant purchasing. This is possible by analysing consumer data for fraud detection, underwriting and classifying risk categories.
Insurtech is clearly posing a threat to incumbents by early adoption of technology and innovations targeting the value pools . Though they are inroads to the sector, they can impact the business model and structure followed by this age-old industry.
They are attracting huge amounts of investments by leaps and bounds. Incumbents who understand this risk are trying to convert this to an opportunity by partnering with such firms thus improving their products and services. Thus they are disrupting the insurance sector but will take time to achieve what fintech has achieved in the banking sector but we can say that the tide is changing so fast.
Conclusion
Like fintech revolutionizing the banking sector, insurtech is disrupting the insurance industry. Using the early bird advantage in adapting technology where the incumbents are lacking they can disrupt the insurance sector.
They are dealing with customers virtually and remotely settles their claims, makes quotes, attends their query thereby making insurance a hassle free process. They can operate in a cost effective manner and can provide better, speedy and efficient service than the incumbents. They are successfully developing a business model by addressing areas which were least served by the incumbents.
For incumbents they possess a real risk as more innovations are on the way with developments in technologies like blockchain, AI, machine learning and internet of things.
They can cater to a digitally savvy customer base who prefer comfort and convenience. They have the potential to disrupt the sector with innovative strategies. Incumbents can convert this challenge to an opportunity by partnering with them to improve their existing products and expand services.
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