Insurtech

Insurtech is a terminology that is an amalgamation of insurance and technology, referring to the use of technology in the insurance industry. This term is inspired by fintech which was again a mix of finance and technology. Similarly, insurtech refers to the use of technology in the field of insurance. These are mainly technology companies entering the insurance sector to cater to a more tech-savvy customer base of the modern era.

The global acceptance of insurtech shows that this will be a wide adoption concept in the future. This is because the underlying factor of insurtech is that the industry has a lot of potential for growth. Insurtech is bringing innovation to the industry such as offering ultra-customized policies, social insurance and using new streams of data to control price premiums.

Understanding Insurtech

Insurance has been one of the oldest financial businesses and requires experienced individuals to run it. Before the methodology which was being used to ensure profitable policies to the company was done with the help of an actuarial table to assign policy seekers to a risk category.

But this approach leads to some people paying more than they should be because of a basic level of data being used to group people. Insurtech is being used to manage this data and analysis issues head-on. It is able to do this by using input from all kinds of devices from GPS car tracking to activity trackers on the wrist.

Apart from these developments, insurtech start-ups are also using other methods such as deep learning trained artificial intelligence (AI) to manage tasks of brokers and also find the right mix of policies for individual coverage.

Moreover, there is also usage of apps to collect all policies in one platform in order to ensure effective monitoring, management and creating on-demand insurance for micro-events to recreate customized group coverage and group rebates.

How do Insurtech works?

It has always been a tedious task to be able to buy an insurance policy. This is because of many reasons the primary being dealing with sales agents who are more interested in their own commissions rather than the customer’s best interest. Secondly, the amount of paperwork that needs to be done is also a long process that can take up weeks and, in the end, getting to know that coverage has been denied due to any reason. Moreover, there is a lot of jargon involved due to which it becomes difficult for a common man to understand policies.

Insurtech has brought about a revolution in all the factors which made getting insurance a time-consuming and futile activity. It has made getting coverage more accessible by lowering costs for insurers and policyholders. Further, with the use of technology, it has become easier to expedite the entire process. Also, customers have the option to research, compare and purchase insurance online from the convenience of phone and computer. The impact of insurtech is far-reaching in almost every aspect of the insurance sector from homeowner insurance to disability insurance.

This has also made it convenient for individuals and businesses to attain access to insurance products and services quickly while also saving time and problems which were previously faced while purchasing insurance. Customers have various insurance options at their disposal while also having the facility to customize insurance plans according to their needs and preferences.

Moreover, there are other benefits of insurtech such as apps, auto-monitoring devices and wearable tracking tools. It has made it possible for anyone to apply for an insurance policy including small business owners.

Key application areas of Insurtech

The following are the five key areas where insurtech can create evolutional changes.

Customer Identity Verification

The Know Your Customer (KYC) policies are really important for insurance companies, reinsurers and brokers. This process can be quite time-consuming because collecting so much information from different customers has always been a tedious job. With insurtech, It has now become possible to design and develop databases to store such mammoth information about the customers.

Claims Management

As per the PwC report with blockchain technology it is possible to develop a single version of claim documents that can be monitored and evaluated in real-time. This means that all parties involved in a claim can manage the process simultaneously.

With blockchain, it is also possible to integrate all documents in the claims process for underwriters. This not only makes it easier to manage claims but also helps to reduce the costs of administrating claims.

Another aspect of insurtech by which it is making claims management easier is through smart contract elements which allow for automation of many processes. This helps to increase flexibility and transparency while also improving the relationship between customers and insurers.

Smart Contract Formulation

Insurtech has introduced the concept of paperless smart contracts. It is basically a blockchain contract between two or more parties. The automated blockchain protocols help to authenticate and facilitate negotiation and managing the performance of the contract.

This brings about a lot of benefits. Smart contracts expedite the efficiency and speed of claims management. The agreement registration, authentication and implementation have become easier since everything is being monitored by a computer and there is no intervention of the claim assessor.

Fraud detection and risk prevention

Insurtech can be quite helpful when it comes to detecting and eliminating errors with the help of a decentralized digital depository. This further helps to establish a complete authentic transaction history of policyholders eliminating duplication and third-party involvement.

Payment Processing

Insurtech has also been quite useful in streamlining payments of insurance premiums and claims.  For example, auto insurance policyholders are paying instalments on a continuous basis according to the proportion of miles driven.

Conclusion

The insurance industry was in a dire need of innovation and disruption and insurtech is here to create the required changes, replacing the traditional methodologies of these companies. It has already made major strides in areas such as the online application process, automated underwriting claims management and fraud prevention to name a few. There are major benefits that the industry will experience with insurtech in the future.