Editor's Note: This article was created as part of my fractional/interim role leading Growth and Demand Gen at Quandri. You can read more about my time there here.
Insurtech investment and availability have drastically increased over the last decade. Insurtech is rapidly changing how customers purchase insurance, insurance carriers and brokers operate their business, and enabling new market participants across the supply chain. Although this can create an uphill battle for insurance brokers in terms of staying competitive, it’s also a tremendous opportunity.
As the we look towards the future of the industry at large, an open question arises: what role will brokerages play and how does it differ from current state?
Since I misplaced my crystal ball a few weeks ago, I won’t be able to answer with certainty. What I will discuss is the dynamics in the recent past, the current insurtech climate, and considerations for how the future may unfold. The foreseeable part of the future is change, new opportunities, and the necessity of innovation. And I propose, as in other industries, the doors of the future will open to those who stridently embrace the change, hunt down new opportunities, and embed innovation into their organization.
So what is insurtech? Insurtech refers to the use of technology innovations designed to find cost savings and resource efficiency from the current insurance industry model. The closest comparison, and perhaps the birth place of insurtech is fintech. Both use modern technology to bring innovation to each respective traditional industry. The insurtech umbrella encompasses products that compete with or service existing insurance firms.
Let’s start with a look at Insurtech companies and capital market flows over the past few years. According to porch.com, VC funding for Insurtech companies in the last decade grew at an average of 89% every year. Here’s a detailed look at the past few years:
According to Hourly.io, in 2018 there were approximately 1,500 insurtech startups globally. As of 2021, there were approximately 3,475 - more than 2x in a few years.
*Source: Crunchbase
The funding and trend shows optimism for the future of insurtech. The rise points to a dynamic landscape that will continue to bear fruits on behalf of the Insurance industry. Secondly, it explains the rise of insurtech products available to the current day brokerage. In the present, insurtech is already changing how coverage is applied and paid.
Enhancing customer experience. Technology enables customers play a more active role understanding their needs and selecting personalized coverage. Current trends point towards more self-serve, online interactions where customers choose their engagement channel.
Efficiency. Policy seekers and holders can research and explore options alone, on their own time. Without waiting for representatives to be available, users can access the information they need on demand.
Personalization. New methods of information gathering and data processing allow insurers to better understand each individual. This improves pricing and delivers more reliable coverage based on higher fidelity and finer grain historical data.
Flexibility. Increasingly, insurance offerings have flexible, customized, short-term, or transferrable plans. This makes the market more competitive and larger at the same time - more use cases serviceable in more ways.
Lower operational costs. Traditionally, insurance companies relied on brick-and-mortar locations and primarily manual labor. Now, companies can operate remotely, interacting with customers digitally, and deploy automation solutions to scale the business at lower cost.
Battling fraud. Insurtech enables the use of data, analytics, trend analysis, and machine learning, to detect fraudulent activities at scale, in real time. These same tools can discover loopholes for insurers to close to avoid exploitation.
“Foundational changes can be game-changing. For example, identifying ways to streamline policy handling may be a priority, so we can redirect our experienced people to take on more complex risks in an innovative, high-impact way”
- Dr. Hanna Karna, Global Insurance and Risk Management Solutions, Google
For the practical among you, let’s talk about how the rubber hits the road. According to Property Casualty 360’s 2020 Agent Survey, the top 3 challenges faced by brokerages are: Online competition, talent, and business development. The 6th most frequently reported challenge is integrating Insurtech.
Adopting technological solutions helps face the top 2 challenges, online competition and talent, head on. In some respects, also the business development challenge. So what’s getting in the way? It turns out a lot of things are.
The top 2 challenges with adopting new technology, insufficient training and staffing, are completely valid talent concerns. That’s why we at Quandri strongly believe Insurtech products need to reduce the work required from humans. Customers shouldn’t have to choose between saving costs and reducing the strain on human resources - it doesn’t have to be a tradeoff.
Even the most technologically sophisticated companies in the world, with tons of automation in place, seek to hire and develop the best. Why is that? Two reasons. Number one, to continue innovating. Number two, the technological sophistication drives productivity gains from their workforce. So the ROI on their talent investment is high and gets higher.
To thrive in the new insurtech climate, hiring and retaining talent is a must. Hiring innovative, productive, tech-savvy team members, equips brokers to stay competitive. A capable staff positions you to adapt to the increasingly dynamic insurance landscape in the future.
This shift in technology is pushing brokerages to update their processes and procedures for the digital age. That can be painful. Well, it’s almost certainly painful in the short term. Like most things worth doing, the pain precedes the gain. And when it comes to the future of work and workplaces, insurtech has opened up a range of new and improved opportunities.
Firms are shifting away from analog paper-based systems towards digital platforms to facilitate operations and customer interactions.
“Customers have had good digital experiences with other industries. And they see right through insurers that just put a digital veneer over analog processes”
- Russel Corbould-Warren, Chief Underwriting Officer and Head of Europe, Collective Benefits
Insurtech has also provided insurance brokers with the opportunity to offer customers new and innovative products and services, such as the use of artificial intelligence (AI). AI can be utilized to help brokers improve customer service and streamline processes by predicting customer behavior, accurately assessing risk profiles and automatically generating quotes. Additionally, AI can help brokers reduce costs and increase efficiency by automating manual processes, such as underwriting, claims handling and customer service.
“AI will embed automated and objective rules in all processes to remove uncertainty and create a new customer relationship. We are going to operate at the speed of trust”
- James Spears, Head of Automotive, Tractable
Insurtech is already major part of the insurance landscape and it’s positioned to continue to grow in impact. New tech can create an uphill battle for brokers to stay competitive, it also provides an unprecedented amount of opportunities to innovate and reinvent. Indeed, the greatest risk of all may be to do nothing and wait.
Further reading:
Report: What Is The State of InsurTech in 2021? - porch.com
InsurTech Rising: A Profile of the InsurTech Landscape - Milken Institute
Overview of Insurtech & Its Impact on the Insurance Industry - Investopedia.com
World InsurTech Report 2021 - worldinsurtechreport.com
2020 Agent Survey: Insurance agents and InsurTech - PorpertyCasualty360
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