A review of trends in global ‘fintech’ has been undertaken by business analysts KPMG, focusing on market drivers and technologies. Investment in technologies for financial services is high, running to $8.4 billion on a quarter-by-quarter basis. One area where there has been considerable investment is with the insurance sector. This is highlighted in the KPMG review “The Pulse of Fintech Q2 2017.”
The application of technology in the insurance sector has been dubbed ‘insurtech’. In recent years there have been various trends to note, such as using artificial intelligence to select the insurance cases of the greatest value. The KPMG report identifies three important trends: the rise of digital only insurers; the use of comparison sites; and the application of artificial intelligence to help process insurance requests and claims.
The first trend noted in the report is that many insurance companies are transitioning to become digital only insurers, abandoning the traditional office and the concept of the client ‘dropping in’, and offering insurance services via apps. The use of apps is important for new challengers given the fall in television advertising which is necessitating a shift to mobile and online channels to advertise insurance services.
A number of new companies have entered the market, challenging established insurance providers. These challengers include digital only insurance providers Trov and Cuvva; the majority of these start-ups, up to 90 percent, are based in the U.S. These challengers tend to be niche providers, such as covering fraud or offering services for clients that carry greater financial risks.
A telling statistic is that some established insurance companies have been in business for over 300 years; whereas some insurtech firms have been in operation for less than 300 days. This is a clear signal for legacy firms to consider competing with start-ups within the digital realm.
For those insurers wishing to make labor savings and gain other efficiencies from automation, but which wish to offer other means of communication in addition to the Internet, automated telephone systems are being tested out. Here artificial intelligence can interact with customers, responding to queries through voice activated key words.
A second area of change within the insurance sector is the use of insurance aggregators and comparison sites. These are websites where the client can search for the different insurance packages based on criteria of interest. This is not simply based on price, the optimal outcomes depend upon what consumers are interested in. Take car insurance, other factors that will influence the consumer are excess paid, whether a hire car is available, support for legal fees and so on. Insurance firms working together through comparison sites is an example of growth within the business-to-business market for financial services.
The third area is with the advantages that new technologies bring for the digital transformation of the insurance sector. Not only can big data analytics be utilized for mining data to assess insurance claims and accident trends, which are the basis of financial risk calculations; new technologies are also able to transform labor-intensive claims processes. Several insurance companies are running pilot programs to investigate how artificial intelligence can help with processing for high-volume, low-value claims. Automation and analytics are also enabling insurers to improve fraud detection.
Artificial intelligence is also being used to help insurers identify complex or severe claims early. In addition, rules-based processes are being automation especially by property and casualty insurers, according to a state-of-play review by Accenture. As an example, with medical insurance, Fukoku Mutual Life Insurance, which is based in Japan, uses artificial intelligence to calculate claims payouts, and to classify different injuries.
The three trends are each an example of a major disruption being driven and enabled by digital advances. While no single competitor or technology poses a threat to the established insurance sector, the trends are set to reshape the insurance sector, signaling a need for digital-based change for those established players that have yet to fully commit to the digital process.