There’s absolutely no doubt that the internet, modern technology and mobile devices have become important elements of how we go about our day-to-day lives, and they have significantly changed how almost every industry operates. The insurance industry has not been spared, as a fairly new phenomenon by the name financial technology transforms the status quo.
According to a scientific survey that was recently carried out by PriceWaterHouseCoopers, 74% of companies in the insurance sector admitted that fintech insurance has significantly disrupted business, and will continue to do so for the next few years. 26% of companies from other sectors also disclosed how much financial technology has transformed the insurance sector.
The perception gap clearly indicates that the disruption has just began, and players in the insurance sector ought to brace themselves for more disruption. According to PWC’s DeNovo platform, there has been a substantial increase in yearly investments in insurance technology startups over the last three years.
What this means for players in the insurance industry?
There is considerable change in the general expectation of customers. The expectations are encouraging insurers to seek value propositions with critical elements such as experience, transparency, and efficiency of transactions.
Self-directed solutions arising among other players will undoubtedly make differentiation a major challenge, and insurers that wish to remain afloat will be forced to find ways and means of overcoming this challenge.
Use New Sources of Data
An important competitive advantage will undoubtedly be the ability of making optimum use of new sources of data to have a better understanding of risk. It will give insurers the chance of exploring new segments that were previously untapped. For instance, some insurance companies may start offering covers to people with certain diseases.
The ability of gaining access to and capturing inaccessible risk data will enable insurers have better understanding of risks, thus facilitating personalization.
Telematics-based solution, an approach which allows car owners to pay as they drive, is among the first models to come out, and it is rapidly gaining momentum. However, new models are also coming up regarding life insurance, whereby wearables are utilized to monitor how healthy or unhealthy clients’ lifestyles are, resulting to benefits such as discounted premiums and rewards, among other benefits.
Outside the Insurance Sector
The main driving force behind significant innovation in insurance will not only be societal changes, but also advancement in technology outside the insurance industry. The technologies such as telematics, advancements in medicine, wearables, industrial sensors and connected homes, among others, will result in better understanding and management of risk.