How Has Fintech Changed the Way We Insure Our Cars, Homes, and Lives?
Digital innovations are disrupting virtually every aspect of the banking and finance ecosystem, and insurance is no exception. Insurance companies should regard insurtech as an opportunity.
Insiders predict that that the insurance industry is headed down a path of disruptive innovation, conferring the ability to drastically improve operations and increase efficiency through the implementation of artificial intelligence. In spite of this, research suggests a disconnect between the amount of digital disruption perceived by the insurance industry, and its willingness to embrace digital innovation.
While 43% of insurance companies report that fintech is central to their corporate strategies, just 14% actively participate in fintech incubators and ventures. In fact, despite recognizing the potential of digital technologies within the sector, a staggering 72% of insurance companies admit that they have failed to explore partnerships with fintech companies.
Experts predict that over a third of operations traditionally performed by insurers could be completed by fintechs in the future. Nonetheless, with insurance companies benefiting from in-depth industry experience, connections, and knowledge, who could be better placed to identify how emerging technology could be leveraged to enhance operational capabilities, comprehend risk insights, and utilize new approaches to underwriting?
Social and technological trends have created shifts in consumer expectations and needs, which in turn have created significant opportunities for insurers capable of embracing emerging technologies. Key market players that have taken action, developing and implementing digital solutions in response to shifting consumer demands, position themselves as leaders in innovation.
Fintech, or financial technology, is a term used to describe computer software and other digital technology that is designed to automate and improve the delivery and use of financial services. Fintech is used to help consumers, business owners, and companies to better manage their financial operations, leveraging complex algorithms and specialized software, facilitating the development of handy apps for digital devices, particularly smartphones. Having emerged in the 21st century, fintech has evolved from technology employed in back-end systems at financial institutions to a more consumer-centric discipline, covering a variety of different sectors, including retail banking, nonprofit and fundraising, investment, and cryptocurrency.
In the insurance industry, fintech has transformed business models, with emerging technologies such as telematics, data analytics, machine learning, robo advisors, blockchain, and AI enabling forward-thinking insurance companies to adapt to the changing expectations of their customers. Fintech delivers a variety of different benefits, including improved efficiency, reduced costs, improved risk assessment processes, and greater financial inclusion, enhancing the customer experience. Investment in insurtech surged between 2018 and 2019, rising from $4.4 billion to $6.8 billion. This is a trend that can only grow as increasing numbers of insurance companies pursue digital transformation.
FinTech has changed the insurance industry in five important ways.
1. Automated Underwriting
An integral part of the insurance business, underwriting can be a slow, laborious task. AI has the potential to automate much of this process, minimizing inefficiencies and eliminating scope for human error, with AI algorithms analyzing data to evaluate risk and generate quotes much faster than their human counterparts ever could.
2. Speed Up the Approval Process
Prior to digitalization, insurance companies could take weeks or even months to approve policy applications. Thanks to modern innovations such as AI and mobile apps, the approval process takes a matter of hours today, if not minutes in some instances.
3. Simplified Claim Filing
Today’s insurtechs have streamlined the arduous task of filing insurance claim forms. Today, these can be quickly completed online via the insurer’s website or app, typically taking no more than a matter of minutes to complete. Not only do these platforms make the process easier and more convenient for consumers, but they also collate and organize the information needed by insurers.
A 2019 study revealed that more than 73% of uninsured adults lacked insurance because, for them, it was unaffordable, with an additional 18% stating that they could not find a plan that adequately reflected their needs. Insurtech provides an effective solution to both of these issues, its AI algorithms capable of analyzing a customer’s financial standing and insurance needs to create a customized plan.
5. Appealing to New Demographics
Generally speaking, insurance does not feature prominently on a young person’s list of priorities. However, insurtech bridges a divide, appealing to a digital native generation, attracting a younger clientele by offering cutting-edge solutions, providing a policy tailored to their needs.
Convenience and remote access are features prioritized by millennials and younger customers. By embracing insurtech, insurance companies can appeal to groups who they otherwise might not reach. This not only expands the insurer’s potential customer base, but also improves customer retention, which is a considerable concern with younger consumers, who tend to be less loyal to companies.
Originally published at http://carltonjamesguyana.com on March 31, 2022.