COVID-19 has given direction to insurtech trends to lean towards digital solutions. If the pandemic has taught us anything, it is that we cannot really make accurate predictions about the future. However, it has also been a major catalyst of change as several industries underwent rapid and rampant transformations. These changes have now translated into the ‘new normal.’
And while there is no concrete understanding of which way the industry may swing, one thing is for sure – insurtech would be a clinching factor in the future of insurance. On that note, let us take a comprehensive look at a few insurance technology trends that govern the industry.
State of Insurance Technology Today
The global insurtech market was valued at USD 5.48B in 2019 and was expected to touch USD 10.14B by 2025. The growth of this sub-industry can be quantified at a CARG of 10.80%. The key drivers of the growth are digitalization of business processes, need for automation in operations, setting up of customer communication channels, demand for claim process simplification, and maintenance of agility.
In the first half of 2020, insurtech registered investments touching nearly USD 2.2B, which speaks volumes about its resilience. Despite occasional hiccups, the sector has managed to jump back into action.
Is There a Need for Insurtech and Insurance Partnerships?
As we may gauge from the current state of insurance technology, it is set to become the highlight of the insurance sector in the future. Apart from the potential, here are a few compelling reasons in favor of an insurance-insurtech partnership:
- Legacy systems, outdated underwriting methodologies, and questionable risk profiling are killing efficiency and profitability. Insurance technology can address such pressing issues and enhance the bottom line.
- About 51% of policies in the US alone are a product of direct underwriting, leaving the market highly saturated. As such, businesses will have to innovate to reinvent themselves.
- End-users expect more from their insurers and are willing to cooperate to derive the associated benefits. A staggering 69% of consumers are ready to share personal information in lieu of affordable insurance rates.
Future Insurance Technology Trends That Will Reshape the Industry
Here are 5 insurtech trends that are set to make a huge impact on the insurance industry:
As a service-based sector, insurance focuses greatly on its customer. As a result, it must factor in everything, ranging from customer requirements, perception, expectations, and more.
In recent times, customer expectations have been expanding in standards and volumes, with more demands flooding the market. For instance, according to a Deloitte survey, 62% of consumers believed that non-insurance products that add value or serve as an extension to the primary offerings could be the determining factor while choosing an insurer. As a result, insurance agencies have had to get creative while diversifying their offerings to cater to such requirements.
This trend has also triggered the large-scale adoption of insurance technology solutions as they help companies by elongating the customer lifetime value through retention. Insurance technology also helps in identifying potential hotspots that could translate into viable business opportunities. Moreover, it could be the differentiating factor that grants one company a competitive edge above the rest.
Data Explosion From Connected Devices
As cliche as it may sound, data is the fuel driving the growth of the insurance technology industry.
Previously, the use of sensors to remotely manage industrial equipment was a common practice. However, with the penetration of the Internet of Things (IoT), this phenomenon has also passed on to consumer devices.
Experts believe that about 55.7B devices will be globally connected by 2025 out of which 75% will be connected to an IoT platform, which could potentially generate USD 3.9T to USD 11.1T per year! Such an elevation in number can be attributed to the integration of IoT with existing terminals. Plus, the trend also offers scope for IoT integration with new outlets like eyewear, clothing, shoes, medical equipment, etc.
The interconnection of such sources will bring about volumes of customer structured and unstructured data. This will allow companies to see the benefactors in a whole new light. Accordingly, carriers can utilize this intimate knowledge to take proactive measures, like developing products, personalizing pricing, and improving services.
Prevalence of Drones, CoBots, and Autonomous Vehicles
Since we are on the subject of drones, it is worth mentioning that the future of insurance technology also offers a sneak peek into the world of unmanned aerial vehicles (UAVs), bots, and autonomous vehicles.
Insurance accounts for nearly 17% of commercial drone activities. Insurance carriers have been putting them to use for various pre- and post-loss assessments. For instance, it can come in handy for risk engineering, pricing, natural disaster monitoring, damage inspection, risk assessment, preventive maintenance, claims adjudication, and even fraud prevention.
On the other hand, collaborative bots (CoBots), in the form of AI-driven chatbots have also proven their mettle, especially in enhancing customer experience. Chatbots are one of the most viable and cost-effective tools that can help with customer awareness generation, lead profiling, claims to process, gathering feedback, and introducing automation.
The insurance technology industry is also playing around with the idea of offering services that complement autonomous vehicles. Even though fully automated, self-driven cars are yet to become common, they will be changing the face of the auto insurance industry. As a result, insurance agencies can leverage technology to scale in accordance with the changes.
Seamless Claims Processing
Managing claims has been a major pain point for businesses regardless of their size. It is the most time-consuming and labor-intensive segment of operating an insurance business, not to mention that it is also highly susceptible to errors and subsequent litigation. Fortunately, insurance technology has been introducing small but impactful changes within this vertical through automation.
A combination of data-capturing technologies and mobility solutions has simplified time-consuming processes. Based on the data produced by such elements, AI-powered systems can automatically trigger claims triaging and repair requests in response to the incident. From the very moment that customers open claims, artificial intelligence can streamline the claims process. The end-to-end functionalities can then guide the policyholder into the next stages of the claims settlement process.
Moreover, claim support systems powered by artificial intelligence can identify data patterns in claims reports. This can protect insurance businesses from costly fraudulent claims, human errors, and resultant inaccuracies. In some instances, AI-powered tools empower insurers to follow a preventive route rather than a reactive one by intervening at the right moment to perform risk mitigation.
Data Privacy and Security Takes Center Stage
Working with data is no less than a double-edged sword.
On the one hand, companies have to store vast reserves of sensitive data and personal identifiers of their customers – a matter of grave responsibility. Apart from keeping this data safe and secure, insurers are also entrusted with the responsibility of maintaining the sanctity of the data and customer trust.
And on the other hand, data, as a critical resource, needs a high level of protection that insurance agencies typically offer. Businesses that can face significant losses due to cyberattacks can avail of insurance services to keep it protected.
While the former is a concern, the latter is a ripe opportunity for insurers to include data protection within the value chain. Such an offering can cover everything – from preventive maintenance to diagnostics to post-attack support to data recovery.
As only 32-37% of CEOs feel fully prepared to deal with ransomware or DDoS attacks, insurance technology can improve cybersecurity.
Insurtech is the new Fintech, and it is set to revolutionize the insurance industry.
The rapid rate of advancements in insurance technology is set to bring several disruptive changes in the sector. Carriers who can leverage such opportunities will emerge victorious in the aftermath of this transformation. It will help them harness new technologies, reduce costs, streamline operations, exceed customer expectations, and adapt dynamically.
In essence, a tech-focused mindset will keep your insurance agency on the path of unmitigated growth!