Top 5 Factors Insurtech is Missing to Go Mainstream

Top 5 Factors Insurtech is Missing to Go Mainstream

By: TEAM International | December 25, 2022 | 18 min

While integrating and delivering the latest insurtech solutions was tough for many market players, those who’ve managed to do it are now reaping the benefits of a fully online experience. Digital insurance offerings and hyper-personalization are driving the pace of change in the sector. So, it is no surprise that more companies are actively looking to intelligent automation services and insurtech AI solutions that can scale and adjust to the growing consumer demands for digital capabilities to stay ahead of the competition.

The fundamental consumers shift in expectations and our insurtech insights gained from working with industry leaders only prove the increasing urgency for incumbent companies to remodel and improve customer engagement the sooner, the better.

The urgency for insurtech insights and transformation

Today, digital innovation has become critical to acquire new customers, retain existing clients, and launch new services or products. Out-of-date sales practices, lengthy manual flows, and long waits for approval don’t appeal to customers who are now accustomed to engaging digitally. Therefore, insurers with more advanced insurtech solutions have an advantage in terms of growth, agility, and cost-efficiency.

So, what is insurtech? The term refers to new insurance technology popularized by disruptive companies and products that simplify policy management and shake up the insurance sector. In 2021, the global insurtech industry market was valued at $3.85 billion.

the global insurtech market share, 2021

With so much reshaping and so much at stake, where should the focus be? Our team of experts has identified five key insurtech trends that should be on your radar.

Top 5 digital trends for insurtech and you to go viral

1. AI-driven systems, ML, and NLP

Insurtech AI solutions vastly improve an insurer’s ability to optimize sales, distribution, pricing, and claim management. From a business perspective, these technologies ensure faster operations, less dependence on manual processes, and lower operating expenses. Furthermore, AI in insurtech can analyze user data to detect patterns and predict behavior. As a result, you can anticipate user expectations, customize product offerings, and better connect with your audience, increasing sales volume and customer satisfaction.

AI, ML,& NLP use cases in the insurance industry

Global experience, as well as our own, proves that insurtech AI integrations can boost productivity and cut costs by 40 percent by 2030. Beyond that, you can now augment artificial intelligence with ML and NLP to streamline different insurance operations, including:

  • Automated claim handling. Advancements in AI let insurers modernize disconnected claims management, leading to faster processing and shorter approval time. Automation has already replaced more than half of claims practices. However, to gain positive results with enterprise intelligent automation, it is important to prepare internal processes and staff and avoid common mistakes that lead to failure.
  • Algorithmic risk assessment. Instead of relying on in-person interactions, you can engage ML algorithms to determine risky behavioral patterns among potential policyholders. For instance, in auto insurance, AI-based insurtech solutions let you better evaluate risks by calculating such parameters as the driver’s age, location, and average driving speed. Hence, improved accuracy enhances underwriting procedures and price-setting efficiency.
  • Predictive insurance analytics allows insurance firms to accurately define risk levels and price their products correspondingly. Such a powerful tool delivers insurtech insights utilizing predictive model algorithms, AI, ML, and data mining to forecast future trends and consumer behavior patterns. Data analytics solutions should be a cornerstone of every insurer to drive the value of the data they collect.
  • Fraud identification. Insurtech AI solutions are good at identifying fraud patterns and decreasing the number of deceitful claims. Given that US insurance organizations lose aroun $40 billion a year to fraudsters, it’s a viable option.

Why invest?

  • Sales growth
  • Streamlined day-to-day operations
  • More accurate underwriting
  • Fraud prevention

2. IoT and cloud computing in tandem

Internet-connected devices like smartphones, security systems, and mechanisms with built-in sensors that can autonomously exchange information over the internet create a network – the Internet of Things (IoT). Thanks to its top-notch data processing methods, you can get insurtech insights that were unattainable earlier.

Advances in this technology can better connect you with consumers by adding essential touch points in particularly sensitive phases, like acquisitions and claims. While people might fail to remember incident details, technology records everything. Yet, understanding IoT and security risks is the first thing you should do to enable new opportunities and unleash paths for more flexible business models.

Connected insurance: LoT technologies in the industy

IoT produces tons of raw data that need substantial computing capacity to be processed, and this is where cloud computing removes the bottleneck of IoT insurtech solutions. With scalability and ease of deployment, the cloud is the most convenient and effective tool for data sharing and business app accessibility. Migrating data to the cloud also helps firms reduce manual efforts and improve resiliency and productivity. Around 67 percent of insurers indicate that the main reasons for moving to the cloud are flexibility and operational agility.

why insurance companies opt for public cloud adoption

Why invest?

  • Faster claim processing
  • More effective cost management
  • Better fraud detection
  • Optimized risk assessment and prevention
  • Higher speed-to-market

3. Distributed ledger technologies

The information stored in such decentralized systems is practically impossible to change, hack, or falsify. Such an approach to business transactions results in transparency and trust between policyholders, insurers, and insurtech ecosystem partners by providing shared digital record storage. We know how valuable it is to the insurance sector, as a distributed ledger guarantees that information is secure, accurate, and trusted.

Blockchain drives disruptive changes to the business model and the insurtech industry generally. It can enhance your cybersecurity strategies and consumer services. At this point, blockchain represents a $5 to $10 billion by 2030.

  • Smart contract technology

Such blockchain-enabled insurtech solutions automatically enforce an insurance agreement when all parties meet the terms. It enables the tamper-proof exchange of information and payments between the parties. The contract code contains algorithms able to predetermine possible insurance payout scenarios, eliminate administrative burdens, and execute agreement terms, leaving little space for manipulation. Notably, the global market for smart contracts will exceed $8 billion by 2030.

Why invest?

  • Lower administration costs
  • Better relationships with customers
  • Improved trustworthiness
  • Privacy preservation
  • Automated transaction execution
  • Fraud detection

4. More flexible insurance models

The prevalence of digital, automated processes is growing, requiring new and more flexible business models. Technology and insurtech software solutions can help you transform your business and deliver rich, personalized client experiences. We know firsthand that scalability and flexibility are vital when redesigning business operations, and that’s where the BOT model comes in.

why insurers should change their strategies now

On that note, here are several customer-facing business models changing the sector:

  • Usage-based insurance (UBI) with the help of telematics platforms

Telematics insurtech solutions collect user data enabling you to develop personalized UBI services. Today, 7 out of 10 users are fine with providing private information in exchange for personalized products and discounts. So, UBI is a preferred consumer model as they only pay for actual car usage based on their driving habits.

  • API-based model

Also known as an open-source platform solution, APIs help build an ecosystem that connects customers, carriers, and agents with technology infrastructure and assets. Companies interconnected through APIs offer unmatched customer experience by interweaving digital services from multiple carriers. About 82 percent users are fine with providing private information in exchange for personalized products and discounts. So, UBI is a preferred consumer model as they only pay for actual car usage based on their driving habits.of insurance executives are sure that scalable ecosystems propel growth, and 58 percent actively seek ecosystem models. Note that intelligent automation and the application of AI in insurtech play a vital role in this model.

  • Embedded insurance

Providing customized offerings to potential policyholders at a point of need is among rising insurtech trends that will grow to $3 trillion by 2023. Embedding insurance protection is an effective way to provide added relevant value while offering a high-quality customer experience. This winning strategy can save you money on distribution and streamline claims processing.

Key stakeholders in embedded insurance

Why invest?

  • Strong competitive edge
  • Revenue growth
  • Simplified claim processing
  • Personalized insurance coverage
  • Low cost of customer engagement

5. Alignment with younger generations

More than 86 percent of consumers will abandon a service due to a couple of bad experiences. If the insurtech industry wants to attract youth, then automation, insurtech insights, and transparent communication will be essential. This powerful group of digitally native gen Z consumers is applying its digital habits to future insurance products, bringing new demands the industry should embrace:

  • Self-service tools. Younger people now expect to do more themselves with self-service platforms. Online policy updates, quote generators, billing schedules, chatbots , and other insurtech solutions allow customers to get the necessary information and purchase insurance quickly and easily. For you, it means doing business with more clients and decreased commission costs.
  • Tailored digital products. Now insurers can draw on various sources, including online forms, social media platforms, customer portals, and even wearables, to adjust a product or service to an individual’s requirements. The wealth of data allows you to develop a more comprehensive vision of your client’s demands and offer better-aligned services.
  • Expansion of digital channels. As customers quickly become accustomed to insurtech solutions, forward-looking insurance leaders expand their offerings with online assistants or voice-first customer service. It is no surprise that 53 percent of younger consumers prefer digital channels to interact with agents, while 41 percent are likely to switch providers if they lack digital capabilities.

Why invest?

  • Customer-centric business
  • Closer ties with users
  • Strengthened consumer interaction
  • Reinforced market position
  • Facilitated cross-selling opportunities
  • Increased ROI

The need for agility to keep up with changes

Today, the competition is fierce, so you should not only watch but anticipate the insurtech industry shifts and trends. Otherwise, you risk losing market share to disruptors that provide new products and services with better insurtech solutions. To avoid that, employ emerging technologies and practices that will allow you to enter new markets and scale quicker.

So, as a leader, push for agile cross-functional collaboration and changes in the corporate ecosystem and find a reliable partner to foster the technical side of your transformation. TEAM International partners with companies to help them turn the possibilities into reality, backed by in-depth domain expertise and market-leading insurtech software solutions. The imperative to accelerate the shift has never been clearer, and only those who challenge their business model will stay competitive.

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