New, tech-savvy players are flooding the car insurance market, bringing all of their disruptive, opportunity-laden strength with them. With their entry, the playing field for incumbents has changed. Something similar had happened in banking with the advent of financial technology companies (“fintechs”).
Fintechs have disrupted the banking industry for over a decade, with many of them starting as startups. These fintech companies have now moved into the car insurance space. The ruling players of car insurance companies have decided to welcome them with open arms as they operate at a fraction of the cost of established companies. This is because they are not burdened by banking activities, branch networks, or legacy IT systems. Fintechs have made inroads into a traditional industry like car insurance by designing innovative products and producing them digitally in a fraction of the time.
The fintech narrative in car insurance is evolving. Forward-thinking car insurance companies have responded by digitizing their operations and using digital platforms to deliver various creative products and services. Fintech operation has moved away from explicitly targeting end-users and competing with incumbents to a lesser extent.
Insurtechs are technology-driven insurance firms that use emerging technologies to deliver coverage to a younger, more technologically advanced client base.
Traditional car insurance companies and insurtech companies are gradually forming partnerships. The incumbents maintain control of the end customer while the fintechs assist in improving the user experience and customer-centric approach. Fintechs have transformed the face of the car insurance business. Still, traditional and small-time car insurance companies are catching up. They have begun transforming what seemed to be a challenge into a plan for the next generation of services.
Regulatory barriers have been reduced in some areas. Insurtechs have been allowed to test their creative business models on unique client segments in Australia, Singapore, and the United Kingdom without adhering to the entire regulatory structures that apply to incumbents. Insurtechs, like fintechs, are spreading innovation in the industry, posing a competitive challenge to incumbents while also providing potentially lucrative opportunities for collaboration in the changing landscape.
Instant digital transactions that are carried out seamlessly through digital platforms are becoming the norm. Although insurtechs have yet to make significant inroads into the car insurance industry, they are rapidly expanding. They are poised to capture a significant share of value pools in the coming years.
The size of incumbents’ share in the next generation of the insurance industry will determine how easily they respond to these inevitable market shifts.