It’s better to have it and not need it, rather than need it and get caught without it. Insurance is one of the oldest financial businesses, but it’s not what it used to be. Like other sectors such as banking and law firms, insurers are receiving a makeover. The traditional methods now include accuracy, personalization, and efficiency like never before. Insurtech is disrupting traditional business.
The New Insurance Business-Model
Insurtech refers to technological innovations in insurance companies. Tech increases savings and efficiency through artificial intelligence and blockchain technology. Insurtech is a play on the words “insurance” and “technology,” like other industries that have been digitized. Another term is “fintech” – short for financial technology.
Upcoming insurance startups have an advantage over older models by using disruptive technology. In the beginning, companies had to lump groups of people together and charge them the same. Now, insurtech tackles data and analysis issues through many means. We’re looking at more competitive pricing and customization, and it is expected to grow 41% every year between 2019 and 2023.
Why Are Traditional Insurance Companies Hesitant?
There is a reason insurance companies have survived for so long and are so reluctant to adapt. Insurance is an extremely cautious industry with many layers of jurisdictions to follow. There are already walking on eggshells, so the idea of switching to a more refined way of doing things isn’t something they can do instantly.
Insurtech startups still need help from traditional insurers to handle and manage legal issues. The benefit of older companies is that you know what to expect, and they are more stable compared to their innovative competition.
The Use of AI Technology
Repetitive processes like risk analysis to decision making may soon be automated. AI and blockchain technology have both become game-changing technologies across every industry. While AI is still making its breakthrough, it can easily be applied to more straightforward operations, such as internal processes and core operations.
One perk of insurtech is cloud-based insurance that offers discounts via usage-based premiums. These features target auto insurance owners who have low-mileage or have a second car. The ability to collect data grants companies more flexibility and fairness. In turn, customers receive more personalized (and more affordable) premiums.
The Sharing Economy
In this sharing economy age, many of the things we have, have already been used or shared. Ridesharing, home-sharing, all these can be covered by the pay-per-use method. This allows user to have protection against damage, uninsured motorist, personal injury protection (PIP), loss of income, and more.
Instead of being restricted to a standard, continual coverage package, individuals can pay for the coverage of the asset only when it is in use and “at-risk”. This enables users to have a home or car insurance in Alberta or anywhere they are while using a ride or home-sharing platform.
Tailored to the Consumer
Insurtech allows users to be covered in many situations for any length of time. On-demand insurances are temporary. It is also for professions like contractors or equipment lenders that need coverage only during the duration of the project.
Pay-as-you-go liability insurance gives contractors coverage within a short period. Ideally, it is used for any timeframe that is required. It enables workers to overcome the obstacles they would usually face with traditional insurers.
On-demand insurance can extend to mobility products like drones, e-scooters, boats, motorcycles, etc. Their “pay as you fly” method for drones uses an app to analyze the estimated risk of where the drone is being used. It allows the user only to pay commercial or recreational drone insurance for the time it was flown.
Along with e-commerce and fintech, insurtech startups are evolving quickly to adjust to our ever-changing lifestyles. The growing startup ecosystem has given rise to narrowing down niches and in-depth focus on the customer’s needs. Now, users can pay for what they use, instead of paying the same premium as everyone else.
Insurtech will face many challenges compared to their traditional counterparts. They risk being unstable or mispricing insurance policies due to the digital approach. On the bright side, we have more options and freedom than ever before.