The insurance industry will evolve dramatically because of the impact of insurtech. This is an industry with well-established traditional providers, who will have to acclimatise to quickly shifting familiar landscapes. The change is already in motion, as the emergence of successful, digitally native disruptive companies attests.
To understand why the market will trend in a given direction, led by insurtech, it is first necessary to comprehend why insurtech is popularising so prolifically. Whilst insurtech in itself is not a new occurrence, with technology being present in the insurance space for years, the new technologies being employed now can be revolutionary. The potential benefits of modern insurtech will accelerate growth and acquire market share, but then continue to transform the market further. There will be multiple aftershocks caused by the insurtech earthquake, as basic business practices will be forced to evolve, and the nature in which providers approach the market will need to adapt with the implications insurtech brings. But why is insurtech doing so well?
Customer experience is central to insurtech’s design and purpose. Understanding this is crucial for comprehending why insurtech is so powerful. Insurtech is a natural result of technological advancement, but its success is because the purpose of the technology aligns with the popular modern theory gripping the insurance industry: that the delivered customer experience is the single biggest factor that determines which provider a customer chooses.
The reason why this is the prevalent belief, is that the previous factor that dictated customer flow has been devalued, that factor being cost. This is of course not to say that cost is not an incredibly important variable, as it of course is. Instead, the matter is that the disparity of cost for a premium is less variable provider to provider than it once was. Interest rates are globally low and look to be for the immediate future; giving providers fewer opportunities to manipulate their price points within reasonable margins, and undercut each other. With no glaring difference in terms of quotes between providers, customers can choose to cherry pick their service based on alternative qualification criteria. Customer experience, the ease and quality of the interaction between provider and customer, has become this exact factor.
Customer care has not traditionally been at the forefront of provider priorities in the insurance industry. Insurtech improves the customer experience in two different ways. Either it makes interactions with the provider easier and more efficient, or it gives them a better value insurance product. The way the product is better valued is through more accurate underwriting or by accompanying the offer with AI guidance throughout a claims process. Considering the insurance landscape, it is hardly surprising that improving customer experience is, in places, a low bar to clear.
It could be tempting to think that if market dynamics were to suddenly shift, the fad of insurtech might be outgrown. This is to misunderstand the transformative impact insurtech will have on the insurance industry, part of which is controlling the climate to ensure its own success. Indeed, insurtech will not fade out. Instead, insurtech will allow providers to gather higher quality and greater quantities of data from their customers. Furthermore, successful disruptors will also play a key ole in helping insurtech persist. Digitally native insurance providers have the potential to be resoundingly successful and quickly become industry challenging players despite their youth. Once this happens the revenue stream of these disruptors reaches the point to give new age providers resources, and R&D funds to ensure they can keep innovating and implement strategies to grow further. Whilst they thrive, insurtech will always have a foothold in the insurance industry.
Our latest whitepaper, Insurtech: The New Insurance Model, analyses the current insurtech landscape as well as examining the different sectors making up the insurance market.
Download the Whitepaper: Insurtech: The New Insurance Model
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