When we mention insurance, what's the first thing that crosses your mind? High rates, confusing policies, it's no surprise that insurers are one of the unpleasant parts of being an adult. No one enjoys paying for something intangible such as security, much less for premiums they have little control over.
The stereotype for insurance is ending. The policies your parents and grandparents had may not be the same as the ones that are starting up. Tech is taking over many industries and changing how things are processed - your coverage is one of them.
Insurtech is disrupting one of the oldest financial industries in history. Here is what we know about the new business model, the pros and cons, and what it means for both insurers and customers.
What Is InsurTech?
The term "insurtech" is short for "insurance technology." It is a category of disruptive technologies used in the insurance industry. It is revolutionizing processes and communications for both insurers and policyholders alike.
Types of Insurance Technologies
Insurtech is an umbrella term for many tech tools used by insurers. Many of these categories are used in other industries to perform a series of tasks faster and more accurately:
Artificial Intelligence (AI)
Artificial intelligence (AI) is the intelligence demonstrated by machines. Computer systems with AI perform tasks usually done by humans. Some of these skills are visual/speech recognition, decision-making, among others.
Machine Learning
Machine learning is a form of AI that can "learn" over time. It can collect knowledge by picking up on patterns from raw data. Its uncanny ability to learn comes from algorithms and artificial neural networks.
For example, Edmonton insurance brokers have access to multiple insurance providers and the data to generate a free quote within minutes, thanks to machine learning. Without it, most insurers use only a small fraction of the data they collect. Here are some ways insurers use machine learning:
Risk modeling: analyzes claims data and predicts risks.
Demand modeling: uses algorithms to predict demand and estimates premiums.
Detecting fraud: identifies patterns that easy to miss among human adjusters.
Processing claims: uses machine learning to automate claim reporting and prompt processing.
Underwriting: uses machine learning to help underwriters analyze data collected from applicants, and flag errors that underwriters may miss.
Internet of Things (IoT)
Internet of Things (IoT) refers to the internet connectivity of everyday appliances. In insurtech, devices are used to collect data related to what is being insured. This can include telematics on a vehicle, or wearable technology like fitness trackers.
Smartphone Applications
Insurer's design smartphone apps for individual or business policyholders. Like fintech (financial technology), insurtech aims to give policyholders as much control and accessibility as possible.
Drones
Insurance companies are among the industries already deploying commercial drones. In insurtech, drones are used for property policyholders and others who could benefit from better risk management through data collection and reduced operational costs for claims.
How Does It Benefit Customers?
Yes, there are plenty of perks of being a policyholder to the new and improved insurance companies. Insurtech has brought benefits to customers and solved many issues, such as:
Improved communication and customer engagement
Lowers premiums thanks to personalized products by usage or value-added services
Full automation for quick responses and accelerated processes
Increased accuracy via data-driven decision making and insights
Will it Replace Traditional Insurance Companies?
The risks insurtechs present to traditional business models are real, but it's not likely that it will be the end of original insurance companies. While startups have the advantage of operational systems, they still need to seek legal guidance from those who were in the game longer.
A New Approach to Insurance
With how quickly technology has advanced in the past couple of decades, it's no wonder that it is changing many industries as we know it. Insurtech is sure to give insurance companies a new look and a modern business model to go by.
