Insurtech is short for “insurance technology” and it’s a hot new buzzword and field within the broader technology industry. But what exactly does it mean? Here’s our quick and simple guide to explain in insurtech terms exactly what it is, and how it’s changing insurance sector both for consumers and insurers.
Answering the question, “What is Insurtech?” isn’t easy. The term ‘Insurtech’ began to be used in 2015 as a portmanteau of “insurance” and “technology”. It refers to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model. Insurtech companies include both startups creating new insurance models as well as more traditional incumbents using tech to improve their offerings.
How Does Insurtech Work?
Insurtech works in the insurance industry with a focus on improving customer experience. It helps companies save money, increase their bottom lines and reach more customers. It also can help customers get cheaper premium rates, reduce wait times and make finding the right type of insurance easier.
For insurance agents and brokers, Insurtech can help them find new business faster, deliver service to existing clients more efficiently and close more deals with fewer resources expended.
Insurtech is an online-based solution that often uses artificial intelligence or machine learning as its back-end technology. The end result is a system that allows you to purchase your coverage online without having to do much of anything at all. If you have ever seen an ad for Geico that says you could save 15 percent or more by switching car insurance providers, then you have already seen the benefits of Insurtech in action.
Application of Insurtech in Insurance
Insurance companies are using Insurtech in a variety of ways to improve customer experience, reduce costs and improve risk management.
Some specific examples from the insurance industry include:
- Customer engagement: Insurance companies are using Insurtech solutions to help customers with no preference to purchase insurance policies and receive policy-related information on their smartphone or tablet.
- Claims management: Insurers may use mobile applications to help consumers report damage, take photos of the damage and upload them directly to their database, file a claim with an insurer, schedule repairs and more.
- Distribution channel management: Automation helps insurers improve relationships with agents by providing better lead campaigns via email or text messages while also enabling them to close leads quicker through faster underwriting.
- Insurtech data analytics allows companies insights into how users are interacting with their products
Benefits of Insurtech in Insurance
Let’s now take a look at some benefits of InsurTech for insurance companies and their customers.
Reduced Cost of Operations
According to the McKinsey report, InsurTech is being implemented by insurers with the aim of reducing operational costs, as well as improving productivity. This is because insurers are under constant pressure from customers to reduce their premiums in order to remain competitive in an increasingly saturated market.
The report states that automated customer journeys can lead to reductions of up to 30% in servicing costs, while automated-claim processes are likely to bring cost savings of up to 50% on life and property & casualty claims. One such example is Lemonade’s use of chatbots for handling customer queries and claims processing.
An analysis conducted by VentureBeat found that Lemonade used its chatbot Jimy (named after Jimmi Hendrix) to process over 95% of its renters’ insurance claims within three seconds! Another example is Bolt Insurance Agency which uses bots on Facebook Messenger for selling insurance policies online through a simple conversational interface.
Improved Customer Experience
The report also indicates that once insurers simplify their customer journeys using next generation InsurTech platforms, it will enable them to offer improved services by making it easier for them to get access products and services whenever they want or need it most – this could be even before they might have actually known they needed it at all!
Improved Access To Insurance Products
In today’s digital world where everything revolves around mobility and continuous connectivity, one challenge facing conventional insurers has been the lack of innovative approaches for generating new leads and acquiring customers beyond traditional sales channels such as independent brokers or agency networks.
It should come as no surprise then that rapidly expanding online distribution channels are already offering alternative solutions wherein users can compare different offerings from multiple providers before purchasing a policy online – all within the same user journey. According to the McKinsey report: “New data sources allow new entrants into the insurance space via comparison websites.