5 Most Crucial InsurTech Trends of 2020
Recent InsurTech Trends will trigger the online insurance market to grow at a CAGR of 45.66% during the period 2019-2023.Market Watch
In recent years, we’ve witnessed the digitization of financial operations and offering financial services through digital channels. The term was coined as ‘Fintech’. However, the financial market trend is changing at a swift pace, with technology solution providers are not only focusing on their target customers but also competing with traditional banking structure for their share.
Consequently, traditional banks are engaging in some form of partnership with the technology giants to capture their market share. In a similar fashion, the traditional insurance industry is also on the verge of adopting advanced technologies such as Artificial Intelligence, Machine Learning, Internet of Things, and Big Data.
What is Insurtech?
Traditional insurers have started realizing the benefits of disruptive technologies in the insurance sector. Just like Fintech, Insurtech refers to the implementation of innovative technologies to improve efficiency and enhance customer satisfaction in the insurance sector.
The use of technology in insurance operations is not new, in the recent past, the technology solution providers were working to make the backend insurance operations efficient. What changes the game is the insurtech trends that bring technological advancement in the customer-facing insurance operations such as AI-powered chatbots, online insurance marketplaces, and many more.
InsurTech Trends 2020 – Infographics
InsurTech Trends 2020
1. Personalized Offerings
Insurers are keen to put the customer at the heart of everything they plan to do. And technology is helping in understanding the customer needs effectively to help insurers offer customized advice, tailored pricing, and coverage. The shift towards personalization indicates that insurers have started viewing consumers as individuals, rather than segmenting them in groups.
The personalization of offerings and data utilization benefits both insurers and customers. Asking visitors to share their location with you might sound prying, a study by BCG and Morgan Stanley found that customers are willing to share such info as long as companies communicate how it will be used.
For example, the data collected from wearable and telematics will be key to insurance companies catering to the growing markets of Africa and Asia. The statistics show that 60% of the citizens in these areas suffer from a lack of income security. Insurers can leverage this data by offering tailored services with break periods that enable customers to postpone paying until they are able to pay.
2. Utilization of Human Capital
The human intellectual capital has always been a pain point for insurers. Employing and retaining technically skilled personnel is hard as well as costly for any insurer. Particularly, younger candidates show very less desire to venture into insurance over other exciting sectors alike tech space.
Additionally, retaining experienced staff is also a key concern. This is where this InsurTech trend might prove to be a savior. Partnering with technology, insurance companies can position themselves as dynamic, disruptive, and connected that help them rise above their stuffy image.
The primary reason behind digital strategy adoption by insurance companies is not improving efficiencies or savings, it is to increase customer satisfaction. Considering 61% of the customers accepted they prefer to check their insurance application online.
However, the transition from paper logs to online-only is really a hurdle. McKinsey reports that nine out of 10 insurers are struggling to develop the required technological infrastructure. Insurance companies blame their legacy software and the sheer magnitude of their IT systems.
The disruptive shift of the insurance industry lies in the digitization of its internal process. TechCrunch suggests that insurance brokers become obsolete in the mobile-first world. The data indicates that in the US alone, almost 1 million jobs could be automated, cutting the cost down by 40%.
So, how insurance companies are overcoming the transition challenges? The companies are adopting API or microservices architecture to overcome the problem of complex-legacy-system.
4. AI & ML
Well, this duo is there to make every aspect of an insurance business more efficient. On one hand, the ML, a transversal tech, could help insurers in anti-money laundering, fraud prevention, underwriting, and pricing. On the other hand, AI provides data collection opportunities that will help insurers realize automation and hyper-personalization of offerings.
Undoubtedly, AI isn’t mature yet and needs a human touch to work the best. But, insurtech companies who will fail to adapt may find themselves left behind in the near future.
Blockchain enables a digital ledger that is automatically created and can’t be altered. This technology can help insurers in reducing the admin costs incurred while reviewing claims and checking third-party payments.
Blockchain ensures that all of this information is fraud-protected, shared, and easy to verify. Research by PWC states that blockchain could benefit reinsurers by simplifying the insurance policy migration process which may lead to potential savings of USD 5-10 billion.
As the customer expectations for convenience, transparency, and real-time issue resolution are paving a way to a new future for the insurance industry, adopting the insurtech trends mentioned above will be the best way to make an insurance venture future proof.
As we go further in 2020, we can expect to see more insurtech trends triggered by the customer, technology, and competitive forces.