The advent of technology has rapidly caused a transformation in various industries. One of them...
For someone who doesn’t know much about insurance may find it less interesting. However, those who intently follow insurance updates would know that there is something exciting work taking place in technological aspect in insurance as InsurTech opportunities are growing. Traditional insurers have given a close watch to newcomers. They have become few of the largest funders of start-ups as they realize the fact that partnering with technology firms is crucial. However, if insurers turn to insurtech without a sustainable plan, then they will fail.
The concept of Insurtech shows the commitment to innovation and growth of new products and services within the insurance industry. It involves use of the latest technologies to expand and optimize the business model of insurance sector. Insurtech continues what was commenced by Fintechs and applies it to the insurance industry from an expert perspective.
The insurance sector grew in parallel with the economy. Whenever there has been technological advancements, the industry has come out with new products, new ways of distribution and with new methods of evaluating risks. There has been increased technological innovation in the last few years than the years that preceded it. Around 50 years ago, insurance companies were among the first users of mainframe computers. Now the smartphone has become more powerful than such machines, and customer data can be stored in the cloud.
Likewise, communications capabilities have enhanced, and talks of 5G networks has emerged. More transformative technologies are expected to become more practical. This has upended industry assumptions about business and operating models, organizational structures and market strategies.
When the insurance companies explore Insurtech, they focus on the tech first and look for new systems to revolutionize procedures. Leaders often tend to look beyond the features and functionality part.
Some of the critical components of InsurTech plan include the following:
There are various opportunities to thrive, but those companies that disrupt the market, in the long run, know that they cannot be good at every bit of things. A temporary revenue boost can make things bad if you wind up spread too thin. Sustainable growth accrues from understanding what capabilities make your company unique.
Understanding cultural fit is critical while considering transaction involving two different organizations. It is essential when considering how a large carrier would work with the InsurTech company, whether as an acquisition, or a joint business relationship, or just as a service provider. The factors that often make InsurTech appealing may struggle when it is integrated with an incumbent provider. If the employees don’t see the value in staying, much of the relationship’s appeal can erode.
Earlier, insurance companies used to look at InsurTech as a competitive and disruptive threat. But now the things have changed, they tend to see a growth opportunity. But what does this mean? There are a few methods to structure a working relationship, and there are tradeoffs involved. In some cases, the form of relationship could be depending on the degree of control that either is willing to give up; in case of others, it depends upon the size of the investment involved.
Legacy companies perceive InsurTech startups as a method to outsource innovation. They think that they may not innovate quickly but can team up with others who do it well. Without having a good governance program, those innovation programs become inefficient. Consider a company having teams in claims, underwriting, auto and homeowners insurance, and where all are looking at innovation opportunities and all scanning the InsurTech landscape. It may not be considered an innovation strategy. The effective approaches comprises of broader view.
Read our article:Insurtech Collaboration: Key to the Future