People see insurance as a yearly expense they pay unwillingly, hoping not to use it, even when there is a loss. Certainly, very few would dispute the fact that insurance is essential - it is frequently mandated by law. 
 
Still, a lot of people see it as a fee for managing tasks, instead of a high-quality service with actual benefits. Insurtech is actually crucial in revitalizing insurance and it has the potential to make a difference in that aspect. Let's examine the reasons why it is crucial for insurance companies. 
 

The entire insurance sector is facing a negative perception issue. Initially, everything appears somewhat dull, and arranging insurance, no matter the type involves a significant amount of paperwork. Additionally, insurance can be costly and in certain situations, the cost may be too high to afford. Also, 79% of customers have the perception that insurance companies lack trustworthiness and will attempt to avoid fulfilling a valid claim. 
 
This proven incorrect belief results in most individuals purchasing insurance only for essential legal coverage from the least expensive provider available. They choose not to file a claim when necessary because they are afraid of their premiums increasing. This has resulted in a competitive environment where everyone is trying to lower prices to attract customers. If you are the insurer with the lowest cost, you are more likely to achieve revenue goals.
 

Insurtech has the ability to evaluate risks related to different situations. It provides more detailed advice on the best coverage for customers, allowing them to receive a customized premium. Insurtech also brings the world of embedded insurance to a whole new level. This enables providers to provide additional services that add value, such as discounts and exclusive perks, while also offering bundled insurance packages at a reduced overall cost. 
 

Benefits of Insurtech 
 

During the pandemic lockdowns, it was almost impossible to receive healthcare services in person. Life insurance claims increased during the pandemic, while claims for critical illness policies decreased because people couldn't get diagnosed with serious illnesses like cancer before dying without treatment or claiming. It should be considered that technology can assist in speeding up the diagnosis process in this situation without requiring a visit to a doctor for a physical examination. Insurtech does enable the development of flexible hybrid systems.
 
These flexible hybrid systems incorporate both physical and virtual diagnostic tools to assist clients. Many people are facing difficulties in scheduling appointments with local doctors due to long waiting times for medical treatment. Therefore, younger generations are looking into the expenses and feasibility of private health insurance. Businesses that are able to provide a more digitalized approach to healthcare will have a higher chance of attracting a younger clientele and an option within a workplace benefits package would also be ideal. 
 

The pandemic has shown the insufficient insurance models of most SMEs in the current market. A large number of companies thought they were covered by extensive business interruption insurance policies. However, they quickly discovered that it didn't provide enough coverage for them to endure the challenges brought about by COVID and furlough. During the pandemic, a lot of small and medium-sized enterprises reduced their insurance coverage since they no longer needed to cover an empty workplace. 
 
The insurance became inadequate for the requirements of the contemporary industry. Omnichannel distribution is not present in this industry. This indicates an absence of competitive pricing or a motivation to provide additional value. By utilizing insurtech solutions, small and medium-sized enterprises can access personalized insurance packages that specifically cater to the services they offer. 
 
That will provide improved value. Disruptive banks like Starling caused a significant impact on the business banking industry upon their launch, forcing traditional banks to struggle to compete. They simplified financial management for SMEs and provided additional protection for issues related to open banking, making the transition an easy choice for many businesses. 
 
Insurtech could enable the provision of insurance as an additional service or a collaborative partnership with well-known SME banking platforms. This could definitely be a foolproof method for entering a market that typically lacks adequate insurance coverage. It only requires an insurer that is ready to shake up the insurance industry just like how challenger banks disrupted traditional business banking. 
 

Due to its actuarial focus on forecasting claims to determine accurate premium rates and reserves, insurance operates as a data-centered sector. As a result, there are numerous possible uses for AI, such as: 

For instance, offering quotes at the beginning with limited customer interaction. Hippo, an insurtech company based in California and driven by AI, offers quick quotes and guarantees to provide them in under a minute. 
 

For instance, Allstate, a leading car insurance company in the US, provides image analysis technology that allows policyholders to quickly process claims by submitting photographs. 
 

One instance is the US insurtech company Lemonade, which functions as an authorized insurance provider and guarantees 'instant everything' by utilizing AI-driven chatbots and providing entirely digital coverage for tasks like providing quotes, changing policies, and managing claims. 
 

Getsafe, a completely digital insurtech company, has detected 27 signs of fraud and integrated automated inspections in its system to constantly watch over them. 
 

A fascinating use of blockchain is its ability to facilitate smart contracts triggered by events. In the insurance industry, this usually consists of four steps: 
 
• The insurer and policyholder come to an agreement on terms to create a predetermined contract. Having transparent, objective, and verifiable information is crucial for determining how a claim should be paid. This could involve clear events like a death noted on a death registry or an official weather report for crop insurance purposes. 
• The incident takes place and gets recorded on the blockchain automatically. 
• The smart contract is executed based on the agreed terms when the blockchain entry is triggered. 
• Settlement happens quickly and effectively through the blockchain, which also keeps a record of the settlement. 
 
The blockchain-based smart contract has multiple advantages. For instance, the efficient and rapid execution of the process leads to cost reduction and decreased fraud through improved transparency. Furthermore, there is an increased likelihood of enhancing customer satisfaction. Certainly, a significant problem within the insurance industry is the lack of trust from consumers. Is there any utilization of blockchain-powered smart contracts currently? One of the first pioneers in the field is Etherisc, a decentralized insurance protocol that works together. 
 
Its examples include crop insurance with automated payments activated by drought or flood events reported by government agencies; flight delay insurance activated by documented flight delays; and a product for protection against hurricanes. However, blockchain does have drawbacks as well, such as evolving regulations, security, and privacy issues (several insurance companies are hesitant to embrace this new technology because of cybersecurity worries), high initial expenses, and users' willingness to adopt it culturally. 
 

Opportunity is abundant in the insurance industry wherever data is present. Connected home devices offer the chance and potential avenue for insurance firms to transform the classical relationship between insurer and insured from solely safeguarding against losses to also aiding in their prevention. For instance, a smart home gadget, given by the insurance company within a home insurance plan, might identify a water leak and send an immediate notification to a smartphone. 
 
Insurers are excited about the new development of wearable fitness devices. They offer a diverse and expanding variety of potential data on behavior and health measures that can be effectively utilized in insurance for various purposes like product development, risk assessment, pricing, and customer interaction. Moreover, the expected increase in autonomous vehicles will transfer the responsibility for risk and insurer liability from human error in driving to issues like software malfunctions and cybersecurity. 
 

The widespread implementation of fintech highlights the necessity for other sectors to also embrace it. Utilizing cutting-edge technologies is the sole means to expand - or potentially endure. The connection between finance and insurance is so strong that it is logical to explore how the insurance sector can integrate insurtech to develop additional services that complement traditional financial institutions. 
 
The main aim of modern platforms is to regain the trust of consumers in insurance companies by accessing the valuable data currently kept in outdated systems. This can be utilized to provide customized and individualized quotes for insurance coverage. Assisting in enhancing the integration of systems and platforms can ensure that customers receive a smooth experience, regardless of their engagement with a company via online channels or over the phone. 
 

Insurtech has the ability to clarify some of the confusion related to underwriting. Chatbots and robo-advisors are examples of tools that increase transparency in the insurance process, helping customers comprehend the impact of various factors on quotes and claims.