What is Insurtech?
Insurtech refers to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model. Insurtech is a combination of the words “insurance” and “technology,” inspired by the term fintech.
Just as fintechs are shaking up the banking and financial services industry, insurtech companies are starting to disturb the insurance world. Today around  %86 of insurers believe they should innovate at a rapid-fire pace to keep up with increasing demands and maintain a competitive profile.

Understanding Insurtech: Insurance is an old business, one of the oldest financial businesses and it tends to favor those with deep pockets and long experience in the market. Traditionally, broad actuarial tables are used to assign policy seekers to a risk category. The group is then adjusted so enough people are lumped together to ensure that, overall, the policies are profitable for the company.
This approach does, of course, result in some people paying more than they should be based on the basic level of data used to group people. Among other things, insurtech is looking to tackle this data and analysis issue head-on. Using inputs from all manners of devices, including GPS tracking of cars to the activity trackers on our wrists, these companies are building more finely delineated groupings of risk, allowing products to be priced more competitively.

How to Retain Innovations Leveraged by Insurtech Providers
• Robotic process automation was called one of the main insurtech trends in 2019, and it’s set to remain on the list in the years ahead.  RPA  is used by fintech, regtech, and insurtech companies mainly to automate repetitive high-volume tasks, reduce labor costs, and streamline business processes. However, this technology can also be applied to accelerate onboarding, underwrite policy renewals, and handle claims.
• The Internet of Things devices – including wearables, smart appliances, and telematics – allow providers to monitor client’s driving habits, health concerns, household problems, and others. For life, home, and car insurance technology firms that means more precise risk assessment, better loss control, and more effective pricing management. Meanwhile, policyholders may benefit from streamlined processes, tailored offerings, better management of personal risks, and quicker checkups.
• Blockchain technology in insurance is mainly utilized to enhance data security and build trust among all the parties of the contract, all while reducing operating costs associated with transaction processing. Insurtech blockchain startups leverage technology to free up human resources and make sure of prompt claims administration and reliable data sharing, particularly in case of cataclysmic events.
• Artificial intelligence and machine learning are among the top trends in fintech mobile app development, and insurance is no exception. Communication with chatbots is now the order of the day. These digital assistants are available twenty-four-seven; they are cost-efficient and helpful. Nevertheless, only a few insurers augment them with machine learning. The combination of ML and AI in insurtech makes it possible for businesses to recognize and mitigate fraud, conduct KYC checks, automate claim processing, forecast demand, and potential future losses.
• Advanced analytics is one of the key differentiators for the insurtech sector, and it’s right here

to empower businesses to focus on the outcomes. In insurtech, data analytics is used to gain a better insight into customer needs, to create relevant products and services, to quickly process claims, and to do targeted marketing. In fact, all these are the means of becoming highly competitive.
• Drones are mainly used by home insurance companies to examine real property assets situated in high-risk areas (natural disasters, lethal regions, and more). However, casualty insurtechs or car insurance businesses can also benefit from drones while recording or inspecting a road traffic accident scene.

Five Types of Insurtech Business Models
• Sales, Marketing, and Engagement category comprises technology insurance companies that offer focused tools to industry-related third parties, including but not limited to brokers and insurers, mainly in the form of API or SaaS business model. These process modifiers utilize technologies to improve certain parts of the value chain leading to better user experiences and more fair pricing.

• Marketplaces/Aggregators are online platforms with numerous insurance products and companies that allow users to compare prices and terms.

• Insurance Management solutions focus on convenient tracking and administration of all your insurance policies and contracts in one place.

• Direct Insurers/Tied Agents offer personalized, flexible, and cost-efficient packages with typically lower coverage and premiums. Such insurtech firms adopt technology innovations like IoT or Data Science, and their products can be easily purchased via a website or mobile app

• Peer-to-Peer/Cashback insurtech solutions allow individuals to team up and club their premiums together to hedge against risk and commonly derive benefits regarding premium proceeds.

Criticism of InsurTech
Along with the high tech solutions that can significantly improve the workflow of the insurance companies, there are certain doubts about the common use of InsurTech. The job of an insurance agent is highly regulated and needs to apply to the legal system and regulation. The risks of financial losses should be minimized. The technologies used should be accurate and reliable, providing efficient tools for data management and value chain. The tech insurance companies should eliminate the risks of cyber attacks and data leakage and present high level of security to their partners and customers.

The future of insurance is bright
Insurance isn’t the only old-school industry experiencing a significant period of innovation and disruption. But it may be the one that needs it the most. From online application processes and automated underwriting to claims management and fraud prevention, insurtech has already made major strides. Lower costs, higher operational efficiency, and better customer experiences are just a few of the benefits of insurtech the industry has to look forward to in 2020 and beyond.

Tuğana Koşun
KTO Karatay Üniversitesi- İslam İktisadı ve Finans

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