Technological disruption is taking place across a variety of industries. The insurance sector is no exception. Insurtech, a portmanteau of insurance and technology, is changing the landscape by introducing technology to otherwise clunky and manual processes that professionals in the industry often encounter. Is it time for a change?
For McKinsey & Co., new tech players are looking to bring innovation, disruption, and opportunities to this traditional industry. Insurtech companies are leveraging new technologies to reach a digitally-savvy customer base. Markets, such as Singapore, Australia, and the UK, have been supportive of these new entrants, even allowing them to test business plans on certain client segments without the need to conform to the full regulatory frameworks that apply to incumbents, McKinsey notes.
Today, it seems that insurtechs are faring well in the city-state, where the insurance penetration rate is high. FinTech News Singapore reports that there are more than 80 insurtechs registered with the Singapore FinTech Association and 29% of total fintech funding in 2019 allotted to this sector alone.
A 2019 article from Asian Insurance Review describes the insurtech scene in Singapore as “booming yet saturated and competitive.” To bring about more cost-savings and efficiency, the article says, insurtech players leverage technologies like Artificial Intelligence (AI), machine learning, blockchain technology, and IoT (Internet of Things).
Industry insiders note in the Asian Insurance Review article that a more profound change is needed to bring about a seismic shift in the sector, where many of its players are hundreds of years old. At the same time, digital disruptions observed in the financial services space paved the way for insurtech firms and insurers to pivot business models and integrate transformative technologies.
Threat or opportunity?
To be sure, insurtechs are introducing innovation to an age-old sector. But are they becoming a threat to insurance companies or is there value in working together to navigate emerging opportunities in the industry?
With the rise of digitalisation, especially in shopping, food delivery, and banking, customers are expecting a more seamless experience from brands across industries. In recent years, companies have been undergoing different stages and degrees of digital transformation. With this in mind, collaboration and competition among insurtechs and incumbents can be a welcome development in terms of enhancing product offerings, reaching out to other market segments, and improving the overall customer experience.
In fact, according to a PwC article, legacy insurers are some of the largest funders of insurtech start-ups. That’s because they are starting to recognise that teaming up with these newcomers can be a game-changer. However, they have to be wary about turning to insurtechs “for the wrong reasons,” the article says. Legacy companies must have a “clear, sustainable plan to extract value” or else their efforts will fail.
PwC also notes that the pandemic has accelerated the pace of change, with the industry acting with more urgency than it did prior to the shift to virtual work and client service. More importantly, as people’s preferences move toward speed in underwriting decisions, claims adjustments, and service requests, insurance companies can seek the help of insurtechs to deliver these benefits to customers and prospects.
Applications of insurtech in Asia
With the help of technology and, of course, innovative thinking, the applications for insurtech are growing. For instance, there’s a comparison shopping site for insurance products based in Indonesia, while another firm in Shanghai specialises in online insurance. To detect fraud claims, another Indonesia-based firm uses machine learning, which also helps customers make claims easily.
In Singapore, insurtech firms provide services ranging from digital life insurance policies to an insurance plan comparison site, as well as an on-demand insurance solution targeted at SMEs. Another insurtech uses AI to simplify and make personalised recommendations on insurance policies.
Insurtechs are also reaching untapped segments, particularly low-income individuals in developing countries. One Singapore-based insurtech firm provides affordable insurance to protect gadgets, such as mobile phones. Another firm targets gig workers and freelancers with flexible and “right-size financial services.”
To stay ahead, industry players must recognise the paradigm shift, especially in fast-growing markets where digital-first competitors are gaining market share. In developing countries where many are mobile-first consumers, insurtech firms aim to cater to evolving customer needs and expectations in the digital insurance marketplace.
It is important to note that insurtechs are not necessarily looking to replace incumbents. Instead, they are carving their niche in underserved areas, whether it’s in the form of affordable insurance plans for a specific economic sector or simply a platform where people can compare insurance plans.
Adopt a coherent strategy for insurtech
Getting the most out of insurtech entails companies adopting a coherent strategy. What problem are you trying to solve? Does partnering with an insurtech firm make sense from a cost-benefit perspective? Will the tech solution help you deliver on your value proposition?
In the end it’s about learning how to make technological innovations work for you and your company. Focus on your capabilities and see how they can be augmented by insurtech, while ensuring that there’s still alignment with your core purpose. Highlight the aspects that make your company stand out from the competition, so you can truly win in this shifting landscape.
Learn how to navigate this increasingly complex, yet exciting, world of insurance with SMU Academy’s Advanced Certificate in InsurTech. Understand how insurance technology plays a role in the future of the industry through the study and analysis of emerging technologies. Gain a big picture understanding of the industry today. Find out more about the course here.
