As the insurtech sector matures, we look at the biggest disruptive elements facing the industry in the form of innovation, technology & digital disruptors
Insurtech now accounts for about 2% of the global insurance market. However, this is rapidly changing as companies scale and investors invest in the new digital insurance carriers that are developing in the field. According to recent research from Research and Markets, the insurtech industry is expected to increase by US$33.73 billion by 2025, with a CAGR of 45.28 percent.
In a multi-dimensional, omnichannel world, where strategic relationships with other providers and new technologies are racing to generate new and increasingly inventive products and services, the sector is maturing. In fact, the environment is so conducive to innovation that one of a company’s defining success determinants is how it chooses which elements to focus on in this ever changing environment.
Leveraging Big Data and KYC opportunities in insurtech
Increased access to Big Data is one of the most disruptive components in insurtech. The way data is used to identify and determine market trends has changed with the times. Insurance firms used to rely on data that was collected over a long period of time and from a limited number of data points barely a decade ago.
Today’s massive amounts of data are generated, collected, and aggregated from a plethora of sources, providing considerably greater insights into the marketplace, client preferences, and dangers. Indeed, data gathered over a lengthy period of time may not be as meaningful as data gathered over a shorter period of time but from a larger number of sources.
“We are seeing companies looking for ways to leverage cloud/big data computing to begin to organise and enrich data at scale to take advantage of the opportunities presented by the increased availability of data,” says Tim McKenzie, director – cloud computing and location solutions at data integrity specialist Precisely.
“From underwriting to risk prediction to responding to catastrophic events, location is a critical component of the property and casualty industry. The capacity to efficiently organise location-based data into a format that modern technologies like artificial intelligence and machine learning can ingest has become a critical approach for capitalising on this influx of data.”
Insurance industry transitions to new technologies and automation
The second half of the equation is Big Data management. According to projections, 70% of the global insurance business would have used automation technologies by 2024. The shift will take a lot of money, but it will make insurance companies more profitable in the long run.
“Disintermediation of insurance is a movement that has steadily been accumulating pace for a while,” says Steven Darrah, founder and CEO of Fuelled. Most people think of disintermediation as the removal of brokers from the value chain, however lately even downsizing underwriting departments can be considered as removing the middleman. It’s easier than ever to enhance profitability thanks to new technologies; it’s simply taken the insurance business a little longer than others to get on board.”
Insurtech strategy and embedded offerings in 2022
Embedded insurance services have steadily grown in popularity over the last two years, becoming one of the most talked-about new insurtech trends. Embedded services allow insurtechs to build a wide range of relationships with a wide range of business clients that want to sell insurance at the point of sale.
Fully automated workflows have been created from automated and digitised services, cutting unit costs and allowing insurtechs to scale quickly. The cover is also adaptable, allowing it to be changed with a swipe or even automatically. Because it is rapid, easy, and personalised, embedding insurance overcomes the typical problems of insurance. These products are also creating a new revenue stream for businesses in a variety of industries.
How to manage partnerships in the insurtech ecosystem
One of the most distinguishing methods an insurtech can employ is the formation of alliances across the ecosystem. Forming a long-term, reciprocal partnership with another service provider can provide a slew of advantages and aid insurtech’s rapid growth. However, in order to assure the continuation of a healthy and productive collaboration, a number of legal and workable techniques must be used.
“Honest and candid conversations regarding these problems at an early stage are crucial,” says Rachel Hillier of Capital Law, who is an experienced regulatory lawyer and oversees the Financial Services unit. The devil is in the details when it comes to putting any partnership in writing. Will an investor be able to appoint a director to the board of directors? What is the frequency with which that director expects to attend meetings? What company choices will require investor approval? The delegated authority agreement (DA) will contain identical elements for delegated authority.”
“The parameters of that authority must be meticulously established and incorporated into the agreement,” she continues. While the scope of that power is critical, exit and reporting provisions must also be taken into account. If not discussed and incorporated into the DA at the start of the partnership, intellectual property and secrecy clauses could become a source of contention.”
