Updated on 07/12/2022
The insurance industry is one of the pillars of the global economic system. It’s hard to produce firm estimates, but according to the Insurance Information Institute, the global value of the industry in 2020 was $6.1 trillion (source: iii.org). And it could rise to $7.5 trillion by 2025 (source: Accenture).
These are staggering figures, that much is apparent.
But above all, they show a growing industry, which shows even greater solidity after this complicated period triggered by the Covid-19 pandemic.Be careful, however: the dynamism of the sector is certainly not a recent fact. We can speak of a real revolution triggered by two main factors:
- Digital Transformation, which has impacted all production sectors and all industries in a meaningful way, and the insurance sector is no exception.
- Increased competition, triggered by a decisive trend towards the opening of the market, with the emergence of new players and unprecedented choice for users. Competition, in short, is an increasingly complex challenge: but also more full of opportunities for companies, which can no longer afford to remain rigid, monolithic, and linked to dynamics that are now out of date.
These are two very strong pushes, which reinforce each other, stimulating a process of continuous innovation.
This process shows its power in the field of insurtech.
What is insurtech?
The term “ insurtech” (i.e. insurance + technology) refers to everything that concerns technological and digital innovation for the insurance sector.
It’s a field in continuous evolution that has triggered a paradigm shift in traditional business models: from apps for smartphones to IoT, wearable devices, and blockchain.
The insurance sector, like the banking sector, was initially held back in its journey towards digitalization by the slow and bureaucratic procedures that have always characterized it.
But now, things have changed.
In the continuation of our post, we’ll focus on new trends in insurtech, and on the opportunities to be seized by the players in the sector. We will collect them in 7 key points. But we’d like to highlight the starting point of all this, in a word: data.
Data is the inexhaustible fuel of the digital revolution, and therefore the most precious asset for today’s companies.
And starting from data, for the Insurance and Insurtech, means first of all starting from the digitization and dematerialization of all documents concerning the relationships between companies and clients.
1. Document dematerialization
The time of dusty archives and folders of paper documents is over. The reason is very simple: the digital document has enormous advantages over its physical counterpart.
- Economic advantages, first of all, related to the production and storage of paper documents.
- Advantages in terms of time and efficiency: just think of how complex it is to carry out a search by hand amidst stacks of sheets; and how simple it is – on the other hand – to carry out a search by keywords in a well-indexed digital document.
Then there is the whole issue of reducing compilation errors and risks of loss, with the consequent increase in security.
Up to this point, we have examined only the most obvious and direct advantages. But these aren’t the only ones, far from it.
Thanks to dematerialization, relationships with customers have completely changed. By extracting data from digital documents, the company has the possibility to really “know” its customers, divide them into increasingly specific clusters based on homogeneous characteristics, in order to carry out increasingly tailored communications…up to personalization (which will be the last and most important point of this list of trends for the future).
Improving the relationship with customers means increasing retention rates and lowering the churn rate: and this is the most important challenge for all insurance companies in today’s fluid and hyper-competitive market.
But an efficient and personalized dialog is also the best way to put on track effective upselling or cross-selling actions: without targeting the masses, but designing them based on the needs of the recipient.
All of this translates into important economic returns, with an increase in turnover and revenue. Of course, upstream you need efficient insurtech systems, starting with well-designed, cloud-based software that’s tailored to each company’s needs.
2. The Sharing Economy ecosystem
We all know about the sharing economy, which has already changed the face of entire sectors, from mobility to real estate, up to entertainment.
Faced with the shift from product to service, and from ownership to access, insurance companies are reacting.
They need to rethink all the steps of the value chain, demonstrating elasticity, adaptability, and speed.
So: insurance products all focused on people’s needs, intelligent, activated instantly, with reduced bureaucracy, and with an increasingly short-term view. There are already many start-ups who are focusing exclusively on these areas.
This is one of the most vigorous trends in insurtech, and it is closely related to what we have already focused on in the previous point.
This is the possibility of stipulating policies that cover limited periods of time, or that are based entirely on usage (for the automotive sector, for example, based on miles travelled).
The micro-insurance trend has been introduced by a number of innovative start-ups in recent years…but it has now been embraced by industry giants, who have fully understood its potential.
Here’s another huge topic, which concerns the automotive sector, the housing sector with smart buildings, the so-called factories 4.0, but also health, with everything related to wearable devices.
Again: cost optimization, increasingly targeted and flexible insurance policies, an increasingly personalized customer experience, with advantages for both companies and policyholders. Last but not least: the Internet of Things will be (and is already becoming) another huge trove of data, to be exploited in the best possible way to optimize all processes.
All of this, in some way, will have strong repercussions in the future in the nascent driverless car sector.
5. Artificial Intelligence
If the insurance world runs more and more towards flexibility, speed, and on-demand optics, the contribution of Artificial Intelligence and Machine Learning systems becomes more and more essential. In some cases, they are already replacing traditional brokers…and in others they provide essential support in an ecosystem of Customer Service that is always-on, 24/7.
Again: any Artificial Intelligence system, in order to be more and more effective and efficient, must be “fed” by a large amount of data…and deeper and more and more meaningful data.
Let’s close with another big trend that is on everyone’s lips. Blockchain technology is now mature and is starting to show all the huge opportunities that it brings with it.
Blockchain is a system to validate transactions without the need for intermediaries, with a degree of security and reliability never seen before in the digital world. Blockchain is gaining traction around the theme of “smart contracts,” which are contracts between parties that – again – do not need intermediaries to be validated and implemented.
And it’s easy to see how this could have disruptive potential for the entire insurance industry.
As is always the case, you can’t fight evolution. In the challenges of the market, only those who know how to adapt to the changing environment around them can survive. And the winner is whoever manages to do this before the others, being ready, and seeing the future before it becomes the present.
7. Personalization and Insurtech
As we saw above, in the first point: digital document management has direct advantages in terms of savings and increased efficiency. And there are enormous indirect advantages in terms of the relationship with the customer, with the final objective of personalization.
So, your archives, with the data they contain, are transformed from a bureaucratic burden into an opportunity, into a formidable tool to improve customer service departments.
Attention: it is on the quality of Customer Service that today’s customer chooses to stay with an insurance company… or to change it.
And, in this field, this figure that emerged from an analysis by Bain & Company is a striking one: acquiring a new customer costs 6 to 7 times more than retaining one.
So, it’s really about putting the customer at the center of the business. And it’s not a slogan.
It’s about communication and personalization.
Today, thanks to insurtech, insurance companies can address each individual customer in a personalized manner, with tailored communications, even when dealing with huge audiences.An example?
AXA has chosen to rely on the services offered by Doxee to produce personalized and interactive videos to be sent via email to its customers. In short, the process is complete: from the collection of customer data to the creation of a new, one-to-one, personalized dialog that uses the most powerful media in the digital environment, video.
In short, the last of these 7 points is all about the importance of individuals. In short, it’s about doing something old-fashioned with the most advanced tools of the digital revolution.