Imagine being able to insure something in record time on your mobile phone or being reimbursed a few minutes after having something stolen. This is how InsurTechs are going to revolutionise the traditional world of insurance.
These financial sector start-ups bring together the businesses of insurance and new technologies (such as big data, blockchain and artificial intelligence) by creating disruption in the sector and using digital to provide their clients with personalised offers.
To stand up to the increasing competition from InsurTechs, the strategy of major insurance players is either to invest in these newcomers or to use incubators to develop solutions themselves.
“If the challenge facing InsurTechs is to have enough of a client base to speed up their development, the insurers’ aim is to integrate these disruptive innovation models so that they are not uberised,” says Matt Moran, Partner and Insurance Leader at PwC Luxembourg.
“Insurers need to focus strategically on client experience, on the insured person. Technology is constantly evolving and, in my opinion, if you try to go for it alone, without partnering up or investing, you are doomed to failure. For many insurers, a long process towards transformation is just starting; but there is also a real cultural change.”
In this era of non-stop innovation, the relative calm in the insurance sector may give the impression that it’s business as usual. This is, however, not the case in practice. According to PwC’s Global FinTech Survey 2017, the industry’s transformation is speeding up and insurers are increasingly looking outward to respond to the challenges of their business and to take full advantage of the opportunities available in the area.
The survey reveals that insurers are more active role than others in the financial services sector in their relations with FinTechs. They actually maintaining very close relationships with these innovators.
Big data, IoT: new strategic thinking towards better risk selection
If insurance digitisation increases the efficiency of insurers’ future working practices, it will also rejuvenate the sector, enabling it to better engage with clients and thereby offer tailored products. According to PwC’s report, this will be achieved by using data to better understand clients’ expectations, study new product-design models and control risks, with the ultimate aim of reaching new client segments. The key to this future success will also lie in transitioning to a more ‘preventive’ model, which will (among other things) help insured persons to avoid accidents and provide them with products that respond flexibly to changes in their behaviour and lifestyle – in other words, an ‘à la carte’ service offering.
Stepping up data analytics will assist with this and will also enable insurers to seize the opportunities arising from the explosion of the Internet of Things (IoT). While accessing data had so far been a barrier to entry for insurers, the increased ease of capturing this data thanks to the IoT is prompting a buzz of more personalised, client-friendly and flexible offers. Data from both social networks and connected objects is now a godsend for insurers, enabling them to increasingly personalise risk profiles and create niche markets by splitting risk in perfect proportions.
“So you can see why 84% of survey respondents stated that data analytics would be the main area for technological investment in the year to come,” says Matt Moran.
Insurers bet on Blockchain
Furthermore, many believe that the innovation that will transform the landscape for the insurance sector – and for the financial services sector in general – is Blockchain. Insurers expect Blockchain to be widely adopted within the industry. PwC’s survey indicates that 81% of insurers claim to be familiar with the technology in 2017. “The only downside is that while 68% of insurers are planning to adopt Blockchain into their production systems in 2018, only 8% say that they plan to invest in the upcoming year,” says Grégory Weber, FinTech Leader at PwC Luxembourg.
The speed at which insurers invest will need to increase considerably in order for this objective to be met.