Insurtechs are reshaping insurance across a number of areas, from minimizing cyber risks through artificial intelligence-based assessment to automating ways to find cover for freelancers. Other innovations include offering more choice to customers. An example of this is with “insurance as a service,” which enables people to insure items only when they are in use, reflects how policies are increasingly being tailored to the customer.
Big insurance companies are starting to realize they need to take notice of the threat of insurtechs and either challenge them or work with them. To compete on the same level as the high-tech market newcomers, traditional insurance companies know they need to integrate modern technology into their legacy systems.
While 2018 has seen several developments, 2019 look set to see further change in the sector. We take a look at three areas that will preoccupy the insurtech space.
According to Sam Friedman, who is the insurance research leader at the Deloitte Center for Financial Services, the optimal word for 2019 will be collaboration. This means that instead of competing with insurers, the majority of insurtechs will work with the big players as collaborators, helping to drive improvements to services like underwriting and claims.
For big insurance companies, working with insurtechs helps to reduce the cost of developing new products and also to transfer some of the risk. Another benefit is that the speed of innovation is often faster, with insurtech not weighed down by the same levels of internal bureaucracy.
Rise of blockchain
Blockchain, by decentralizing information, creates data that is more secure and near impossible to hack. This makes blockchain more attractive to insurance companies. However, the cost of upgrading core systems for blockchain compatibility represents a large obstacle. In addition, there’s currently a lack of standardization which books breaks on wider uptake of blockchain so far.
However, several insurtechs are investing in blockchain, seeing the potential and opportunity for removing inefficiency and cost from the insurance value chain. One example is Lemonade, which specializes in property and casualty insurance.
The Lemonade model uses a fixed fee from monthly payments and it uses an algorithm to pay out claims as soon as possible, when conditions in blockchain-based smart contracts are met.
Artificial intelligence platforms are assisting with the insurance customer process. In terms of insurtech, AI is reshaping claims, distribution, underwriting, and pricing. Many of these make use of machine learning algorithms.
An example is the insurtech Pixoneye, which is a data analytics software-as-a-service company. The insurtech offers computer-vision technology to analyze a customer’s public online photo galleries to create a personal risk profile.
In related news, Digital Journal has profiled five leading insurtechs to watch out for in 2019.