To a common man, Disruptive Innovation may sound like an oxymoron. But currently, it is the hot topic with both technology and insurance start-ups. Disruptive Innovation is a process by which the age-old practices and methods of doing business are entirely revolutionized by the use of technology. It provides innovative ways of doing business by making services less expensive and more accessible.
Of all the industries that embrace Disruptive Innovation, Insurtech is at the forefront. Insurtech refers to technology innovations that are designed to maximize savings and efficiency from prevailing insurance models. Market leaders the world over agree unanimously that the insurance industry is ripe for innovation.
The focus of a successful Disruptive Innovation depends on two key factors:
- Enabling technology: Technology or tools that make a product or service more accessible and affordable that save consumers time and money will eventually flourish.
- Innovative business approach: Approaching new targets through an expanding business model will attract new consumers. As they are not locked into older methods, they may be more willing to try the new approaches. Reaching out to these target customers is the key.
How Insurtech is changing the future of insurance industry
The Insurance industry is one of the oldest in the history of America. Traditionally, all policy seekers are assigned a risk category based on generalized actuarial tables. The groups are then adjusted and enough people are lumped together until the policies are profitable to the insurance company. This process is clearly profit-oriented and not customer-oriented and has its downsides. Some people, even with a lower risk profile end up paying more than they should because of the group in which the insurance company assigns them.
Emerging roles of Insurtech
Insurtech is providing ways to tackle this discrepancy head on. Insurtech is exploring ways of bringing these costs down to the consumer by providing data analytics and a thorough risk profile analysis. By embracing technology, insurance companies are able to offer customized policies, social insurance and dynamically priced premiums according to observed behavior from the internet-enabled devices.
Insurtech innovations are not limited to data analytics and risk profile analysis. Insurtech firms are also focusing on big data, artificial intelligence (AI), and Internet of Things (IoT). Some major players in insurance like the Zurich Group have deployed the use of advanced technologies like artificial intelligence for paperwork review (such as medical reports for personal injury claims) and have significantly cut down on the claims processing time. Innovation in Insurtech has also resulted in faster and smarter use of technology and has greatly improved the customer experience with overall insurance management. To learn more about insurance management and insurance salesa automation, check out our blog on Digitized Insurance Management.
Big data, AI, and the IoT accounted for 56% of the total number of insurance-related deals made in 2016.
Other services including front-end policy services like finding, purchasing and managing insurance transactions have become a whole lot easier with Insurtech. Backend claim services have also been significantly impacted by the use of fraud detection algorithms, where a customer simply uploads a photo of the damaged car to an appraiser who then works with the insurers and body shops to settle the claims in an expedited manner.
As expected, all this innovation in the insurance industry is bound to cause some panic in the legacy insurers. Instead of considering the Insurtech start-ups as their rivals, many of the legacy insurers are teaming up with the startups to enhance digital innovation. They are seeking technical support and guidance through innovation labs and foster innovative research and collaboration. Some legacy insurers are also putting their capital to use by forming corporate venture capitals to invest in these Insurtech start-ups.
The future of investment in Insurtech
One cannot deny the fact that the graph of the future of Insurance is heading north at lightning speeds. Investment in Insurance Marketing Automation by venture capitalists has peaked over the last couple of years with 59 deals for $783 million in 2016 and 38 deals for $283 million in the first quarter of 2017, according to CB Insights. With this volume of unparalleled growth, it is a smart move for the insurers to leverage and integrate the advantages of Insurance automation solutions.