A portmanteau of “insurance” and “technology”, InsurTech is latest buzzword in Fintech area, and what a good time to take the centre stage! Reinsurers are facing record catastrophe losses this year. While areas of Fintech such as payments have roared in recent years, the InsurTech-concept has been slower to develop.
The idea is said to have emerged back in the 90s with the internet boom, but the concept gained traction in the last couple of years when some of the large global insurers decided to give it a go. The growth had been up in 2015 as investors got excited about merging insurance with data and technology. InsurTech is one of the key areas of FinTech that is attracting investment, and the investment boom shows no sign of easing in 2017.
Changes and upgrades in the financial services industry worldwide is accelerating, which seem to have pushed the rather slow respondents – the insurance players to look beyond their traditional brick and mortar setups to manage risks. Amid Big Data, Internet of Things (IoT), Bitcoin revolution, and Artificial Intelligence (AI), InsurTech might not sound too revolutionary to the tech-enthusiasts, but for the insurance sector it is likely to become the new normal. In fact, insurers are taking a more proactive approach to seize the opportunities offered by InsurTech; InsurTech firms are disrupting the global $5 trillion global industry in a way like Airbnb, Uber, Netflix upset their industries. And according to The InsurTech Report by Business Insider, they are doing so by leveraging new technology and a better understanding of consumer expectations to increase efficiencies in the insurance industry. Moreover, the findings of the report go on to highlight that these small firms are either helping insurers deliver better products, or are directly competing with big players; billions of dollars are going into InsurTech start-ups that are on the quest to challenge big players.
So far, the opportunity for InsurTech is mostly in the US and Europe as they have the largest mature insurance industry. The InsurTech start-ups are largely focusing on retail customers and small businesses as of now.
The insurance industry might have been slower than other areas of finance to wake up to the digital age, but it’s time to take a step on the technology ladder. While InsurTechs are acting as the enablers in the sector by prioritizing better risk insights and customer engagement, they also pose a threat to the middlemen and the intermediaries in the sector like the insurance brokers and the reinsurers as they could completely eliminate them by replicating their role more efficiently.
InsurTech is also primed for Blockchain adoption, and one of PWC’s latest studies on shows that 68 percent of participants are expected to adopt Blockchain as part of their processes by 2018 where the focus will be on automated claims processes, streamlining data collection and payments, and better and transparent aggregation and allocation of catastrophe risks or losses.