Digital Insurance Marketplaces And Insurtech Innovations In The Fintech Industry – Insurtech refers to the use of technological innovations to achieve savings and efficiencies within the current insurance industry model. Insurtech is a combination of the words “insurance” and “technology” and is inspired by the word fintech.
Insurtech is built on the belief that the insurance industry is ready for innovation and disruption. Insurtech is exploring opportunities that large insurance companies have no incentive to pursue, such as offering hyper-customized policies, social safety nets, and using new data streams from networked devices to dynamically set premiums based on observed behavior.
Digital Insurance Marketplaces And Insurtech Innovations In The Fintech Industry
When it comes to traditional insurance, some people pay more than the basic data used to group people shows. Beyond that, insurtechs want to solve this data and analytics problem. These companies leverage input from a variety of devices, from geolocation tracking in cars to the activity trackers on our wrists, to create more precisely defined risk groups, allowing for more competitive product pricing.
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In addition to better pricing models, insurance startups are testing some potential game-changers. These include using artificial intelligence (AI) trained with deep learning to perform broker tasks and find the right set of policies to ensure individual protection.
There is also interest in using apps to consolidate different policies into one management and monitoring platform, create on-demand coverage for micro-events such as borrowing a friend’s car, and adopt a peer-to-peer model to create customized group insurance and encourage active participation through group discounts choice.
There are many similarities in the goals and implementation of insurtech and fintech, as both the insurance and financial industries are undergoing significant process changes.
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Insurance plays an important role in changing the way insurance is used and paid for in many different ways:
Traditionally, the claims management process involved manually processing each claim, deciding whether to award compensation, and then forwarding it. Currently, insurance companies aim to establish processes that automate certain processes and detect fraud.
Larger companies can use technology to collect and aggregate specific data for specific claims. These claims can also be automatically verified by comparing different data streams. Finally, large companies can use automated or repeatable workflows to pay high volumes of claims with minimal human intervention.
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The underwriting process involves reviewing an individual’s profile, assessing their risk profile and extending the insurance package that includes coverage. Information provided to the customer also includes his or her monthly premiums and the compensation to which he or she may be entitled in relation to various claims.
Much of this data can be mined or collected automatically. Even when customers are asked to submit information, modern technology uses multiple data points to compare with historical data, which can continuously learn, evolve and make more informed assumptions. This means that the data itself determines whether to extend the policy to an individual and what price is fair relative to the relevant level of risk.
Whether it’s paying claims, executing different levels of coverage, closing expired customer policies or approving new customers, insurance involves a large number of contracts.
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Using blockchain technology, smart contracts can be launched when certain conditions are met. This removes the human element needed to process the contract and allows an impartial, neutral party (i.e. technology) to evaluate the contract criteria and decide on the appropriate course of action.
As mentioned earlier, big data can be used to collect, analyze and summarize information. This includes analyzing a customer’s historical activity or evaluating various claim types. Based on the information collected, insurers may be able to detect fraud, guard against undue risk or better understand where they are most vulnerable.
The insurtech industry will be worth a total of $5.4 billion in 2022, according to Grand View Research. Revenue forecast for 2030 is $152 billion.
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The range of technologies used in insurtech continues to expand and evolve, and is changing the way insurance is underwritten. The following are the most famous techniques that have been used.
Artificial intelligence capabilities make it possible to perform some tasks that previously required human interaction and now rely entirely on technology. For example, customers had to contact a representative ahead of time to get answers to their questions; now, interactive discussions with chatbots allow customers to get help without having to talk to a human.
A subset of artificial intelligence is machine learning, which has the ability to mine historical data and compile predictive models. These models are then used to distribute messages and can be set up in feedback loops. If future data is fed into the model, the model can “learn” and continuously evaluate how to calculate appropriate premiums based on demographics or risk profiles.
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Insurtech revolution is based on efficiency. This means that when an insurance customer completes a document online, the entry is automatically saved in the data warehouse or used to automatically prepare the policy for signature. Automation tools are used to avoid human intervention when technical tools can perform the process on their own.
Big data refers to the collection of large amounts of information. This includes extensive data, rapid on-the-fly data collection, and diverse data sets. Big data collection technology enables insurance companies to collect a wider range of data that can be used to analyze customers’ risk profiles to better understand their characteristics and habits. Additionally, this information can be collected for millions of customers and fed into the predictive models discussed earlier.
Although it is best known for its cryptocurrency, the fundamental foundation of blockchain technology is an immutable, decentralized legacy. This allows records to be maintained at any time and ensures the security and reliability of information storage. It can also execute smart contracts on the blockchain and remain dormant until certain conditions are met to release insurance proceeds or insurance customer approval.
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Insurtech also focuses on innovative hardware technologies. Drones can be used to assess property, assess property damage where people are moving where physical danger may be present, or review on-site claims. Drones are now increasingly reliant on the quality of high-resolution photos and videos, so evaluators can rely heavily on in-flight photos and stored imagery.
Another insurtech innovation building on physical innovation is the Internet of Things (IoT). Although the Internet of Things is a digital concept, it is based on the interaction between physical goods and software. For example, car insurance companies now often offer devices that measure vehicle speed, handling and driving habits, and these devices can be used to reward positive driving habits or punish negative ones. While this level of information has never been available before, insurance companies can now determine premiums based on the smallest details.
Lemonade sells insurance directly through a customized mobile app. This insurance is sold directly to customers, not through a broker. Policies include renters, homeowners, pet and auto insurance. All insurance claims processing is conducted through digital platforms.
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Dacadoo uses consumer devices such as mobile phones and smart watches to collect information through integrated APIs. This information creates individual consumer profiles, allowing Dacadoo to instantly assess risk and adjust profiles based on positive or negative life improvements.
Bdeo uses artificial intelligence to streamline the claims process. Bdeo uses chatbots to interact with customers to collect claims information. The chatbot provides guidance on what information is needed, how to photograph the damage, and where to enter the information. The remote controller then analyzes the provided information. The company also uses computer vision models to leverage technology to minimize misjudgments by regulators.
Etherisc uses blockchain technology to leverage smart contracts. Etherisc collects information from third party providers. Then, as events unfold, companies can automatically execute tasks in the contract based on results compared to third-party information. For example, agricultural insurance claims can be automatically processed when certain natural conditions occur; natural conditions such as rainfall can be compared with third-party data to ensure that no fraudulent activity occurs.
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Avinew is an insurtech pioneer in IoT technology. The company offers lower premiums to customers who change their driving habits, take less risky routes or use autonomous driving systems. All of this information is delivered through in-vehicle devices that track vehicle usage and trends.
While many of these innovations are long overdue, there’s a reason why current insurance companies are so reluctant to adopt them. Insurance is a highly regulated industry with multiple layers of jurisdictional legal baggage to deal with. So the reason the largest companies have survived for so long is because they are extremely cautious, which leads them to avoid working with any startups—let alone with startups in their own very stable industries.
This is a bigger problem than it seems, as many insurance startups still need help from traditional insurance companies to underwrite and manage catastrophic risks. That said, as more insurtech startups attract consumer interest with sophisticated models and user-friendly approaches, we may find existing players warming to the idea of insurtech and becoming
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