Insurtech disruption trends: is traditional insurance broken?

What are the main Insurtech disruption trends? In this article four leading insurtechs discuss the decline of traditional insurance.

What are the main insurtech disruption trends driving change in the insurance industry?

The traditional insurance industry is being disrupted by innovative insurtech’s that use digital solutions to enhance the customer experience and fundamentally change how insurance is delivered.

In this article, four of the UK’s leading insurance disruptors reveal the main insurtech disruption trends driving innovation and change in this traditional sector.

1. Is traditional insurance broken?

Krystian Zajac, CEO at Hiro — the smart home insurance provider – says that traditional insurance models pit insurers against homeowners.

He believes that in traditional insurance more transparency is needed, so “homeowners can see how their actions and decisions actively change their insurance premiums. With this shift to a more flexible system, homeowners can start to feel empowered in making responsible choices for their properties, as they can see the benefit with a reduced insurance bill.”

However, traditional insurance isn’t moving towards a service, rather than a product, fast enough – that is why a space for Insurtech disruption has emerged.

Answering the question: “The insurance industry is fundamentally broken,” continues Zajac.

“Insurance should no longer just be a payment you make and hope you never have to use, it should be a seamless service to help people. While customers are surrounded by personalised on-demand services like Netflix and Amazon Prime, they have every right to begin to question why insurance is so far behind. Insurers need to innovate faster to stay relevant,” he adds.

2. Insurtech innovation – technology leads the way

One of the main insurtech disruption trends is operational resilience. Digital-first insurtechs are challenging inefficiencies and reducing costs across the insurance industry.

“Digital transformation is allowing companies to increase their operational resilience across the business, whereas old technology systems mean it’s costly and sticky to change policies, update admin, and develop new products. Insurtechs bring the technology into one place,” says Will Wood, Head of Life and Health at INSTANDA – the Software-as-a-Service company that helps create and distribute insurance products..

Janthana Kaenprakhamroy, CEO at Tapoly — the digital provider of on-demand insurance products – also sees technology innovation as leading insurtech disruption trend.

She believes that there is an increasing need for AI and big data in insurance, because in the hard market — a period of time when there is a high demand for insurance, but a lower supply of coverage available — there is increased risk for insurers.

Kaenprakhamroy explains: “This risk will require extra data to evaluate whether insurers should offer cover. The AI and big data applications by insurtechs can join up these dots, using things such as social data and IoT to cross-reference risk and improve reliability. Insurers are beginning to really recognise the power of AI and big data in both underwriting and distribution, for example using social data. Embracing big data and AI allows insurers to offer tailored products to customers with a slick and interactive buying process.”

In a hard market environment, “insurers are looking is here that insurtechs could offer AI and APIs to encourage seamless automation, such as insurance-specific chat bots and email automation, to free up valuable time for more value-adding tasks,” she adds.

3. Customer centricity and seamless customer journey

The adoption of technology is a main insurtech disruption trend. But, for what purpose?

The aim of any disruptor is to improve the levels of customer experience, offering something more nuanced and personalised than any large incumbent.

Insurtechs are helping companies improve customer journeys and experiences. This is important, because customer expectations have changed dramatically in the always-on, digital-first culture of the 21st century.

As Wood highlights, “they [customers] now expect seamless, digital, customer journeys and more personalised products. They are also demanding more transparency, complete clarity on policies they are taking out.”

He continues: “Digital insurtechs are at the forefront of these customer centric propositions. Older technologies, in comparison, like those used by traditional incumbents are more product focused. Insurers are now recognising the need to accelerate towards customer-centric product development, distribution and operational strategies to meet rapidly changing customer needs, otherwise they are at risk of a complete disconnect from their customers and competitors.”

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4. Hyper-personalisation

Cameron Shearer, co-founder and CEO at Superscript, whose aim is to make sure insurance better for digital businesses, agrees that improved focus on the customer is a key trend for the insurance industry to follow.

He comments: “Drawing on a vast array of data points, be it from the Internet of Things (IoT), social media, credit reports or integration with SaaS services, there are growing opportunities to build better user profiles and deliver hype-personalised insurance products.

“In an ‘ultimate hyper-personalised experience’, a user would be provided a highly competitive, comprehensive and tailored policy without entering any information.”

Embedded insurance journeys

Shearer views embedded insurance as a key insurtech trend for 2021 and beyond.

Embedded insurance includes coverage alongside the purchase of other products or services. In this scenario, consumers would not have to consider insurance for a new purchase, like a car. It’s simply part of an overall insurance package.

Shearer explains: “By leveraging third party data in such journeys, users can expect more affordable, relevant and personalised propositions, not to mention an overall better experience. The distributor on the other hand can often drive higher levels of engagement, lower acquisition costs and a better underwritten product.

“Companies like VanMoof in The Netherlands have jumped on this opportunity, offering cover with anti-theft protection and access to Bike Hunters when you buy one of their electric bikes.”

5. Continued working from home

Despite the end of the UK’s national lockdown in sight, with the Prime Minister likely to unveil a cautious lockdown exit plan this week, working from home will continue as ‘normal’.

As remote working continues, the importance of cloud storage and seamless data sharing will continue as opposed to the traditional communication silos of insurance.

Kaenprakhamroy suggests that “insurtechs are set to capitalise on this requirement as insurers look to embrace further technological innovation to remain at the forefront. Remote working also allows for insurtechs to embrace talent from across the country and the world.”

6. No-code — democratising technology development

The final, but potentially most important insurtech disruption trend being seen in the market is the democratisation of technology development through no-code.

Like so many disruptive innovators, insurtech’s are taking technology development out of the question, allowing business leaders to create, update and roll out black box products themselves, without the need for developers with specialised skills.

“N0-code technology allows business leaders to create and update products themselves. This ensures they stay focused on serving the market. Ultimately, this is about bringing insurers closer to their customers. There is an added benefit to no-code too — products can be brought to market much quicker and at a lower cost,” says Wood.

7. Covid-19

Summing up, Shearer concludes that “the pandemic has supercharged the need to adopt new technologies and streamline processes across all sectors, particularly when it comes to servicing changing customers needs and behaviors efficiently.”

He adds: “Moreover, the surge of services digitising for survival has boosted customers’ expectations when it comes to accessing and managing their stuff online. Within a harding insurance market, the urgency to underwrite risks better and lower operational overheads has never been greater.”

Analyst view

Commenting on the disruption of the insurance industry, Gartner analyst, Juergen Weiss, Practice Research says:

“According to Gartner’s 2021 CIO Survey, IT leaders consider artificial intelligence, analytics and user experience as “game changer” technologies or trends for the insurance industry in 2021. One outcome of the pandemic is that business and IT leaders in insurance will dramatically accelerate their digital transformation journey. We know on the other hand that IT budgets are limited: CIOs in insurance spend approximately two thirds of their IT budgets on “running the business” and not on business growth on transformation. Working with Insurtechs is an opportunity for incumbent industry players to keep up with or even leapfrog the competition.”

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...

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