The startup ecosystems in sectors such as finance and insurance are growing rapidly. While finance witnessed the fintech revolution, emerging technologies in insurance has the potential to drive change at the very core of its operating model. This article will be discussing the changing landscape of insurance and the implications of insurtech. It will examine how this evolving industry can make the most of technologies through collaboration between insurtechs and incumbents.
The dawn of insurance
It is easily forgotten that from its inception, insurance is about people helping people, receiving support from the community when life takes an unexpected turn. The main objective of insurance is to provide people with a safety net. After all, it has been a part of society for essentially as long as we have had some sort of currency. In earlier days, it could be as simple as villages gathering a small amount of money from each of their residents consistently into a pool. This to then be utilised in the unfortunate event that something difficult or unpleasant were to happen. It was an early version of the sharing economy.
The beginning of Lloyd’s provides an even closer rendition of the modern day insurance. Edward Lloyd’s Coffee House was at the centre of the business world, dominating marine insurance for a long period. It was also here the term underwriting was introduced from underwriters writing their name under insurance proposals from ship owners.
The term underwriting was actually derived from insurance proposers writing their names under insurance proposals from ship owners, at Lloyd’s Coffee House.
These issues are still as prevalent in today’s society. However, as we have grown more accustomed to insurance and its role in our lives, it has become taken for granted. As a consumer it is something you want at hand without it preoccupying any headspace. Insurance has for a long time been one of the more integral cogs of the big, ever-changing machine that is society. Up there with finance, it is an industry that is a constant presence in our everyday lives. All in all, it fills a huge social function. However, due to a variety of misconceptions, the general public tend to view insurance as a massive, intimidating, corporate system. A giant company that does nothing but take an amount of money from you each week, month or year. Obviously, this is not the case.
The industry’s adaption to a technological society has been a slow-paced organism the latest couple of decades. With an entire system built upon risk assessment, resorting to any leaps of faith is not an easy task. Especially in larger companies with a more intricate internal architecture, where everyone has to be onboard. The last five years however, have seen a big external push for insurers in the direction of a more automated way of operating. Consumer expectations are steadily growing and businesses are in dire need of upgrading. When the finance sector witnessed a technological reform, interest swiftly turned to the promise of insurance.
Even with its importance constantly increasing, the insurance cog struggles to keep up. However, the issues do not come from public disinterest, like many presume. More precisely, it comes from issues in meeting consumer demand for a more exciting and intuitive customer interface. This is due to the fact that incumbents can not keep up in the technological sprint. Technology offers major possibilities from a business-to-business perspective. The opportunities surrounding the use of data are monumental such as customer insights for product development, price calculation and particularly risk calculations. There is vast untapped potential, waiting to be unlocked.
Insurance and technology belong together
The beauty of a marriage between insurance and technology became clear. The startup phenomenon introduced itself and came with a revolution built upon highly technological expertise. The merging of new technology and insurance resulted in the conception of what is today known as insurtech. Similar to fintech, it currently consists of smaller players acting as catalysts for both business and consumer markets. With these new aspirants free from technical and organizational bureaucracy, the journey towards a solution is clearer to embark on.
Innovation is regarded as a large part of the insurtech culture, rather than an oddity as seen throughout the insurance sector. Having the fast-paced, entrepreneurial spirit and scalability that is ever-present in a startup, makes it possible to catch up with major insurance actors. There is great potential in a union between insurance and technology, but this will only become reality if incumbents and insurtechs actively work together.
There is vast untapped potential, waiting to be unlocked.
The future: collaboration and integration
Looking forward, it is probable that many of the elements from fintech will materialize themselves in insurtech as well. This will include upgrading and improving on existing customer experiences, as well as completely reshaping some services. Furthermore, it implies introducing entirely new products and finding ways for insurtech and insurance to integrate. It is this that will push insurance to new plains and bring the industry even further.
First, both need to find common ground. Insurers need to adopt a more open-minded approach to innovation and be willing to allow insurtechs to solve for them. Insurtechs have to find their place in the growing industry and understand at what pace they need to be functioning to co-operate with insurance giants. Insurance is a highly regulated, capital intensive sector and the incumbents sit on an expertise which is still highly relevant.
After this, all that remains is for insurers and insurtechs is to agree on which direction to pull the industry in. As insurance moves from the analogue era into the digital age, the amazing opportunities that exist for both new and older players are many. When all these new cogs manage to fit together, insurance will become the well-oiled machine that it has the potential to be.