5 Myths About Insurtech That Will Surprise You
- By prioritizing insurtech, you improve not only efficiency and customer satisfaction but also your revenue.
- Insurtech is not expensive if you approach it right.
- Legacy tech is holding many insurers back.
- A nimble technological partner offers more flexibility than a large one.
When insurtechs appeared around 2010, everyone saw them as an offshoot of Fintech and a potential threat to insurance. Over the years, they formed their own sector and gathered many myths around. So, what isn't true about insurtech? Let's look at the five most common misconceptions.
Myth 1: There are more important things for your business than insurtech
There aren’t. And while you’re swamped with other things, your competitors are very likely moving ahead with digital transformation efforts, leaving your business behind. In fact, as a result of COVID-19, 44% of companies have already or planning to accelerate digital transformation.
By prioritizing insurtech, you improve not only efficiency and customer satisfaction but also your revenue. Oracle's study shows that companies that utilized emerging technologies increased their annual revenue by 58%.
So the time is now.
"Is there anything you can't buy online these days? From groceries to banking, to a college degree, today's consumer expects a direct, digital, and delightful experience. Yet, for some reason, the industry continues to believe that insurance is different. That an agent is needed not just to guide but to motivate the purchase." - Jamie Hale, CEO & Co-Founder at Ladder.
Myth 2: Insurtech is expensive
Insurtech is not expensive if you approach it right. Don't start with massive long projects - go for MVP instead, and take it step-by-step. When selecting a platform, look for cloud-native, customizable, insurance-specific technology to configure on the fly. There is no heavy price tag, rather more agility and flexibility than any legacy system could provide.
McKinsey research shows that the potential benefits of modernization include a 40 percent reduction in IT cost, a 40 percent increase in operations productivity, more accurate claims handling, and, in some cases, increased gross written premiums and reduced churn.
Myth 3: It's better to build your system internally than use a vendor
It might be a shocker, but no! According to the Cisco report, 73% of IoT projects fail due to limited internal expertise, budget overruns, and low-quality data.
In addition, such complex in-house developments often distract the focus from growing the business, taking funds and resources from marketing and sales. Hence, the budget of using a SaaS vendor is only a tiny fraction of what it would cost to hire a CTO, 3-4 developers, and cover ongoing maintenance and upgrades.
"Traditional insurers sometimes see insurtech companies as disruptors which could threaten their market dominance, and they look to try to compete with these companies by attempting to develop their own processes and technologies in-house. This approach rarely succeeds, as insurers don't usually have the requisite technical expertise or IT infrastructure to do this." - Jake Robson, a Singapore-based partner at international law firm Morrison & Foerster.
How can you use insurtech to outperform and pick the right one for you? Read more here>>.
Myth 4: It's not the time to replace your current older system
Change is always difficult. However, the longer you delay, the harder it will get, as your tech support may not be available to support the change.
"Legacy insurance platforms are built on sustainable and scalable mainframe technologies suited to processing a large volume of transactions. However, as a result of historical mergers and acquisitions, pressure to launch new products under a time constraint, and the need to fulfill specific distribution channel requirements, most legacy systems have added peripheral features, become siloed across lines of business, and bound by inflexible integrations. As insurers embrace the new digital future, change to the organization's technology infrastructure becomes increasingly critical not only for current performance but also long-term viability and competitive differentiation." - Yoshi Makita, Director, Technology Strategy & Performance, Insurtech Leader, KPMG Australia
Myth 5: Large vendors are better than startups
It’s a very common misconception. In reality, it’s the other way around. Startups are often more flexible, more innovative, and deliver a better service than larger vendors.
"Startups have the agility, entrepreneurial spirit, and many of the new thoughts and ideas in insurance. As 60% of all new products that come to market are from startups, so it's important to pair up with them." - Stuart Domingos, Head of Group Innovation at Zurich Insurance Company.
"Small businesses can execute ideas more quickly and pivot easier than enterprise-level companies." - Chalmers Brown, Former CTO of Due.
About Cloud Insurance
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