Insurtech – Concept, Workings, Technologies, Benefits, Cons & moreLast Updated Date: Nov 17, 2022
Insurtech is an abbreviation for Insurance Technology. The use of technologies that help to increase the efficiency of its operation is what we consider as insurtech.
Insurtech has numerous changing technologies that we use in the insurance industry. The word insurtech is inspired by the term fintech.
What is Insurtech?
Insurtech can be any form of new technology that we present to the insurer. It helps in saving costs or for the smooth working of the process.
Insurtech is a subdivision of fintech. Fintech help in improving the operations and the smooth working of the financial companies.
Just like fintech, insurtech also makes use of a wide range of technologies, making it difficult to pinpoint any specific defining characteristics or an application.
From the year 2010-2019, around $16.5 billion have been spent on the startup of insurtech. Insurtech is also referred to as the companies that produce insurtech.
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How does Insurtech works?
Since making use of technology is the main key point of insurtech, insurance companies are making use of chatbots and smartphone apps to help customers with their queries.
Making use of chatbots and smartphones has helped the insurance companies streamline the backend processes.
Now the insurance companies need not hire telecallers and answer the customer’s queries.
They can do so with the help of chatbots that automatically responds to every customer’s concern day and night. This saves the company money.
Smartphone apps have also helped a lot in improving customer experience.
Earlier, the customer had to take photocopies of their licenses and other paperwork, stand in queues, and have their queries answered.
But now the customer can snap a picture on their phone and upload it on the app. The concerned person will tend to the query. This saves the company as well as customers’ a lot of resources.
A major concern about insurtech is privacy. Since the insurance companies handle the sensitive details of the customers, they have to be careful about data protection.
The technology that the insurance companies will use must also have a strong security protocol to avoid the leak of the data.
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Technologies & Advancements used in Insuretech
The insurance companies make use of the technologies we have below for better results. They can replace some of the technologies currently in use with newer technologies.
However, others might evolve and still play an important role in the future of insurtech.
Following are some insurtech that the insurance companies most frequently use: –
Artificial intelligence (AI)
The use of chatbots is a good example of artificial intelligence that the insurance companies use.
Chatbots can communicate with customers via verbal or text and help with the customer’s queries.
As the name suggests machine learning is a technology that enables the machine to learn over time.
Instead of following a specific set of instructions machine learning allows the computer to acquire knowledge by drawing out patterns from the data.
This helps the insurer to extract suitable data from the large databases and find out the valuable information according to the needs of the user.
This solution helps the broker find the exact product from a wide range of insurance policies.
This solution helps in saving the time and energy of the agent and helps the person to choose from various opportunities.
The process of payment is an important area for the insurance company.
The use of different insurtech methods for payments will help the customer pay the bills effortlessly just by the click of a button, without any hassle. This leads to customer satisfaction.
Solutions for Quoting
This solution will help agents with acquiring multiple insurance quotes more efficiently.
Instead of having to fill out various forms and waiting for days to get a quote, the agents can now type in all the information into a platform and get the quotes in minutes.
Internet of Things
Ordinary household machines such as refrigerators and televisions work with the internet.
An example of the internet of things as insurtech is making use of electronic devices to collect, store, and transmit data over broadband or a networked connection.
Vehicles come with GPS which gives the owner the precise location of the vehicle, the braking pattern, the acceleration pattern, and other habits of the driver.
This data is then later in use by insurance companies in the case of an accident or to provide discounts and improve the safety of the vehicle.
Apps on a Smartphone
Apps on a smartphone is beneficial for the customers as well as the agents as both can keep track of the insurance taken.
By launching apps of the company, insurance companies have streamlined the insurance process for the customers.
The insurance companies use drones while dealing with property insurance. Drones are to inspect a property where sending a human being would be hazardous.
Such areas are rooftops, disaster areas among others. Casualty insurer also finds an application of a drone in various accident sites, for inspection and photography for a particular case.
The use of drones can also be done to make sure the workplace is safe and secure.
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Benefits or Advantages of Insurtech
Following are the advantages of insurtech:
Insurance Rates are Low
Numerous insurance companies are receiving data from the wearables such as Fitbit. It helps in reminding the customers to lead a healthy lifestyle.
Since these wearables help in maintaining weight, food consumption, etc. insurance companies offer discounts and benefits.
It is if the customers meet the required fitness goals and have a healthy life. This in turn helps in saving a huge amount of money on health insurance.
The use of self-driving cars will also help in lowering the death as well as life insurance claims.
Prevention of Fraud
Insurance fraud costs insurance companies billions of dollars a year. Therefore, insurance companies are always trying to prevent more cases of fraud.
This is possible by establishing a secure and safe technology framework. It also needs the companies to gain access to advanced protocols and taking steps to prevent it.
Efficiency of Paying Bills
Billing systems are now more advanced than before and are very flexible in payments of bills.
The automated services can remind customers of an upcoming bill helping the customers pay in time thereby avoiding unintentional dues.
Disadvantages of insurtech
Following are the disadvantages of insurtech: –
Price Comparison is Difficult
It is difficult to compare prices of insurtech rates at one place, which was much easier, unlike the traditional insurance companies.
Since there is no way of finding which rate is cheaper, there are chances of one overpaying for insurance more than the other.
Lack of Financial Security
Incase an insurtech company goes bankrupt there is no chance of financial security. Since these insurtech companies depend on financial investors there’s no federal protection.
Due to this reason, some consider investment through insurtech is not fully guaranteed.
Missing Personalized Touch
Just like digital platforms have their very own benefit of not employing telecallers, this can also be a major disadvantage for insurtech companies.
Since traditional companies appoint telecallers to attend to every customer’s query who are committed to providing the best customer service.
Insurtech solves this problem by having chatbots that may not be able to fully answer the query all the time.
Conclusion – InsurTech
Since Insurtech is a new term, there is no one particular way to define them and understand how they work.
Insurtech’s applications are evolving at a much quicker pace which improves the customer experience and helps save the insurance company a ton of money.
Insurtech startups are now making use of modern technologies such as artificial intelligence (AI) to do the work of brokers and help in finding the best-suited policy according to the individual’s coverage.
They are also used to find better pricing models. It is expected that the global insurtech market will grow by 41% annually between the years 2019 and 2023.
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