Insurtechs: Built On Technology And Disrupting The Insurance Industry

Using An Omni-Channel Approach To Find New Customers

A tidal wave of change is sweeping over the insurance industry today and many insurers are not ready for it. For an industry that is highly conservative – after all, insurers are in the risk-management business and therefore averse to risk – such change can seem to be coming too fast and too soon. Yet, traditional insurers are being forced to act, whether they’re ready to or not.

Technology is driving the changes on a large scale and that technology is a natural by-product of a consumer who is far more demanding than ever before. Consumers, as most industries have discovered, want streamlined customer service and the means to purchase across a wide range of channels.

Innovation pushes technology development which, in turn, spurs more innovation. That’s why in today’s insurance marketplace, a new brand of company has emerged: the so-called Insurtechs. Just as technology led to the birth of fintechs in the financial services industry a decade or more ago, so, too, has technology driven the creation of Insurtechs.

“Jack be nimble, Jack be quick”

These small technology-based insurers are nimble, data-driven, and able to design and market numerous new products, so much so that they are taking market share away from the traditional players.

One of the strengths of Insurtechs is also one of the obstacles facing traditional insurance companies; Insurtechs have created a modern technology infrastructure from scratch, using the latest software platforms. They also make strong use of low-code software, software that uses drag-and-drop graphic interfaces rather than lines of custom code as well as re-usable components to create custom solutions in a fraction of the time it takes to manually generate code. By contrast, traditional insures have to deal with the problem of their legacy systems and old code; they must consider what components can be migrated to new platforms; but their biggest issue is whether to jettison the legacy system altogether and build anew.

It’s no surprise that the big firms struggle with this issue and it’s one that continues to hold them back. Meanwhile, the Insurtechs continue to develop new products across an omni-channel universe, leveraging data analytics and AI to define and then target new, niche markets that would be too small for the big players to bother with.

Data Drives It All

Just as manufacturers have discovered how to source and analyze the enormous amounts of data produced within their companies through ERP and CRM systems, so, too, the Insurtechs aggregate data from a myriad of data points, both public and private, to design and price customized products.

Take Kin Insurance, based in Chicago,  for example. Kin uses data to create personalized home insurance policies for its customers. In addition to providing these specialized policies, Kin offers its users discounts on hardware and services to help homeowners better secure their homes. When a potential customer sends their home address, Kin accesses data from more than five thousand data points to build a fully customized policy for the customer and ensure that customer doesn’t pay any more than necessary for the coverage they want.

Auto insurance is another area already being worked by Insurtechs. When auto insurance rates rise in a given geographical area, traditional insurers often argue that all drivers have to pay for the failures of a minority of drivers. In effect, the industry is saying good drivers have to bear some of the cost penalty. The Insurtech approach is to assess an individual’s driving habits via telematics and other data points and to design and price a policy based on real-time data for that specific driver.

Other Insurtechs offer coverage designed for today’s gig economy. Auto insurance for Uber drivers, for example, insurance for small businesses that may be targeted in a cyber attack or single-day coverage for Airbnb owners. These are all examples of niche products and markets that agile Insurtechs are taking advantage of.

Consolidation Ahead

Billions of dollars have flowed from venture capital companies into the Insurtech space in just the past few years and hundreds of Insurtechs have sprung up. It’s reminiscent of the growth of early personal computer firms in the late 70s and early 80s.  The fledgling computer industry went through a period of consolidation as the number of companies was whittled down through mergers, acquisitions, or outright failures.

The same is likely to occur with Insurtechs, according to InsuranceJournal.com. Consolidation presents an attractive opportunity for traditional insurance companies. Rather than struggle with the question of whether to rebuild a legacy technology system at great cost, why not invest in an Insurtech with a leading-edge technology infrastructure already in place?

Insurtechs provide a number of advantages that traditional insurers can’t:

The ability to find and open new, niche markets

• The ability to reach customers on an omni-channel basis

• The ability to create custom products in small numbers that are also profitable

• The ability to leverage digital technology to drastically reduce costs

Gerent has amassed a high level of experience in the insurance vertical, working alongside Vlocity, now part of Salesforce Industries, in shaping and implementing Salesforce products for the insurance industry. Our work with Vlocity created technology solutions that continue to streamline underwriting, distribution, and customer service for major insurers in North America. We invite you to get in touch to learn more.

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