There is no secret that technology started to take over all the sectors of people's lives. It became a part of everyone's daily activities and it is now the core of business. Tech innovation never ceases to impress society and changes are happening at a very fast pace. Technology is present in all industries, including the unexpected ones that didn't seem to need a swap from traditional methods of handling them. One of these industries would be the insurance one.
A study of Google Trends will show you a huge spike in the mentions of'InsurTech' since February 2016, and that's because people and investors are beginning to take note of how state-of-the-art AI can enhance the insurance sphere and disrupt specific elements of the insurance value chain. Indeed, according to PwC's 2017 Global InsurTech Report, 45% of insurers are currently partnered with InsurTech players, whilst a staggering 94% have aligned their priorities closer to emerging trends and AI-led risk insights and customer engagement. Whilst there is budding support from all camps to evolve the traditionally fairly inertial insurance industry, there is little to suggest that innovation will come from incumbent insurers. The insurance disruption space hasn't seen nearly as much activity as fintech, but 2017 has seen the trinity of technological trends - machine learning, AI and Big Data - cross over and fuel the motor of change within InsurTech. But how fast is the industry moving and how worried should incumbent insurers be?
Insurance technology, also known as InsurTech, is an economic industry composed of companies that use technology to make insurance services more efficient. InsurTech is an integral part of the global FinTech revolution to bring more innovation to the financial sector in general. InsurTech involves exploring avenues that large insurance firms perhaps have less incentive to exploit, such as offering highly customized policies, social insurance, and using new streams of data from internet-enabled devices to dynamically price premiums according to observed behaviour. InsurTech attracted around $2.6 billion worth of investment last year, and market research analysts at Technavio predict that the global InsurTech market will grow steadily at a rate of 10% over the next four years. We reached out to some of the top influencers on our list to ask them for their views on InsurTech.
"We do not expect traditional insurance business to be fully replaced by insurtech companies, as the insurance sector is highly regulated and capital-intensive, with barriers to entry," S&P noted. "Instead, we are seeing larger established insurers actively invest in setting up insurtech joint ventures through which they can take advantage of their proprietary data, rather than outsourcing to pure technology-based entrants." Insurtech companies and technology are envisioned as ways to bring innovation and disruption to the insurance industry, and this has happened through startups, but also including larger company investment participation. Allianz, for example, has Allianz X, a division focused on developing new insurtech concepts and companies. Hiscox is among participants who helped back Indio, a commercial insurance broker platform.
Until recently, insurance has been a virtual island in a sea of technological change. While innovators began disrupting banking and wealth management during the FinTech boom, which preceded the financial crash in 2008 -- not to mention also completely transforming the music, travel, taxis and booking industries -- insurance was happy to maintain its centuries-old business model, whilst also maintaining its aversion to deploying new technology. And for a trade built on its ability to quantify and price risks, it was startling to see just how unprepared the insurance industry seemed to be against technological disruption.