For decades, the insurance industry was not a competitive market. The major players were traditional insurance companies, who were exhibiting high resistance to change. Now, in the last five years, with the advent of new technologies, the competition is slowly shifting to a new arena with the inclusion of new players - called disruptors. An insurtech is one such disruptor in the industry, like Fintech which disrupting the banking industry. An insurtech is an entity in which technology plays a role of strong catalyst in the insurance business. It helps to increase the efficiency and efficacy in the insurance value chain. Insurtech companies operate their business in a way that is different compared to traditional insurance companies, with the help of technological advancements such as Artificial Intelligence, Big Data, Internet of things (IoT) etc.
Insurtechs enables a tailored product, with ‘one-size-fits-all’ not being the mantra:
An example of an insurtech use case is an automobile insurance provider quoting a premium based on the driving pattern of the driver. The insurtech app installed on the mobile monitors the driving pattern for a period of 14 days on multiple factors such as drivers’ braking pattern, their consistency with speed, driving in safe hours and their turning pattern. All these are monitored using the geolocation feature in the phone. A score after the assessment period will help classify the driver into pool of either good or bad drivers. The insurtech then company uses the information collected in the smartphone to quote a premium. However, a traditional insurance company would place the driver in the general pool and quote a calculated premium which is 50% more than the quote by the insurtech. Though a lay-man may not need to know the nuances of how the premium is 50% cheap with insurtech, they are happy and convinced that they are not sharing the risk of bad drivers on the road by paying an additional premium. This means, by large, insurtech enables a tailored product and not one-size-fits-all.
An example in life insurance would be the use of data analytics focused on enabling insurance companies to reduce premiums for anyone with a smartphone or wearable devices. The data collected from consumer’ devices helps the insurers improve the underwriting process to classify the consumer either in a standard or substandard rating in less time compared to the conventional rating process.
Another use case is that of telematic solutions by the insurance companies to cut their annual claims cost, saving millions each year. Smart sensors installed on the property provide real time data to policyholders and insurer in case of damages due to natural occurrences, fire and theft. Proactive communication, customer engagement and loss mitigation are the prime focus areas to consumers in this case.
There are lot of other use cases to substantiate the involvement of technology in insurance. All the use cases can be broadly classified into two types: stand-alone entities who redefine the business model and the other being the booster/accelerator to the traditional insurance business model.
There are more than 1500 insurtech startups worldwide as of Q2, 2019. These insurtechs are started to fill the gaps in different areas of traditional insurance models such as automotive, life, home, P&C, health, travel, P2P insurance, reinsurance, aggregators, knowledge management, insurance data, employee benefits, consumer management etc. The number of start-up insurtechs are high and disrupting almost all areas in insurance. Traditional insurance companies are facing serious threats from these startups. This will disorient the way traditional companies run their business. Does this mean that there is no replacement for insurtechs? Before answering this, we will have to look at the trends observed in the industry:
- Traditional insurance companies acquiring or partnering with insurtechs to jump ahead in the queue
- Insurtechs becoming the industry itself, slowing pushing traditional companies out of business
- Digital and Enterprise IT vendors has started developing solution accelerators that are sold as digital offerings to the traditional insurers.
Given the legacy and roots of traditional companies in consumers’ minds, the second trend will take almost a decade or two to happen, but it is inevitable at some point in future. Whereas the first trend is happening already.
The interesting trend observed is the last one where the IT vendors started developing solutions catering specific need of the insurers they support. For example, Mindtree, being a strategic IT partner for top insurers, has developed accelerators catering multiple needs in par to the solutions developed by insurtechs such as:
- Conversational Commerce for Life Insurance: A simple and convenient way of generating a premium estimate for a life insurance product through Skype messenger
- Conversation Commerce for Personal Lines Insurance: A simple and convenient way of buying a homeowners policy on Duck Creek using a conversational interface
- Customer and Producer Servicing for Life Insurance: Mindtree’s solution that can handle frequently enquired queries with a humanized engagement
- IoT for Risk Management: A solution that provides a mobility app which communicates with sensors in building and provides navigation assistance through safe zones and additionally provides a command center for monitoring evacuation. It enables managing loss exposures for customers of insurance companies, thus serving as an effective way of engaging with customers and defining newer revenue models.
- InspectMind: A cloud-based SaaS platform to carry out the underwriting and risk assessment for insurers, intermediaries and risk management companies. It is developed with configurable and flexible templates at its core.
- MACAW: Mindtree’s Digital Insurance Framework is offered holistically as a digital new business selling platform for assisted (intermediary facilitated) and non-assisted (customer direct) process applicable to both P&C and life insurers. The solution is packaged with content, customer experience, business logistics and insights to meet the changing dynamics of a future insurer.
- Intelligent Automation for Insurance: Intelligent automation helps insurers optimize their business processes across the insurance value chain by streamlining front and back office business processes. Intelligent automation brings together Robotic Process Automation (RPA), Conversational Solutions, Natural Language Processing, character/ image recognition techniques, and third-party data extraction and enrichment tools to bring in a holistic approach to automation. With intelligent automation, insurers can improve their speed of response, offer 24x7 availability, increase productivity, ensure quality and consistency, and improve customer experience and employee satisfaction.
There are multiple ways to measure the success of a solution when these accelerators bring value to the traditional insurers. One way is to the have a checklist of factors to verify the efficiency and efficacy of the accelerators. To develop and deploy a successful accelerator, the below factors should be considered.