How “InsurTech” Will Change Our Daily Lives
One of the recent changes in financial lexicon has been the introduction of the word FinTech. Meaning computer programmes and technology used in the banking and finance industry, it has quickly become common vocabulary and no longer raises eyebrows in financial institutions and beyond. A new concept doing the rounds in these days, which falls under the umbrella of FinTech but receives much less attention, is the idea of InsurTech. InsurTech aims to innovate in order to improve profits and efficiency in the insurance industry using the latest technologies. Not only will new technology be used to speed up the administrative side of the industry, but it will also be used to more accurately assess risk and speed up the payout process. The term is sure to become common within the insurance business just as FinTech has in the wider financial industry.
It is not only insurance industry insiders that will be affected by this change. Life for ordinary people will improve as InsurTech is adopted. It is suggested that technological improvements will save us money and offer many other advantages compared to the current status quo.
The insurance industry traditionally has a negative image in the eyes of customers, believed to be mysterious, difficult to understand and navigate, and ultimately perceived by some to be a waste of money. InsurTech is helping the industry to rewrite that story by offering customers a better deal all around.
The use of technology to automate much of the underwriting and back-end tasks in an insurance business is a sure-fire way for the company to save money and improve customer experience. One company passing on these savings to customers with great success is Lemonade, a new startup that is taking advantage of InsurTech to offer “killer” prices which work out much cheaper than competitors. Lemonade currently has a Net Promoter Score (NPS) which is a score to measure how likely a customer is to recommend the company to a friend, of 70 compared to an industry average of less than 20. Their use of big data back-end technology does not only save customers money, but it means that claims are handled faster than other companies, which is certain to have contributed to that amazing score. The company have also employed chatbot technology to ensure customers have queries answered 24/7 and their company blog does a great job of demystifying a sometimes confusing industry.
Ageas is a UK firm using artificial intelligence to automate the analysis of images of a car crash to decide on the validity of a claim. This is a more efficient and cost-effective way to assess claims. For the customer, this means cheaper insurance and faster payouts.
Usage based insurance
Usage Based Insurance or UBI has been gaining traction for a number of years now, namely in the car insurance sector. In return for sharing recent driving data through black box recorders or telematic devices, customers are offered improved rates as companies are able to more accurately predict the likelihood of the driver being involved in an incident. With this new dynamic pricing system, gone are the days of safe drivers being penalised for the recklessness of a select few. Better still, these systems are very effective at reducing incidents of fraud, which again is great news for the rest of us in terms of price. This technology is now spreading to the health insurance market, using connected wearable devices to allow your insurer to risk-assess thus saving you huge sums of money. The home insurance market is next, with smart home monitoring systems being installed to ensure optimum security and minimise the risk of house damage.
Technology is allowing insurers to serve niche markets who were previously unable to get adequate cover or affordable cover on the mass market. A good example is a person who wishes to drive their car from time to time, previously they could only get an expensive policy which would cover them every single day, even though they did not intend to use the car every day. But with the diversified market, as a result of InsurTech, those people can now access exactly the cover they need at a much more reasonable price. Cuvva is one such company that offers insurance by the day or Trov which allows cover to be switched on and off as required. Bought By Many is a company that uses data to find gaps in the market and serve them. This model caters to those who work in the gig economy or run a small business, people with long term health conditions who wish to travel, or pets with special medical needs.
The area of catastrophe insurance has been greatly improved by the advent of technology. For those living in disaster-prone areas, it is reassuring to know that the use of data mapping and analytics has improved the ability to predict disasters, meaning that assistance is more readily available when they do occur.
Add to that the use of drones and parametric policies which pay out on the occurrence of a specific incident rather than in response to losses, both of which are giving remote communities faster payouts enabling speedier recoveries.
Artificial Intelligence (AI) is another area of technology being used to improve the InsurTech industry for customers. Many companies now have chatbots on their websites so that customer queries can be answered quickly and effectively. As the technology improves it is hoped that customers can obtain answers about policies and make decisions on the kind of cover they need.
Thanks to InsurTech, claims are being streamlined, many companies now allow claims to be made online, some even from a mobile device. Compared to the traditional method of filling out forms to be sent or emailed, this is going to vastly improve the customer experience.
Though InsurTech may be a term that the general public is not yet aware of, we are already reaping the benefits of this revolution, the biggest change to happen in the insurance industry since its inception.
Here are some other interesting articles you should check out:
・The latest tips from Warren Buffett’s investment strategy
・What is InsurTech? What kind of impact is this Fintech sub-segment expected to have in Singapore?
・5 Tips for improving your credit score in Singapore