The insurance industry is one of the oldest business models around. There are many reasons for its longevity, but the chief reason is that it is incredibly cautious, risk driven and favors experience above innovation. Insurtech aims to wring out efficiency and savings from the incumbent insurance models through this much-feared innovation. It explores areas that large and well established big industry players are incredibly reluctant to accept as it goes against the bedrock of their longstanding guiding principles of playing the long game. Insurtech is beginning to capitalize on the troves of streaming data from internet enabled devices such as vending machines, thermostats, driverless cars, drones and emergency devices to name a few, and plans to effectively price premiums according to the observed behaviors shown in this data.
The implementation of the Insurtech models and ensured longevity of the Insurtech startups popping up rely on the use of AI and the data received from Internet of Things (IoT) devices. Traditionally, the insurance industry has relied on expert risk advisers and actuaries to assign risk to policy holders and policy seekers. These groups are then further analyzed and categorized to ensure profitability. However, this has always resulted in some discrepancies and uneven customer burden. Conversely, Insurtech is looking to leverage the IoT to essentially build out more finely categorized groups of risk. The results allow products to be priced more competitively, lower customer premiums and provide a much faster turnaround.
These exciting and complex revolutions allow for a more efficient insurance process, better pricing models, and is leading to the creation of on-demand insurance. The data being gathered can be leveraged to create AIs to handle the tasks of brokers to complete individual or company coverage and can create more customizable options. While innovations like these should be more widely accepted and implemented, the industry as a whole is still dragging its heels. The reality is that insurance is still a highly regulated industry. Dealing with the many steps of legalities takes time and capital. Implementing such rapid change can be difficult and is probably unlikely in the short term.
Nevertheless, the intriguing user friendly approach of the Insurtech world will certainly begin to generate increased consumer interest. This interest will be largely based on the fact that it can offer a more streamlined process and refined industry model that is largely based on analytics called telematics. Telematics utilize machine learning algorithms to wrestle with and define the phenomenon of seemingly limitless data. As the larger insurance players implement more data initiatives it is likely they will eventually warm to the idea of these innovations. It is believed that the next twelve months will be crucial as companies compete to gain the advantage in this data analytics race. However, if tradition and the regulatory environment dictate business needs, this innovation may still be another five years in the making. It is a viable long term goal, but one that still needs to be accepted by the conservative but long-lived insurance industry.
Interested in more conversations about trends in the insurance industry and actuarial careers? Contact Rory Hauser, Actuarial Recruiter at Smith Hanley Associates, at rhauser@smithhanley.com.
Additional sources of information on IoT and Insurtech:
http://www.investopedia.com/terms/i/insurtech.asp
http://1.insurancenexus.com/LP=15997?utm_campaign=4820%2007FEB17%20Content%20Autoresponder&utm_medium=email&utm_source=Eloqua&elqTrackId=2260ea6108b34cb39a331ec866251b28&elq=ddf7aa87d1824b2daa6a551325a04862&elqaid=25256&elqat=1&elqCampaignId=
http://www.propertycasualty360.com/2017/01/24/10-trends-expected-to-shape-the-casualty-insurance?eNL=5888d166160ba0604066a643&utm_source=PC360_ClaimsConnection&utm_medium=EMC-Email_editorial&t=es-specialty&utm_campaign=01252017&page=9
http://www.propertycasualty360.com/2017/02/24/pc-insurers-hopeful-about-growth-prospects-but-bra?eNL=58b0867c140ba0b2703e9c2e&utm_source=PC360_Daily&utm_medium=EMC-Email_editorial&utm_campaign=02242017
