2016 was a storm for the insurance industry. A year later, the waves have finally settled and we’re beginning to see the face of a new reality in insurance – InsurTech can provide new, and in most cases better models for insurance distribution.
This reality focuses on technology companies developing a new digital experience for customers, then laying that new and easier digital experience on top of an application process. It’s in this space that InsurTech currently fits into the insurance process. For now, this technology is only being used with policies that have a low number of variables, and questions that can be reduced to Yes or No answers (or, 1’s or 0’s). Programmers can then insert code into the application that eliminates unnecessary questions based on the answer of the previous question asked. As we move forward, InsurTech will be applied to more complex applications to simplify any time-consuming processes. These Tech ventures need to rely heavily on how their digital interface will handle the online data that customers provide. If that data can be allocated usefully, the insurance company can use their underwriting models to assess risks more efficiently. Therefore, data aggregation is a determining factor for ventures that seek to be acquired in 2017.
The good news for Agencies is that InsurTech ventures are focusing more on partnerships rather than disruption. This technology should be viewed as a tool for Agencies to improve their online user friendliness. Agencies, Companies and InsurTech ventures also benefit much, much more by working together rather than working against each other. 2017 has already been a busy M&A year for early movers that have been able to develop this technology.
Today, the technological focus is on reducing the number of steps to complete an insurance application for customers so they can focus on things that are more interesting. If we resist this change and become a fragmented industry, it opens the opportunity for real threats to expand into our market - Google, Facebook, Amazon, Microsoft. These are the companies that already have vast amounts of data and the necessary capital to attack during opportunistic conditions. Adopting InsurTech into your agency is a risk, but it can give you a large advantage over your competition.
Written by Chris Prewit, Co-Director at the IIASA