Insurance providers don’t have the best track record when it comes to innovation. In fact, the wider finance sector is often viewed as being reluctant to embrace change. But thanks to the rise of insurtech companies, we expect to see a major shift in how insurers operate over the coming months.
While fintechs have been changing the face of the finance markets, insurtechs are set to shake up traditional business models with new technology and innovative software solutions. It’s a winning combination, designed to coax the insurance industry into the 21st century.
The concept of insurtech has been around for at least a decade, but it’s really come into its own in recent years. Insurtech companies are emerging left, right and centre – especially in the United States. This is an exciting, thriving sector that’s showing no signs of slowing down.
Read on to discover five current insurtech trends to look out for in 2021.
Internet of Things
IoT has been a high priority for companies across the finance sector. It’s a cover-all term that includes all the web-enabled physical devices that collect and share data, making it a driving force in the advancement of insurtech.
Automation allows for simplified and expedited underwriting and processing of claims, reducing the cost to both the insurer and the customer. In addition, connected devices help insurers to offer more relevant products to customers, based on data collected.
However, this can be a cause for privacy concerns – after all, not everybody is happy for their movements to be monitored. The insurer might be able to assess risk more easily, leading to a reduction in premiums. But for many, this is counteracted by the potential for security breaches. After all, if tracking data gets into the wrong hands, it has the potential to be used for criminal activity.
Automated convenience concepts can also be gimmicky. Do you really need an app to tell you what food you have left in the fridge? And do you really need to be able to control your oven via your smartphone? While there are many benefits to automation and monitoring, they have not proven to be as popular as expected.
Virtual insurance experiences
Digital communication has become prevalent since the start of the coronavirus pandemic. Post-pandemic, this will continue to be prioritised by insurance companies – whether they choose to hold meetings via Microsoft Teams or integrate more sophisticated systems to enhance the user experience.
Virtual, augmented and extended reality will likely come into play. This will help to enhance the claims submission process, which has become increasingly more digitised. Self-service opportunities will continue to grow with the advancements in technology.
Consumers are already benefiting from being able to upload photographs and videos to assist in the processing of claims. For example, being able to film the impact of a water leak could save the insurer from having to send someone round to assess the damage.
The ‘live-chat’ feature may well upgrade from text-based interaction to a conversation with an avatar-human hybrid. It might seem far-fetched, but with virtual reality becoming increasingly accessible, it’s not as unlikely as it may seem – it just might look a little different to the image portrayed on television where everyone is wearing a VR headset at all times.
This will allow customers to buy insurance for products at the point of purchase, helping to remove the monotony of searching for suitable protection. This is a big draw for consumers and a huge growth area.
Device protection is regularly sold with mobile phones, and we’re seeing a similar trend within the motor industry. Car manufacturers are partnering with insurance companies to provide insurance as an add-on, with some providing cover as soon as the car is driven off the forecourt.
Moving away from the traditional model of protecting everything separately, we can expect home insurance policies to start offering the option of including more items under the personal possessions element of the policy. Embedded insurance is a useful way to help streamline the process of arranging insurance cover, so it is likely to be an appealing choice for consumers looking for multiple insurance products.
Blockchain technology looks to be a fundamental factor in insurtech. It provides insurers with tools to boost the efficiency of operations, saving time and helping to prevent fraud.
Many processes are made easier and more cost-effective through the use of this technology, but there are concerns that come with it. The lack of regulation around it makes it a risky foundation on which to build an insurance business.
However, for all of its benefits, Blockchain technology is unlikely to gain a decent foothold in the UK. Governments are regularly stepping in and looking to regulate the blockchain and cryptocurrencies, so insurers need to weigh convenience against economic and environmental costs. It is probably too risky a foundation on which to build an insurance business.
Offering a discount to customers willing to take extra measures to reduce risk has been at the heart of insurance for a while. For example, the black box captures data about a policyholder’s driving, rewarding safe drivers with reduced premiums. Smart technology means we are likely to see more of this in future, as it allows for a more personalised approach to monitoring risk.
Customers can expect to receive discounts based on their individual situations and behaviour, rather than a flat rate for agreeing to use a monitoring device.
Behaviour-based discounting is predicted to be a long-term fixture in the insurtech market, since it enables insurance companies to price risk more accurately. Many big-name companies have embraced behaviour-based discounting already, for example black box insurance has been offered by well-known car insurance brands for nearly a decade.
The five concepts outlined above are expected to evolve as insurtech continues to grow in 2021 and beyond.
However, it’s worth noting that many of the major insurance operators have already started to integrate some of these technologies. Others are evaluating them as potential areas for opportunity and growth.
The term ‘insurtech’ refers to new firms that seek to disrupt traditional insurance models. But we can expect to see insurtech trends being embraced by ‘old-school’ insurers, with vast capital available to invest in research, customer testing and product development.