Similar to how FinTech reshaped financial services in 2015, it is now InsurTech’s turn to switch up the elements of the insurance industry.
Using new technology advancements such as cloud computing, smartphone hardware and apps, InsurTech is set to transform old processes and enable new ways for customers to obtain and remain insured, while allowing insurers to connect digitally with customers.
In the past year alone, this growing segment has increased three-fold – from US$800 million in 2014 to more than US$2.6 billion in 2015.
The upward trajectory has continued into 2016, during which the first quarter has witnessed more than 45 deals worth over $650 million in funding.
The Main Drivers of InsurTech
So, what exactly does InsurTech cover?
Contrary to popular beliefs (and misconceptions), InsurTech is more than the mere provision of insurance plans through technology.
According to Startup Bootcamp, it comprises of up to seven major components:
Data is the lifeblood of all insurers and InsurTech looks into almost all lines of data management.
Here, cloud computing is used to store clients’ data and information. Just like iCloud from Apple, it is internet based and insurers do not have to rely on their physical computers to gain access to data.
Fintech does crowdfunding while InsurTech does Peer-to-Peer Insurance. They serve the same purpose of pooling shared risks and rewards.
Some may term it the “Friend-insurance” because of the benefits that they bring.
For one, it increases revenue as more people step in to contribute. On the other hand, it improves the organisation’s social branding especially when insurers offer social funding vehicles. Furthermore, it improves the ability to engage with under-insured populations.
Real-time Accessible Data
Blockchains is a shared digital ledger, or a continually updated list of all transactions. It is used to record product information. The real-time factor allows companies to both update and share information in a cost-effective way. There will be not be time and cost wasted at upkeeping or underwriting one’s data that have already been done so by another party.
Simply put, insurers and the relevant parties involved can accurately and conveniently access and pool together verified data.
Smart contracts are defined by their digital feature. With the blockchain connected to the Internet, any public available data can be used to trigger the insurance policy.
For example, a flight delay is a public information and this update will automatically trigger an insurer that pledges to provide claim for such disservice.
Automated Claims Settlement
The verification of claims can be made and recorded on blockchain in executing the right contract. This automation streamlines operations efficiently and reduces customer waiting time for payments.
InsurTech – A Guaranteed Risk Free Future?
Granted, this wide array of innovation does sound exciting. But as much as this excitement can be dizzying, one should not overlook the threat of cyber security that may be birthed from this complex network of innovation.
It is therefore essential for companies to remember their fundamental core – to anticipate and mitigate risks.