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In the recent past, Insurance companies have seized the opportunity from Insurtech disruptors. There has been a shift from the normal and an increase in insurtech collaboration has been witnessed. New challenges posed in this sector have been tackled by the rise of Insur-tech.
Insurtech refers to the use of technology innovations that result in savings and efficiency from the current insurance industry model. Insurtech is a combination of two words- Insurance and Technology. It is a term similar to fintech, used for a company that uses technology to disrupt the insurance industry.
Insurtech companies are motivated by the perceived need for innovation and disruption of the traditional insurance industry. Their focus is specifically on the needs of the customer, which includes personalized insurance. With the help of technology, it delivers an improved and creative user experience to their clients.
Insurance has been there since ages and has worked traditionally for a long time. It is a heavily regulated sector as it involves risk. The insurtech companies intend to use data, digital innovation, new design and machine learning to tailor insurance more effectively and accurately. It seeks to provide this tailor-made insurance at a low price which may have a profound impact on the industry.
Although it’s still in its early stages, there has been a growing investment in Insurtech start-ups by insurance companies which is a piece of good news for both Insurtech as well as for consumers.
As per a new survey named World Insurtech Report 2018, the insurance executives across the industry believe that Insurtech would be a significant catalyst for redefining the customer experience, providing widespread efficiencies and creating new business models.
Close to 96% of insurers believe that insurtech collaboration is essential and are seeking to collaborate with Insurtech firms so that they can improve their services and keep up with the customer demand for digital capabilities and better customer experience.
78% of the respondents also stated that partnering with the Insurtech firms to design a new solution was their preferred approach instead of seeking to acquire them. Insurers and Insurtech believe that collaboration is an essential key to the success of the evolving industry ecosystem.
As per World InsurTech report, the benefits of collaborating with insurtechs are many. These include:
A structured approach is expected to bolster collaboration initiatives and mitigate challenges.
The four pillars of effective collaboration are as follows:
It may be assumed that collaboration would come easy in a complex and people-driven industry. However, it is not wholly true. Insurance has been a highly regulated industry since the start, and insurance has some traditional form of practices for a long time. Collaboration has not been a priority.
Legacy tech systems are still supreme in the insurance industry and are highly sluggish in reacting to real-time needs. These systems were not build to meet today’s expectations of urgency. As a result, it is difficult for employees to collaborate while leading to less efficient and effective work processes.
Apart from legacy technology, most of the teams are stuck in top-down structures. These types of organizational structures disable cross-department communication, thus making teamwork a chore. Even the goals and incentives are divided into these structures; therefore, the employees lack a collective sense of purpose.
The companies require a dynamic way of working if they want true collaboration. They must adapt quickly and make decisions to make itself competitive.
There are three essentials for a collaborative environment. These include:
A company vision with a set of common goals can help people unite with a purpose. Without this purpose, people can become confused, misguided and stressed. With a common goal, they can provide the best service to their customers.
A team-based structure can help to remove company silos that impede collaboration. It will lead to communication becoming more effective, there by further leading to a collaborative environment.
The shared incentive is essential to align team members towards goals that will reinforce the company’s vision.
Although the insurance industry has not moved as quickly as other areas of financial services, there are a lot of opportunities for this sector in the future. Gaining greater data access would make it simple for insurtechs to collaborate with insurers by allowing them to securely integrate their products and services to the data held by the insurers through APIs (Application Programming Interface), to provide data aggregation services like price comparison.
The responsibility is of the industry to see the opportunity that is presented both for insurers and insurtechs and to drive this initiative. It may be owing to the fact that the policymakers or the regulators do not desire to mandate such arrangements.
It is also crucial for the insurers to realize that they must use every opportunity in a way that it benefits the customers at the same time it is in line with the legal and regulatory guidelines.