What about InsurTech?
Along with RegTech, InsurTech is the little brother of FinTech, but by far the most unloved one. The insurance industry has been long untouched by innovation and disruption, much longer than the financial sector. But many startups are now tackling the stiff insurance sector.
Insurance + Technology = #InsurTech
What is this new phenomenon called InsurTech? Like FinTech in general, startups in InsurTech seek to disrupt a traditional industry by introducing new technologies and business models. Yet, those startups merely rattle the rigid structures of big insurance companies. Unlike FinTech, InsurTech startups face a greater number of challenges and do not manage to use their full potential. In fact, four major issues keep startups from having a greater impact on today’s insurance industry:
- The first key word is opacity: The insurance business is complex, thus, hard to understand from an outside perspective, with little public data available.
- Equally to banks, insurances are strictly regulated, forcing startups to work with existing industry partners or recreating the whole value chain. In addition, different regulations in every country complicate scalability for InsurTech startups.
- Insurance is one of the most traditional and conservative businesses, in which all players are well connected. Accordingly, those people prefer doing business with whom they know and trust, giving newcomers a hard time.
- Because of all three issues, investments in technologies or business models that disrupt insurance are highly risky.
Disruption step by step
Under those circumstances, InsurTech startups are primarily focused on serving incumbents. They operate as non-regulated, B2B or B2C businesses, while demonstrating value to their customers. InsurTechs address customer satisfaction (or rather discontent with current insurance policies) with their innovative solutions. As they target sub-areas of insurances, startups develop leaner, customer-centrist technologies that create a positive user experience and build a trustful relationship. Sub-areas are usually the purchase experience (consulting, sales, sign up and subscription process) and claims and reimbursement processes (notification of loss, damage assessment, claims processing and actual reimbursement). InsurTechs provide a single point of contact for customers and make individual process steps fade into the background. For B2B concepts, InsurTech startups sell a service or a product to the insurance company to positively influence their most important KPI: the combined ratio.
With other industries changing continuously, insurance will have to act likewise: Increasing number of tech items in households, car-sharing, or subletting property already demands for usage-based insurance. Accurate and real-time data collection will be used to create individual and flexible insurance premiums. Insurances will have to take the leap – why not take the first step and mix industry expertise with an entrepreneurial mind? InsurTechs can and should lead insurance companies through the digital age.