Insurtech (a portmanteau or blend of the words ‘insurance’ and ‘technology’) commonly refers to the use of technology specifically designed to transform and disrupt the traditional insurance industry model.
Much like fintech, insurtech has at the core the application of technology designed to address a long list of challenges that currently face one of finance’s often unloved siblings, Insurance. And like Fintech and the use of technology in the finance industry, the insurance industry is at pivotal point, where innovation and the application of specific technologies are beginning to greatly impact this age-old industry.
While it might still be early days for insurtech, it is the smaller insurance firms who are exploring this new terrain and leading the charge. Larger and more established insurance firms have less incentive to wade through the unknown and are not ideally positioned nor nimble enough to make the changes needed to implement many of the technologies currently being developed.
From offerings such as ultra-customized policies, social insurance, smart contracts and using data from internet-enabled devices (IoTs) to dynamically price premiums according to observed behavior, Insurtech is proving to have the potential to make insurance a win-win situation for both the insurer and the insured (along with all the partners who make insurance possible).
As bold as insurtech might seem to be, it will be something that most people (both in and out of the industry) will never really see. It will mostly be technologies implemented behind the scenes and processes running alongside traditional ones. Currently the more noticeable examples of insurtech are seen in personal insurance lines such as; vehicle tracking devices, wearable activity trackers, online software and mobile applications. Most of these are data driven technologies which allow for more accurate predictions about risk, reduce costs, offer better customer experience and speed up the delivery of insurance coverage.
While insurtech may seem to focus on simplifying insurance, the insurance industry remains a complex one. It remains highly regulated and thus can be slow in adopting many of the opportunities which insurtech presents. Much of this is as a result of insurance companies needing to comply with various laws and regulations, but mostly, because of the mindsets and old schools of thought which have dominated the industry for centuries.
In future articles, we will explore insurtech in much more detail, looking at both the technologies and processes, and how they will impact the industry, the insurer and the insured. We hope it will get you as excited about the future of insurance as we are.