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According to Investopedia, insurtech is a “technology innovation designed to squeeze out savings from the current insurance industry model.”
The current focus on manual working in the insurance sector leads to slow processes and missed opportunities. There was a need for a technology that boosted collaboration and enhanced policyholder experience. That solution is insurtech.
Insurtech is a portmanteau of the two words “insurance” and “technology.” It focuses on boosting efficiency in the insurance sector and bringing about the best outcomes for both businesses and policyholders.
Insurance Companies’ Investment Priorities in Digital Technologies
In 2021 the value of the global insurtech was $3.85 billion. That market value is growing and is expected to reach a compound annual growth rate (CAGR) of 51.7% from 2022 to 2030. The main contributor to this exponential spike is the growing rate of auto, life, and home insurance claims all over the world.
A survey in the year 2020 concluded that most insurance companies are focused on investing in insurtech. But more than two-thirds of the survey population say they also want to focus on cybersecurity.
Meanwhile, they considered artificial intelligence and robotic process automation the least interesting investments. Only 30% of respondents said they planned to budget for those two technologies.
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Insurtech Solutions for Insurance Brokers
Insurtech allows brokers to skip monotonous tasks. This gives them more time and resources to focus on valuable business considerations such as gaps in business plans and programs.
This also means insurance providers can now use digital means to procure their products and do business.
Additionally, the expectations of both businesses and customers have changed. For example, everyone now expects fast delivery of services.
Insurance brokers, however, feel that insurtech is a potential threat to their work environment and occupation. The vast opportunities available on the internet give the modern user, irrespective of age or gender, the ability to search with ease for the best insurance options available, eliminating the role of the broker.
How Insurance Carriers Will Benefit from the Insurtech Era
On the other hand, smart insurance agents win with insurtech.
Take for example the times when an agent tries to win a client and offers a quote, but the client rejects it and the transaction doesn’t close.
Throughout the process, the agent has had a limited understanding of how many other prospective clients were in the wings. The agent had no understanding of how many other potential customers they never approached due to their own limited visibility.
This is what happens when you make decisions based on a single piece of information. While insurance carriers celebrate every account won, they do not realize how many other accounts they have lost.
But with effective insurtech insurance for carriers in place, an agent can maintain records of the customers they have won. And they can also keep track of any lost opportunities as well as any opportunities they did not consider in the first place. Moreover, with insurtech, any carrier who works for several insurance companies at a time can broaden their view and better assess the market.
This will help agents better understand the value of their product against various other options available in the market from different companies.
The more information available to companies, the better decision-making power they hold. For example, insurance agencies that currently operate in the fast-casual restaurant insurance business can understand the potential investment opportunities in the same niche. Insurtech will help them identify the right areas for expansion.
The Future of Insurtech and Insurance Firms
Insurtech has changed the insurance game. Therefore, insurance agencies and firms are now in a better position to develop simpler, more customer-friendly products. Almost every segment of the business has gained strength from the right use of the right insurtech.
With time, it is becoming more convenient for all companies to invest in insurance outsourcing services. This can only enhance insurtech standards.
The best effects of insurtech for insurance firms and agencies include:
A. Increased Connectivity
Firms are now able to better connect with their target clients, agents, and brokers. This enables them to better understand market requirements and plan accordingly.
The understanding of market needs and wants through insurtech allows for better product development. This means tailor-made solutions and targeted product concepts for clients.
B. Data-Driven Decision-Making and Insights
Insurtech is changing the insurance game. However, it is not yet available everywhere. This means that the role of traditional insurers persists.
According to the McKinsey Panorama Insurtech database, 61% of insurtech available in the market today focuses on offering better services to insurers. In other words, it simplifies and digitizes several parts of the insurance value chain.
Meanwhile, a small segment, of 9%, focuses on replacing incumbents. The other 30% is focused on disintermediating the customer.
There are also several insurtech offerings that are based on the incumbent’s ability to write down risks. A considerable segment of incumbents is getting inspired by insurtech. They understand not only how the technology works but also how other technologies can enhance services.
The smart insurance digitizers who play by the rule of insurtech are making better profits than their traditional counterparts. They are expanding like never before and the change is global in scope.
How Insurtech Is Reshaping the Future of Insurance
Age-old workflows in the insurance sector are changing now. Additionally, industry observers report greater integration among existing practices. The industry is now seeing enhanced services such as maintenance and repair as well. Changes with healthcare and risk management are also in the works.
Subcontracting non-core activities has also become a mainstream practice in the insurance sector. A survey by Accenture showed that more than 76% of insurers consider outsourcing their backend tasks a way to overcome the level of competition in the market.
Insurance companies, especially those in the US, Canada, Australia, and others, consider insurance business process outsourcing (BPO) to be a competitive tool.
Therefore, with data availability on the rise in the insurance market, insurtech companies are now more focused on risk mitigation and management. The change will be a core factor in deciding the fate of the insurance industry over the next few decades.
Insurance agencies, if they want to stay competitive, must invest in hiring technology experts who offer them a better understanding of technology in the insurance sector. These experts will help them identify the right opportunity to invest in and make use of.
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