InsurTech: Transforming a Colossal Industry
Technology is affecting every industry, so it’s no wonder that InsurTech —insurance technology— is rapidly growing in interest, offerings and capabilities. After all, insurance is a giant amongst industries; for example, in the U.S. insurance premiums totaled $1.2 trillion (2017) and the industry had over $5.7 trillion in assets. Using technology to deliver innovative solutions and lower costs is, much like the fintech industry, attracting new entrants and forcing incumbents to adapt.
In Q1, 2019 there were 85 InsurTech funding announcements worth US$1.42 billion, which is an industry record. As insurance covers a gamut of sectors, it’s important to note that the impact of InsurTech varies among market segments. The low-hanging fruit are areas that have direct touch with the consumer, as improving onboarding is a quick win. Filling in mounds of paperwork has never been an enjoyable customer experience and now that online and mobile alternatives are common-place, it’s becoming increasingly important to offer those channels to maintain users.
The promise of InsurTech
As insurance is so reliant on data, technology can assist almost every aspect of the industry. Indeed, any technology that can assist risk-mitigation or risk-transfer can have a significant impact. Consider the internet of things (IoT), where sensors and connectivity are integrated in every imaginable object. Just as fire alarms reduce the damages from fires, embedded sensors in a bridge can warn of imminent failure, reducing the risk and the associated costs of payouts. Car tracking sensors can monitor use and adjust rates based on driving habits. Weather sensors can alert users of high-risk situations before any person even notices.
All the data improves insight and provides insight to improve risk-mitigation strategies. Artificial intelligence (AI) systems is deployable to better analyze the massive data sets and, when combined with advanced modelling techniques, the information gleaned can help set more appropriate rates, spot fraudulent claims and point to new cross-selling or gap coverage opportunities. The rich information provides a path toward more customized insurance, where actuary data becomes ever-more refined and customers get personalized packages. One result is that hard to insure markets, such as self-employed or marketplace workers, now get appropriate coverage, tailored to their specific needs; insurance for a day or a week, or coverage for specific equipment or obscure situations.
Know your client
Understanding who an insurance client is and the risk they pose is fundamental to the nature of insurance. Therefore, proper identity verification measures during onboarding are necessary. With mobile and online channels becoming increasingly popular, electronic identity verification (eIDV) enables an applicant to quickly sign up online while still providing the necessary evidence to fulfill regulatory requirements, as well as assisting fraud prevention measures.
Other identity techniques, such as document verification and biometrics, provide additional layers of verification, delivering more security and better risk-mitigation.
Identity verification can also assist in a payout scenario. After all, insurers should be extra diligent when paying out funds, so verifying a claimant’s identity can speed up the process as well as flag potential fraudulent activities.
Properly done, identity verification offers privacy protections to cover different market’s regulatory requirements. Insurance documents contain an abundance of confidential information and processes should ensure that the information is protected and sharing of the information is strictly limited.
The potential of InsurTech to decrease risk, provide better coverage, save money, create better back-end processes and improve the customer experience is significant. Of course, with all the opportunities, it can be difficult to know where to begin. As the saying goes, start at the beginning. In this case, providing mobile and online channels to quickly onboard and renew customers is fairly straight-forward and promises quick ROI. With effective eIDV processes in place, risks are mitigated and the customer experience is positive right from the beginning.