Insurtech Innovations Buyers Guide

Insurtechs are driving the future of the insurance industry.

Analyst Perspective

Insurance companies must rise to the challenge and embrace new technologies to support evolving customer needs. Despite the obstacles posed by antiquated infrastructures, compartmentalized systems, and stringent regulations, innovation must remain at the forefront of business strategies. High capital investments may deter new entrants, but the industry must remain receptive to fresh perspectives and alternative approaches.

Insurance technology firms (insurtechs) have undoubtedly improved the customer experience (CX) by streamlining processes, providing competitive pricing, and expanding product offerings. Despite these accomplishments, the industry's intricacies have remained an obstacle to increasing market share. Many insurtechs have overcome this challenge by shifting their focus from competition to collaboration, partnering with established companies as innovative allies rather than attempting to replace them.

Insurance companies must embrace new technologies and services to remain competitive in the digital age. Integrating AI and other emerging technologies is essential for continued growth and sustainability. Working together, insurtechs and traditional insurance firms can collaborate to advance the industry and reap mutual benefits.

Business owners can rely on this guide to evaluate their current business models and explore how insurtech firms can provide valuable services without requiring a complete overhaul.

Ahmed Mapara MBA Principal Research Director, Financial Services Industry Info-Tech Research Group

Executive Summary

Your Challenge

• Customers are dissatisfied with their engagement with insurers. Consumer needs have evolved and require sophisticated solutions that your current technology struggles to support.
• Product development must improve. Generating cutting-edge products requires working in an agile environment freed from outdated ecosystems.
• Insurers are losing business to agile competitors. Speedy product release is vital to remain competitive, given the rise of established and emerging competitors vying for prospects.

Common Obstacles

• Established insurers’ systems are complex and costly to maintain. Outdated hardware, software, and development practices make it increasingly challenging to keep your existing systems up to date. Innovating on top of this can feel impossible.
• Insurtechs who compete directly face challenges. Gaining customer trust requires consistent effort over time. Established insurance companies have a revered reputation that can be difficult to match.
• Legacy systems drain your budget, and it becomes difficult to finance innovation.

Info-Tech’s Approach

• Technology must be the driving force in meeting business needs. The key is to work closely with your business to anticipate future demands and provide practical solutions for executives.
• The collaboration of established insurers and insurtechs is a win-win. Partnering with insurtechs to harness their data-centric capabilities can be a game changer for traditional insurers, improving process efficiency, cost savings, and productivity. As a partner, insurtechs can help insurers achieve their goals while becoming profitable.

Info-Tech Insight

Partnering with insurtech companies that leverage advanced technologies and data-driven techniques can be a game-changer for insurance companies looking to innovate and expand their offerings. It's a wise move that can help insurance providers stay ahead of the competition and provide their clients with hyper-personalized services.

Why insurtech?

Insurtech is a blend of insurance and technology – an innovation designed to maximize efficiency, savings, and productivity.

“[Insurtechs are] creating a potential competitive threat to the incumbents, but also creating new opportunities for everyone through partnerships.” (McKinsey & Company, 2021)

Insurers must embrace innovation for their future

The Past

• Insurance platforms were costly to purchase, program, and support. These characteristics created significant market entry barriers for new insurance carriers. They also created significant risks for existing insurance carriers looking to change or consolidate platforms.
• Brick-and-mortar insurance footprints were expensive to build and maintain. New entrants required a physical footprint.
• Policy premiums and investment income were the primary revenue sources sustained in a noncompetitive environment. Consumers had limited choice between available policy types.

The Present

• Incumbents still rely on legacy foundations that flow to the general ledger but are leveraging application programming interfaces (APIs) to integrate overarching capabilities. APIs have mitigated risks and provided new opportunities for traditional insurance carriers to compete with startups.
• Cloud/platform computing is transforming insurance. The democratization of technology has accelerated the massive growth of new insurance carriers (insurtechs, digital only). Hosting in the hybrid cloud has enabled small insurance carriers to compete with larger firms.

The Future

• The future of insurance is hyper-personalized. Insurance firms must anticipate client needs and focus on convenience, personalization, and advice on complex product lines.
• Insurance carriers will deliver new value-based revenue streams and move away from transactional revenues and punitive fees. The emerging needs of customers, such as digital assistants that monitor accounts, are being met by data analytics and technology.
• Deep customer insight must drive the future of insurance. Access to AI and machine learning (ML) is becoming easier. Cloud services expand access to analytical tools. Insurance carriers will anticipate client needs before clients ask.

Traditional insurers are facing common challenges

“Insurtech innovators leverage technologies like AI and data science to reduce the need for repetitive processes and tailor plan options to what each customer needs, streamlining the journey from inquiry to enrollment.” (Built In, 2023)

Customer engagement needs to improve: Consumers increasingly seek digital-first experiences that insurtechs can readily provide. New market segments and increased cross-selling will improve market share.

Product development is falling behind: Insurtech companies are providing valuable assistance to insurance providers in managing the challenges posed by environmental, social, and governance (ESG) risks. By offering customized services, insurtechs are better positioned to address these concerns.

Innovation requires a strategy: Insurtech firms utilize big data, AI, and ML to help both large and small insurance companies improve their understanding and use of these technologies. An example is demonstrating to insurers how data analytics may be used to price products more accurately and ultimately increase profitability.

“In 2021 alone, the total amount of VC invested in insurtechs surpassed $11 billion, double the amount invested in 2020.” (McKinsey & Company, 2022)

Insurtech companies have the potential to improve your financial performance

In 2021, the US had the largest share of insurtech funding transactions at 46% worldwide, followed by the UK and China. (Source: Statista, 2021)

Faster product development. Speed to market is critical in the insurance industry. Insurtech firms can provide that edge, offering immediate and potentially long-term revenue advantages.

Improve customer experience (CX) and net promoter score (NPS) measures to build revenue: Many insurtech solutions are focused on improving CX through streamlined purchasing processes, quick claims settlements, and user-friendly apps and online interface, increasing customer satisfaction and retention.

Reduce loss through improved risk models using AI and ML techniques. Insurtechs use advanced tools and predictive models to mitigate risks. The use of telematics in car insurance encourages safe driving habits, which reduces claims.

Increase fraud detection to reduce losses: By leveraging ML and Generative AI (Gen AI), insurtechs can significantly enhance the ability of insurers to detect fraudulent activities. Also, Insurtechs can use their agile platforms to adapt and reduce losses.

“Insurtech has been particularly hot in recent years, with a 70% increase in investment from 2018 to 2020 (from $4.9 billion to $8.4 billion) and doubling between 2020 and 2021 (from $8.4 billion to $17.3 billion).” (Bain & Company, 2023)

Focus on collaboration and partnership

“By making these investments, we do seek a financial return with the investment, but really we look for opportunities to work together, reconnaissance on how the world is changing.” (Dan Reed, Managing Director, American Family Ventures, quoted in Insurance Journal)

Work closely with academia and startups to improve innovation and development. Insurance firms can access new technologies and ideas in the industry by testing and adopting new solutions before their competitors do.

New partnerships can improve predictive ability and risk management. Traditional insurers have decades of experience in assessing and pricing for risk. Insurtech firms can build on that expertise to be even more effective in predicting performance.

Build customer trust. The customer needs to believe that the insurer can pay claims when required. Traditional insurers have built this trust over many years. Insurtech solutions can further trust with clients of traditional insurers.

Collaboration leads to reduced costs and improved efficiency. By collaborating with suppliers and vendors, insurers reduce costs and claims processing time by streamlining processes and improving target pricing.

Insurtech partnerships can improve CX. Working with other stakeholders and technology providers, insurers can offer more personalized, flexible, seamless, and user-friendly products and services.

Case Study

INDUSTRY: Auto Insurance | SOURCE: Tractable

Admiral Seguros, Seville, Spain
Founded in 2006

Tractable and Admiral Seguros collaborated to create a touchless claims processing system

Challenge

• Users would send photos of their automotive accidents and human resources could spend hours manually identifying damage.
• Admiral Seguros required a strategy not just to speed up the claims process but to make it super easy for customers. They aimed for a process comparable to using an ATM or making a medical appointment.
• They required their technology to be foolproof.

Solution

• Admiral Seguros implemented Tractable’s visual AI solution to analyze pictures.
• They started by designing an accident management strategy for claims using touchless straight-through-processing (STP).
• Clients could submit pictures using their mobile devices.
• It’s all about using the right technology with the right partners at the right time in the right use cases.
• Clients greatly appreciated this solution.

Results

• Using Tractable STP for claims:
  • Claims reports are completed within minutes
  • Greatly reduced touchpoints
  • 70%-75% of customers who are sent the link to the web app complete the entire claims process
  • Records updated with reports
  • System used by all age groups, from millennials to 80+

Case Study

INDUSTRY: Insurance | SOURCE: Insurance Business Magazine

MS&AD, Tokyo, Japan
Founded in 2010

MS&AD Insurance Group partnered with Akur8 to boost accuracy, speed, and predictability of underwriting

Challenge

• MS&AD Insurance wanted to increase the efficiency and predictive success of their underwriting model.
• Akur8 offered a unique technology that integrated ML with actuarial practices.
• MS&AD faced integration challenges when working with an insurtech firm, but they were motivated by the potential of Akur8’s technology to save them substantial time and bring efficiency to the process.

Solution

• Integrating with Akur8’s core technology is simple, starting with a look at the underwriting system it is replacing or evaluating clients that are looking to implement one.
• Akur8 then imports the data sets, including all relevant external data used for underwriting, into its system for modeling.
  • Client data is isolated using API connectivity
  • Modeling takes place with the running of Akur8 algorithms

Results

• Insurers typically take months to build modeling for an insurance product, but using ML elements this process can be completed ten times faster.
• Once the system compiled risk proposals and demand models and adjusted rates, MS&AD drew rate tables and other factors and coefficients into their products.
• The total integration process took a few weeks.

Collaboration is the key to success

“More than 75% of incumbent insurers said they consider insurtech collaboration as a way to improve their customer experience competencies.” (Capgemini, 2018)