The use of insurtech is becoming increasingly common in the insurance industry. It’s changing the way insurance companies do business.
So, what is insurtech? In this guide, we’ll discuss the different types and benefits of insurtech, what to can you expect from insurtech in 2020 and how it will affect you.
Insurtech stands for insurance technology. Insurtech falls under the umbrella of financial technology, also referred to as fintech. Up until recently, many of the changes in the insurance technology industry were kept invisible to policyholders. Insurance providers utilized insurtech behind the scenes, but now policyholders experience it firsthand. Insurance providers now are using insurtech to provide faster service and improve their communication with customers.
Prior to the introduction of new technology, the insurance industry went largely unchanged for decades. Today, insurtech is making the insurance industry more competitive, allowing new companies to enter and giving customers the ability to choose from multiple providers for the best rates and incentives.
Insurtech is changing the insurance industry — so, which types are impacting the industry the most? Some increasingly common types of insurtech include:
When computers can function like humans, this is known as artificial intelligence, or AI. In the insurance industry, companies are using artificial intelligence to create chatbots. These are computer programs that verbally communicate with customers or communicate with customers through text.
These chatbots can be found on a company’s website, and they can answer customers’ questions in real-time. Other companies have also incorporated chatbots to allow customers to file claim reports or to complete applications. Chatbots are available 24 hours a day, every day of the week to communicate with website visitors.
Because AI in insurance is so helpful to both customers and providers, more and more insurance companies are incorporating AI into their customer service practices.
Insurtech examples also include what is known as the Internet of Things (IoT). But what does the Internet of Things mean? When ordinary machines, such as televisions and refrigerators, are connected to the Internet, this is known as the Internet of Things — for example, telematics for insurance falls under this category.
Telematics for insurance refers to the use of electronic devices in vehicles. These electronic devices collect, store and transmit data about the driving habits of the vehicle operator. Businesses with fleets of vehicles tend to include GPS-enabled devices in their automobiles to track drivers’ speed, acceleration patterns, braking patterns and the vehicles’ locations. Auto insurance providers can also use data from these electronic devices. Collecting vehicle data for insurance purposes can allow insurers to provide discounts, analyze accidents and improve safety.
Wearable technology is another example of the Internet of Things that insurance providers are utilizing. Wearable technology — like Fitbits and Apple Watches — can be used to monitor the user or the environment around the wearer. Wearables may contain sensors that can detect and monitor a user’s skin temperature, heart rate or blood oxygen level. A wearable device may also be able to track a user’s movements and determine if the user falls, allowing the user to easily use the technology to request help. Wearables may also be able to alert users when dangerous gases like carbon monoxide are present.
For example, wearable technology can track a customer’s exercise habits and allow insurance providers to reward their customers with a premium discount.
Machine learning is another example of insurtech. This subcategory of artificial intelligence is a technology that allows machines to learn over time by utilizing mathematical models and algorithms that mimic the human brain’s neural networks. Rather than by following specific instructions, computers acquire knowledge through the extraction of patterns from raw data.
Though machine learning isn’t as widely used by insurance companies as chatbots, most companies can benefit from using this technology. Insurance providers accumulate a large amount of data, but many use only a small portion of the data they amass. By utilizing machine learning, insurance companies can extract valuable information and mine data more efficiently and effectively.
Insurance providers can use machine learning to assist with:
Drones are small, unmanned aircrafts that are inexpensive, fast and simple to operate. Because of their ability to travel anywhere, drones are the ideal technology for traveling to areas that are dangerous for humans.
Drones can be used to inspect property that is located in a dangerous area, such as a rooftop, high-rise construction site, grain silo or a disaster zone. Drones can also be used to photograph and inspect the site of an auto accident.
Another example of insurtech technology is smartphone apps. These apps are offered to both individual customers and businesses and can be used for a variety of purposes. Uses range from allowing users to create work permits to giving users a platform to learn more about a travel destination and VISA requirements.
Apps may be used in place of plug-in telematics, for example. Auto insurance providers may offer customers the chance to download an app to their smartphone that will track their driving habits, such as acceleration, miles driven, hard braking, night driving and cell phone use. These apps give customers an easy way to track their progress and improve their driving habits through feedback from the app.
Many of these examples of insurtech are in use today, and if an insurance provider has not yet adopted any of these types of insurtech, they surely will in the future.
Insurtech comes in many forms, but how can insurtech benefit policyholders? Insurtech was created to improve the efficiency of the industry and create a more effective market for customers. As such, insurtech has resulted in insurance providers improving their offerings and customer service. Policyholders are enjoying these and several other benefits from the introduction of insurtech.
Insurtech allows policyholders to save money. This technology enables policyholders to take control of their policies and demand products that can benefit them.
One example of money-saving from insurtech is insurance discounts from data collection. For auto insurance, policyholders can choose to practice safe driving habits to qualify for a discount on their premiums. Telematics collect data on a policyholder’s driving habits, and the collected data informs the insurance company what the driver should be paying for a premium.
A policyholder may find they’ll qualify for a lower premium if they drive fewer miles, limit nighttime driving and avoid hard braking and accelerating suddenly. Auto insurance companies want to provide coverage to safe drivers, and they can provide rewards to those policyholders who practice safe driving habits. As such, policyholders who drive safely can receive a discount on their auto insurance, saving them money now and in the future.
Insurtech can also help policyholders save time. Insurtech makes the process of applying for and securing insurance much easier. For example, an insurance company may use insurtech to gather social data and help you fill out an insurance form.
Artificial intelligence can also provide customer service that is tailored to each individual’s needs. AI can provide a quick summary of insurance options and present products that are the most relevant and useful to a customer. AI can perform these functions faster than a human, which means the insurance company and the customer are saving time. The process of finding the best insurance policy options becomes a faster, more streamlined process for customers through the use of insurtech.
Insurance providers can also use the Internet of Things to collect detailed data about each individual customer, using this information in conjunction with artificial intelligence to offer customers the right products.
Live chat features can also answer customers’ questions efficiently. Artificial intelligence uses natural language processing to better understand and communicate with customers, providing you with answers that go beyond the standard FAQ section of a provider’s website to give you information that is relevant to your specific situation.
One of the most significant benefits of insurtech for policyholders is the facilitation of more competition among insurance companies. Providers now need to step up and improve their offerings and customer service to meet heightened industry standards. Insurers can no longer get away with avoiding change and doing things as they’ve always been done.
Insurance companies now need to ensure the insurtech they offer is attractive and useful to their policyholders. Insurers will need to deliver products tailored to individual customers instead of one-size-fits-all products and adapt to new communication methods, such as mobile devices. Insurance providers will need to keep up with changing technology and best practices to stay competitive, and policyholders can use this competition as leverage when choosing between insurance providers.
Insurtech reflects the reality of a customer’s daily life. Rather than force policies to fit strict industry standards, insurtech can allow policies to suit a customer’s needs. Because of insurtech, insurance companies are now able to provide more customized insurance solutions to policyholders. With the advent of IoT devices, insurance providers are now able to use comprehensive data sets to create custom policies for individual customers.
Previously, insurance companies based premiums on just a few pieces of data. These data points typically included age, criminal history, DMV records and placement on a mortality table. This information is analyzed and determines the likelihood of this policyholder making a claim. The premium is calculated based on this likelihood of making a claim, allowing the insurance company to also hit its desired profit numbers.
Insurtech has contributed to insurers’ ability to collect more data from their customers. This access to personalized data through the use of Internet-connected devices allows insurance providers to set a premium that is customized to each individual policyholder.
For an individual who is looking for auto insurance, they may be able to install a device in their vehicle that measures the driver’s speed, hard braking events and how the vehicle turns. Over a set period of time, data is collected from this device and then assessed to determine the premium for this individual.
Wearable technology also enables the transmission of real-time data from the wearer to the insurance provider. Insurance companies can use machine learning to mine this data more efficiently and use it effectively in providing customers with custom insurance solutions.
For example, a health insurance policyholder who sleeps eight hours and runs five miles a day is more likely to need fewer visits to a health care provider than someone who is a sedentary smoker. The premium of the healthy nonsmoker should be lower than the premium of the sedentary smoker.
Insurtech can improve the effectiveness and efficiency of the industry and reduce costs, benefitting both customers and insurers.
We understand change and technology can be scary. We want to provide our customers with the best of both worlds. You can call in and talk to a representative and get a personalized quote or get questions answered quickly and easily without ever clicking a button. For the more tech-savvy, we offer online forms and calculators to help you get a quote quickly and easily without the need to talk to a representative.
At David Pope, we use insurtech to save our policyholders time and money to allow them to enjoy the things they love. Contact us today to see how we can save you money.
