Deep Dive into Insurtech: Definition, Market and Trends

Last time we covered the basics of Financial Technology, which has a strong and fast-growing popularity. Apps like Klarna or Revolut are just a few examples of well-prospering apps that revolve around fintech. We also explained how fintech ties in with ESG and has great potential in expanding your project as its market share grows.

In this article, we will cover a closely related topic: insurtech, a technology designated to the insurance sector. It's becoming influential and profitable the businesses as it lowers the costs, enhances customers' experience and fosters innovation. These are just a few benefits that make insurtech worth attention. If you want to expand your business and increase your company's wealth by incorporating this technology into your projects, we prepared this helpful article. To better understand this topic in the following text, we will cover the most critical questions:

• What is considered Insurtech?
• What are examples of Insurtech?
• What is the size of the insurance industry?
• What is the primary goal of Insurtech?
• How is IoT used in the insurance industry?
• How to build a successful Insutrech product?

What is Insurtech? Definition

Insurtech is a term that encompasses the intersection of insurance and technology. It refers to innovative startups and established insurance companies that use technology to revolutionize the traditional insurance model, improving the design, delivery, and management of insurance products and services. The term is inspired by fintech and reflects the innovative use of technology in the insurance industry, aiming to create cost savings and increased efficiency.

Insurtech in numbers

As an important and rapidly growing trend in the insurance industry, insurtech offers numerous benefits to consumers and companies. The importance of this technology in the market is evident, as it drives growth and innovation in the insurance industry. Now, it has a share estimated at USD 5.45 billion in 2022 and a projected CAGR of 52.7% from 2023 to 2030. This growth is fueled by the increasing number of insurance claims worldwide, a major contributor to the market's expansion. Additionally, Statista provides us with more important numbers that confirm its significance.

Understanding Insurtech

You already know what it is and how it impacts our market and be confused. To barter illustrate inurtech to you, we will explain how it works. Insurtech startups are shaking up the traditional insurance industry by leveraging technology to offer better solutions and capture market share. They aim to address the slow and cumbersome processes that dissatisfied many customers with traditional insurance models.

Some of the ways insurtech companies are revolutionizing the industry include:

• Personalized risk assessment:

Instead of using broad statistical models, insurtech startups use real data to create smaller, tailored risk categories, which allows for more competitive pricing.

• Convenient and accessible:

Insurtech companies are moving away from hard copy documents and instead using online forms and digital signatures to make the process quick, easy and accessible for customers.

• Integrated solutions:

By bringing together multiple policies and products onto one platform, such as mobile apps, insurtech startups are simplifying the insurance experience for customers.

• Data-driven products:

Insurance companies are leveraging data from wearables and social platforms to offer even more personalized policies.

Top Insurtech startups in 2023 that will inspire your business

By leveraging technology and data to offer more personalized and efficient solutions, insurtech companies are disrupting traditional insurance models and creating new opportunities for businesses and customers alike. Here are just a few examples of the numerous innovative startups that are driving change in the insurance industry:

• Lemonade:

An AI-powered insurance provider that offers homeowners and renters insurance using behavioral economics and peer-to-peer technology.

• Oscar Health:

A technology-driven health insurance provider that offers virtual primary care services and individual and family insurance plans.

• Metromile:

A pay-per-mile car insurance provider that offers personalized rates based on telematics data.

• Root Insurance:

An auto insurance provider that uses telematics and AI to offer personalized rates based on individual driving behavior.

How to build an Insurtech product?

once you decide that you would like to incorporate insurtech into your business, you should plan a strategy to maximise your future benefits from it. To make the best of this technology and to create something that will stay on the market and bring you profits, plan your project carefully. You may start from:

1. IoT

Insurtech is revolutionizing the insurance industry by incorporating cutting-edge technologies, such as the Internet of Things (IoT). IoT has the potential to transform the way insurers gather and use customer data, allowing them to provide more personalized and tailored products.

With the widespread use of sensors and connected devices, vast amounts of data can now be collected, providing insights into customers' behaviors and characteristics. This information can be used to make more informed risk determinations, leading to a shift in focus from reimbursement to prevention. By leveraging digital technologies and customer data, insurtech allows insurers to enhance their core business model and create a superior customer experience.

2. AI and machine learning

Insuretech companies leverage AI and ML to optimize internal processes and automate tasks, reducing costs and allowing employees to focus on more creative work. Machine learning is explicitly widely used to automate claims settlement, providing faster, more precise and cost-effective processing. Lemonade, a company we mentioned in this article, uses this solution as thor business model.

3. Blockchain

Blockchain technology is making a big impact in the insurtech industry, providing stronger security and fraud prevention through its use in effective reinsurance systems. Smart contracts ensure the blockchain system is secure and resistant to fraud. Blockchain can also reduce fraudulent claims by analyzing data from multiple sources, such as analytics and location.

4. APIs and microservices

An insurance company can stay competitive and take advantage of the insurtech trend by integrating solutions from outside partners. Using APIs, libraries, and microservices can save time and money by integrating existing solutions into the product rather than developing everything from scratch. Third-party solutions can provide features like checking customer data to prevent fraud and abuse.

5. Focusing on a new demographic

Reaching new demographics can enhance an insurance company's product offerings. Younger generations, such as Millennials, Gen-Z, and Zoomers, are becoming a prime targets for insurers. 14% of young adults in the US remained uninsured in 2018, creating a sizable market for insurers to tap into. To appeal to these demographics, insurance companies should offer products and services that cater to their specific needs, such as access to online and mobile services. Focusing on these untapped customer groups can reposition existing products for a new demographic and provide new business opportunities.

How IoT is changing Insurance Sector

As we mentioned before, IoT has a significant influence on insurtch development. Its primary function for insurance technology is collecting data, which contributes to better risk assessments and underwriting experience. To better illustrate its importance, let’s take a look at IoT uses in insurtech in devices you already know:

• Smart Homes:

Insurers can use IoT devices, such as smart thermostats, smart locks, and smoke detectors, installed in homes to monitor the home's environment and security. This information can be used to provide customized insurance plans and discounts to policyholders based on their home's safety and security features.

• Smart Cars:

The usage of connected devices in cars can provide insurers with valuable data, such as the car's speed, location, and driving habits of the policyholder. This information can be used to assess the policyholder's driving risk and offer personalized insurance plans accordingly.

• Underwriting and Risk Assessment Processes:

IoT devices can provide real-time data that can be used in underwriting and risk assessment processes to assess the potential risks and losses associated with a policyholder. This can help insurers make informed decisions about policy coverage and pricing.

• Connected Healthcare Systems:

Insurers can use IoT-connected healthcare devices like wearables to monitor policyholders' health conditions and provide real-time health data. This information can be used in underwriting and risk assessment processes to offer personalized health insurance plans and efficient claims processing.

• Efficient Claim Processing:

IoT devices can provide real-time data about accidents, such as the location and extent of damage, which can streamline the claims process and reduce the time required to process claims. This can result in faster and more efficient claims resolution for policyholders.

How exactly can Insurance companies benefit from adopting IoT solutions?

From the examples above it is evident that IoT and Isuretech can be paired together. Insurance companies can use IoT data to understand policyholders' risk profiles better, leading to more accurate pricing and reduced losses. Personalized insurance products and pricing can be offered based on IoT-generated insights into policyholders' lifestyles and habits. IoT devices can streamline the claims process, resulting in faster and more efficient claims resolution. Overall, adopting IoT solutions can help insurance companies improve their operations and remain competitive in a technology-driven industry.

How do insurtech companies make money?

Insurtech companies are profitable because they can offer innovative insurance products and services that meet customers' needs and provide a better customer experience. By leveraging technology and data, they are able to lower costs and improve efficiency, which can lead to increased profitability. Additionally, by offering insurance products and services through new and innovative channels, they can reach new customer segments and generate additional revenue streams.

The main reasons they generate wealth are:

1. Premiums:

This is the main source of revenue for insurance companies and involves collecting payments from customers in exchange for insurance coverage. Insurtech companies can earn money by offering innovative insurance products and services at competitive prices and attracting a large customer base.

2.Commission:

Some insurtech companies earn commissions by acting as intermediaries between insurance companies and customers. They earn a fee for each policy sold or each referral leading to a policy sale.

3. Technology and data fees:

Some insurtech companies charge technology and data fees for providing innovative solutions such as cloud-based platforms, data analytics, and other value-added services to insurance companies.

4. Investment income:

Companies may earn investment income from their investments or investments made by their customers.

Summary

As a part of fintech, insurtech is gainings popularity because of the many benefits it brings to companies and customers. It is at its best when it incorporates new technologies like IoT or AI to collect more valuable data and create better risk assessments. It also speeds up many processes and draws the attention of new important demographics.

Those are just a few benefits and upgrades that insurtech can bring to the table. To improve your business and lower costs, you should really consider the development of insurtech into your new or existing projects. To make the best of it be sure to contact specialists in this area and live the important development to a company with a great experience. Our team at SolveQ will help you with everything. Get in touch with us!