The startup economy is here to stay, and it’s disrupting the insurance sector just as comprehensively as the mobility, hospitality, and banking sectors. InsurTech, or the way to combine tech and Insurance, is gaining strong traction, with numerous startups bringing new business models and improved customer experiences to the market.
With their agile structures, streamlined operational costs, risk-taking mindsets, and data-driven experience models, InsurTechs are proving themselves better and faster at addressing customer needs.
Technology revolutionizes customer engagement
The days are gone when insurers communicated with customers only when claims were filed. InsurTechs have altered the traditional low-interaction model between insurer and customer by leveraging connected devices and Internet of Things (IoT) to drive product innovation and reinvent customer engagement.
By gathering real-time data from wearables and other connected devices, InsurTechs are popularizing product personalization, and premiums based on highly granular risk assessments.
For example, Root Insurance, an Ohio-based car insurance startup, uses telematics (IoT devices installed in cars to record driving habits) to calculate insurance premiums based on individual driver behavior. Launched in 2016, the product is expected to be available across the United States by 2019. That’s an entirely new business model nationwide in just three years. Not only has Root disrupted traditional premium calculation, it has also changed the business model by acting as an insurance broker itself instead of selling its data to other companies.
Similarly, Beam Dental began as a startup in 2012 selling Bluetooth-connected toothbrushes that gathered real-time data on brushing habits. It used the data to price dental insurance policies, leading not only to more accurate policy pricing but also to potentially lower loss ratios by providing customers an incentive to mitigate risky behavior. Today, Beam is available in sixteen US states, and is expected to double its reach before the end of the year.
From disruption to collaboration and new revenue streams
IoT-based sensors and wearables allow continuous monitoring of a vast array of risk factors, from an individual’s vital signs to water leakage in a house. Collaborating with InsurTechs that offer insights into these risks can enable traditional insurers to deepen their relationships with customers. It also enables them to engage in proactive risk mitigation services, and to provide timely care interventions.
An example is Hiotlabs, a Stockholm-based InsurTech that offers “prevention as a service” by leveraging IoT sensors to measure humidity and temperature inside buildings, thus enabling early detection of water damage.
InsurTechs are ushering in a collaborative model with traditional insurance players using Application Programming Interfaces (APIs). This rapidly-evolving API economy is creating new customer touchpoints for insurers by boosting the array of insurance apps they can offer. APIs help insurers provide seamless customer protection and open up new revenue streams.
For example, Matic uses an API to integrate with home insurers’ systems and third-party mortgage platforms. By clicking the “request quote” button, 95% of the details needed to offer a home loan quote are pushed out automatically to the carrier. The customer only needs to answer few additional questions for a near-instant quote.
Operational efficiency through technology
InsurTechs also help traditional insurers streamline processes and achieve operational efficiency with technology such as cognitive document processing.
To illustrate, Mexico-based InsurTech Expediente Azul offers a web and mobile tool that helps insurers capture, analyze (via optical character recognition and artificial intelligence), and store insurance claim documents in the cloud. The tool manages end-to-end insurer and customer interactions during claims processing.
Increasingly, InsurTechs are also offering ways to use Robotic Process Automation (RPA) and Artificial Intelligence (AI) in the automation of insurance value chain processes. Blockchain technology is also starting to disrupt the insurance sector as it facilitates transparent, seamless, and secure data storage and data sharing, which can enable better fraud detection and prevention. Blockchain-based smart contracts allow for instant claims processing and faster payouts.
VeChain, a public blockchain platform that focuses on supply chain management and smart contracts, and Etherisc, a decentralized insurance protocol that offers common infrastructure, product templates, and insurance license-as-a-service both use blockchain technology to enable insurers to streamline claims management.
Identifying the best partner towards effective collaboration between Insurers and InsurTechs
Better customer retention, new revenue streams, and operational efficiency improvements are just some of the benefits that make InsurTechs attractive partners for insurers. InsurTechs, on the other hand, look to traditional insurers’ extensive customer bases as the key to scaling their offerings.
To help facilitate effective collaboration between insurers and InsurTechs that will perform well over time, Capgemini has created the Capgemini ScaleUp qualification program to measure the readiness of InsurTech Scale Ups (or mature startups) to effectively collaborate with insurers. The program analyses InsurTechs across four essential pillars: People, Finance, Business and Technology using a rigorous, global, and systematic approach. Post qualification, InsurTech participants receive a comprehensive evaluation and are assigned one out of the following four qualification levels: Promising ScaleUp, Emerging ScaleUp, Intermediate ScaleUp and Advanced ScaleUp.
The process helps InsurTech Scale Ups build credibility, and helps insurers select the right ScaleUp partners to build a sustainable and industrialized business model. To learn more about the program connect with me on social media.
The World InsurTech Report 2018, which launched 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.