Billing auto premiums based on mileage. Selling renters insurance through a widget on a website. Quoting and binding a homeowners policy in near real-time. These are just a few examples of the many insurtech digital solutions that are transforming the traditional insurance model, from marketing and policy origination through underwriting, services and claims. But what exactly does insurtech mean? How is insurtech used? And is it an agency’s friend or foe? To help answer these questions and more, this article dives into the what, why and how of insurtech, plus the benefits to both customers and the independent insurance agency channel.
What is insurtech?
Insurtech is a blanket term used to refer to digital technologies designed for insurance that offer greater speed and efficiency than traditional methods. Insurtech has come a long way since gaining momentum in 2010, following on the heels of the banking sector’s fintech revolution to meet customers’ rising digital expectations and feed investor appetite for seizing market share. Like banking, the insurance industry was perceived as technologically slow moving by outsiders and ripe for disruption. While insurance insiders understood transferring and assuming others’ risk with a promise of financial indemnification in a heavily regulated industry is more complex than nearly any other sector, venture capitalists saw the opportunity to invest in insurtech and improve the insurance process for customers.
Today, developing digital insurtech solutions has been embraced not only by early startups disrupting the traditional model but also insurance industry veterans looking to innovate and grow. Regardless of the provider, the goal of insurtech is to offer customers new and more efficient ways to do things, such as how information is gathered, contracts are executed and information is analyzed. Think digital solutions that use apps, wearables, claims data and machine learning to automate and improve processes across the insurance value chain, spanning personal lines, commercial lines, reinsurance and life insurance.
Why is insurtech important?
With technology powering new products and processes throughout the insurance value chain, tasks that used to take days can today take minutes. In short, insurtech is important because it drives speed, ease and efficiency, offering the following benefits:
- Enhancing the customer experience. With the trend of consumers moving away from on-premise to online services, offering digital services meets customers when and where they want to connect. Whether it’s visiting a self-service website, leveraging a mobile app to manage a claim or using online tools to compare policies and pricing, insurtech enables agents to provide access to faster, easier and more personalized customer services.
- Providing tailored solutions. Through information harvesting and data processing, insurance companies can gain a crystal-clear view of an individual’s insurance needs, giving them the ability to tailor pricing and coverage that fit their needs.
- Reducing operating costs. Using digital solutions to grow enables insurance agencies to scale their work without scaling their operational footprint. Less overhead leads to reduced operating costs and higher profit margins.
- Illuminating fraud. Using machine learning and trend analysis to spot patterns and identify potential risks, insurtech can help detect claims fraud or system loopholes more quickly and easily.
- Shrinking cyber risk. Holding vast amounts of policyholder data puts insurance companies in the crosshairs of a data breach by cyber criminals. Insurtech solutions that encrypt customer data and detect threats are making it harder for cyberattacks, shrinking cyber risk and bolstering security.
When should insurtech be used?
From personalizing policies to streamlining operations, insurtech is used to elevate service, simplify operations and harness data for sophisticated analysis. With countless applications, the following highlights how it’s advancing traditional insurance activities.
- Coverage. From premiums based on actual mileage driven to short-term rental property insurance (typically excluded from a homeowners policy because it’s considered activity), insurtech is enabling insurers the ability to expand its coverage offerings from a one-size-fits-all policy to new coverages based on a consumer’s unique wants and needs.
- Quoting. From putting a quoting engine directly on an agency’s website to tools that provide rates and discounts based on data unique to the policyholder, insurtech offers convenience and customization in the quoting process. For example, using a comparative rater offers efficiency in quoting, tracking, recordkeeping and remarketing efforts for agents, plus convenience and time-savings to prospects.
- Underwriting. Insurtech advances traditional spreadsheet models, which are time-intensive to maintain, giving underwriters access to real-time data from numerous data points. This provides a clearer view of a risk, greatly minimizing the time it takes to analyze the risk and improving loss ratios.
- Claims. By enabling user-friendly ways customers can submit, track and appeal claims, and insurance companies to process and pay claims more quickly and accurately, insurtech is streamlining the claims journey from first notice of loss to adjustment and settlement for customers and agencies alike.
- Reporting. Insurtech that harvests data from internal and external sources, such as telematics, agent interactions, customer interactions, smart homes, loss information and social media, enables insurers to use proactive reporting from predictive analytics to their advantage. This includes how to better manage customer relationships, set pricing, improve claims and underwriting practices, flag fraud, triage claims, manage risk, anticipate claims trends and improve customer retention.
- Loss control. Through leveraging data, insurtech is being used to reduce the potential for losses. For example, companies with vehicles can lower costs and improve overall fleet safety and efficiency with telematics, insurtech that gathers data related to a vehicle’s location, driver behavior, vehicle diagnostics and similar operating metrics.
Insurtech is consistently reshaping the insurance industry
With new products and faster ways to underwrite, bind insurance and make a claim, insurtech has and will continue to reshape the insurance industry. As agents look for new ways to make their day-to-day activities more efficient and attract and retain clients, modern insurtech solutions are on their doorstep. With careful consideration of the right digital tools, agents can benefit from all that insurtech has to offer. And the time to partner with insurance experts who can help in innovative ways is now: as the insurance industry continues to shift, keeping up rather than catching up will likely play a key role in agents’ continued success. To learn more about why adapting your systems and practices can help you succeed in today’s changing environment, check out our Guide to Agency Technology. See how we partner with you to stay competitive with digital tools and technology.