Having worked as a CEO of a startup insurance broker company, I got the opportunity to fully immerse myself in the world of insurance, risk management, premium setting, credit handling and everything relating to insurance and technology used in the sector. As Finance has its own term for financial technology firms, Fintech, so does the insurance sector: InsurTech.
I got the opportunity to do a lot of research which a later condensed into a book I am working on – that is a post for the future, this one will focus on what InsurTech actually is.
To discuss InsurTech, we need to define what it is as we did with the term insurance. The most basic definition of InsurTech is the following:
it is a word that is derived from two other, insurance and technology.
There is yet no structured empirical definition of what InsurTech is, but the field is gaining traction in research and academia.
InsurTech is a sub-category of FinTech, a term that has not caught on just as well as its Finance cousin despite the insurance industry being the most innovative sector in the world. The term started to be used in 2011 and became a household word in the industry in 2015.
An important difference between the two terms and sectors they are used in is that finance has an active clientele whilst insurance has been quite a passive product. You usually buy a house or life insurance, and rather forget about it short thereafter – until you need to use it. This difference is one of several factors that may explain why the insurance industry is not going through the same rate of technological shift and transformation in the same extent as finance is; the pressure from clients is not as strong as in finance and banking. Another issue is that of market entry hindrances – it requires a lot of capital to get started in the insurance industry, especially if you target being an insurance carrier or even broker. Most InsurTech companies thus initially focus on being service and product providers of different types, using their technological skills as leverage and key value driver when presenting their case to established insurance companies.
Along with new technologies comes the need for new business models, as with other kinds of digital transformations we have seen – the one in FinTech being a prime example. As the sector is relatively new, it is difficult to categorize InsurTech companies. The sphere is still growing and evolving, and we will be seeing a lot of deals, technological and operational shifts and new business models the coming years.
The main focus of InsurTech companies is currently non-life insurance companies and services, and in terms of offerings can be condensed into:
- AI and machine learning / Big Data and data mining
- Automation (of processes)
- IoT, e.g. as seen in the auto insurance industry using Telematics
- Risk sharing services
Want to know more on how your company can leverage InsurTech? Get in touch.
Comments are closed