When it comes to performing several essential responsibilities, data has always been essential to insurance businesses. Insurance technology is gaining traction as a growth concept in the car insurance industry as the digital transformation takes hold.
Although the word “insurtech” has been around since 2010, its use and influence have grown in recent years.
Insurtech – a portmanteau of insurance technology – is about how technology transforms the car insurance industry at its most fundamental level. Insurtech, like fintech, is a broad term that encompasses both insurance processes and products. It’s also often used in the car insurance industry to describe disruptive start-ups and products.
Insurtech’s ascent has coincided with the advancement of artificial intelligence (AI) technology and the enhanced data-crunching capability now available to businesses.
Data is the new oil.
Because the car insurance sector is well aware of this, insurtech and data use are important strategic growth concepts. Insurtech sector’s investment share fell dramatically in 2020, although researchers believe this is only a blip due to the pandemic.
Digital transformation is now an essential priority, and this trend will assure continuing robust insurtech investment. The pandemic has spurred many insurers to accelerate their digital transformation efforts and seek insurtechs that may help accelerate virtual interactions in sales and claims while also lowering expenses.
Data improves value chain’s efficiency
Insurtech is defined as the use of technology to make insurance more accessible and inexpensive. It’s about looking at every component of the insurance value chain. It’s merging new technology with a piece of the value chain to produce something unique, which could be new insurance products or a new way of doing things within an insurance company.
Insurtech is constantly changing as technology advances. At first, the focus was on the internet and mobile-friendly content. It was all about making the experience more accessible to customers. In recent years, we’ve seen technology like artificial intelligence (AI) and data analytics develop more efficient and cost-effective solutions. Insurance companies have traditionally used data to perform the core responsibilities of underwriting risk and assessing claims.
New technologies have boosted the volume and quality of data available, allowing insurers to uncover new efficiencies and develop new solutions. You see more embedded insurance products. Tesla auto insurance, or insurance built inside accounting software packages that look at new company indicators and adjust accordingly, are examples of this.
Tesla is already using integrated electronics and connections to market its new insurance offering to car owners. Tesla believes that accessing its unique data can offer drivers of its vehicles a considerably better bargain than standard car insurers.
Micro-opportunities emerge from big data.
Massive breakthroughs in AI lead to even more significant upheavals in the insurance market. While insurers have had access to large amounts of data in recent years, AI processing capability is now catching up to the quantity of data collection.
Car insurance companies are improving their data crunching, slicing, and dicing skills to delve deeper into the figures and give better-tailored products to individual policyholders. The significant difference between traditional incumbent car insurance companies and insurtech firms is the product, not the technology. This includes more specialty and micro coverage, allowing insurers to enter new markets while also extending insurance benefits to individuals who previously could not afford it.
Insurtech start-ups have had the most significant impact in this area. With microinsurance, the price drops to 70 cents on the dollar, whereas standard insurers can’t afford service at that level due to capital expenditures. Insurtech, on the other hand, is inventing a new paradigm for this type of micro-insurance. Your risk exposure is also minimized because you underwrite such a low premium.
Insurtech start-ups provide coverage for low-cost, high-frequency customers and small company activities. Insurtech goods are complementary, offering coverage where it was previously unavailable or unprofitable, rather than competing directly with existing insurers, who frequently underwrite smaller products.
Insurtech is propelled by data
With advancements in AI, IoT, wearable devices, and nanotechnologies, insurtech will continue to expand its reach. Traditional insurers and insurtech businesses will customize coverage to include varied consumer demands and extended data points as more data and computing power becomes available. Insurtech is altering the insurance sector from both a product and a process standpoint.