What is insurtech?
“Insurtech” has recently become a major buzzword in the insurance industry. Despite the term commonly being thrown around, it seems a lot of people are not quite sure what it actually means.
Insurtech is essentially an insurance model that incorporates technology and innovation. Exactly how much technology and innovation are involved for each insurance model depends on its various components and the value it can bring.
Insurtech reduces the gap between policyholders and insurance companies
Today, technology is an inevitable component of our daily lives. Policyholders have become more tech-savvy. Therefore, it is not surprising that traditional insurance models feel outdated and complex, and are no longer attractive for the modern day customer.
In short, there is a widening gap between policyholders and insurance operators. Technology can bridge that gap by making the insurance industry more customer-friendly, easily accessible, and less time-consuming. Technology also helps insurance operators provide better customer service, placing operators in a more positive light.
The introduction of technology into the insurance industry has made the industry more attractive.
Where does the technology come from?
There are no set rules on who is able to provide the technology. For example, it may come from the insurance company itself or a partnership with an insurtech start-up.
Examples of successful insurtechs
Buying insurance abroad has become extremely easy and convenient, thanks to technology. The trend started in the US, UK and Australia with Asia following suit.
One of the many examples include an application that allows you to take a photo of anything, from cars to watches, or even small inexpensive items, and send it directly to the insurers through the app. The app then calculates the premium for insuring the object within a matter of seconds.
On top of that, you can select the insurance coverage period, ranging from hours to days. This may come in handy when your friend borrows your favorite bike for a short ride or your smart watch for a date night.
Another example of an innovative insurance model involves individuals pooling their money together for an agreed period of time. At the end of the period, the co-insured will be entitled to the remaining funds in the pool.
Technology can bridge that gap by making the insurance industry more customer-friendly, easily accessible, less time consuming.
Questions to ask
It is crucial that insurance companies ask themselves the same questions the founders of many start-ups have asked themselves:
“Is what we have good enough? How can we further develop what we already have? Have we really considered the needs of our customers? Is it customer friendly?”
The more insurance companies realize the benefits of introducing technology into their business, the greater the role insurtech will play. For instance, an insurance operator may use telematics to remotely monitor the driving habits of policyholders, including when they drive, where to, and how fast.
The use of telematics allows insurance companies to analyze risks and calculate premiums almost instantaneously. Moreover, insurance operators no longer have to base their premium calculations on general statistics, which yield results that are too generic to be useful. Instead, they are able to offer policies that are more tailored to each customer.
Making room for insurtech
There is certainly room for insurance companies and start-ups to benefit from and establish insurtech. However that does not mean that such developments will be without limitations. All insurance companies and related businesses are still required to abide by the laws and regulations of the insurance industry.
For more information, please contact our insurtech team at Baker McKenzie: