Savvy use of automation, data analytics, connected devices, and machine learning has allowed InsurTech startups to offer new kinds of insurance policies. These include dozens of innovative policy types such as on-demand, pay-per-mile, parametric, peer-to-peer, and usage-based.
InsurTech firms are also integrating social media and third-party data in real time to gain customer insights that can be applied at any point in the value chain, from intelligent quote generation to fraud detection, reporting, and claim settlement. The integration of third party data into the value chain enhances assimilation of ecosystem partners and provides a seamless digital customer experience.
InsurTechs are also making an impact on insurance operations with technological offerings that cater to evolving customer demands for a digital and personalized experience while simultaneously delivering internal operational efficiencies.
Technology is evolving from a differentiator to an essential tool within today’s competitive insurance landscape.
Brokers and agents are feeling the impact of InsurTech
The impact of the InsurTech boom has been most significant for insurance brokers and agents. Offerings that now link carriers and customers directly mean intermediaries may need to reassess their business models, and transform using InsurTech methods, to remain relevant and provide value.
Traditional insurance platform providers are also feeling the effects of InsurTech’s ability to quickly address evolving customer needs with sophisticated, technology-based solutions. We expect more and more traditional insurance platform providers to aggressively acquire agile startups in the months ahead as a way of cost-effectively winning back a competitive edge.
For example, in 2017 property and casualty insurance software provider Guidewire acquired Cyence, a Bay Area startup that uses data science and risk analytics to help P&C insurers underwrite threats such as cyber and reputation risks, as well as new forms of business-interruption risk that have previously gone underinsured or uninsured.
Similarly, Duck Creek, a Boston-based provider of core system cloud services and software to P&C insurers, last year acquired Yodil, a U.S. insurance data management startup that helps carriers harness their data, analyze their operations, and optimize market opportunities.
The rise of InsurTechs is expected to have a positive impact on established insurance firms as the newcomers provide cost-effective paths to differentiated and personalized offerings, continuous consumer engagement, customer retention, and new customer acquisition.
For resource-strapped small and regional carriers struggling to compete in the technology arms race, strategic collaboration with InsurTechs could broaden shifting-market survival competencies. Collaboration can enable established insurers to provide innovative digital offerings quickly, and to explore new technologies that can streamline internal operations across the value chain, improving operational efficiency.
InsurTechs can also open new revenue streams that address current coverage gaps through products and services that are tied to mobile devices and time-efficiency, as well as catering to new and underserved markets.
It is critical for incumbent insurers to assess potential InsurTech partners based on the strength of their value propositions, impact on customers, the possible effect on the top and bottom lines of the business, ease of integration, scalability of their offering, and on the opportunity costs of not partnering.
InsurTech firms are impacting the insurance industry in many ways. To continue this discussion, please share your thoughts and connect with me on social media.
The World InsurTech Report 2018, launching on October 2, explores the impact of InsurTech firms and deep dives on strategic collaboration between traditional insurers and appropriately-paired InsurTechs, which can lead to a growing market and ecosystem.