All of those in the insurance industry have heard the term “InsurTech,” but do we understand what the term means? As attorneys in the insurance field—whether in-house or outside counsel, insurer-side or policyholder-side attorneys or claim or regulatory counsel—it is imperative that we understand what InsurTech is and how it impacts the industry and our legal practice. All attorneys, regardless of one’s practice area, really should understand InsurTech in light of the impact it will have on risk management concepts and practices generally.
InsurTech is a subset of the broader popularized term “FinTech,” a concept that generally refers to the integration of technology into financial services’ companies’ offerings, leading to the expansion of financial inclusion and reduction of operation costs. InsurTech is technology-based innovation and disruptions in the insurance industry, specifically, used to collect and analyze customer data. For example, new technologies are creating user-friendly platforms to purchase insurance online and through smartphone apps.
Many innovative companies use InsurTech to create a niche market to provide insurance products, such as on-demand insurance for personal belongings and travel through the use of a smartphone app. Other companies are giving on-demand and usage-based auto insurance. For example, start-up Trov® insures personal belongings through simple steps on a smartphone app, while Sure® provides on-demand travel insurance. On-demand auto insurance is also available, from start-ups such as MetroMile® and Cuvva®. Next Insurance® is offering affordable insurance for small businesses.
Although the first wave of InsurTech involved mostly start-ups and venture capitalists in Silicon Valley, more recently, traditional insurance companies have begun entering into partnerships with mature innovators. The United States decidedly leads in investment, but InsurTech is a global phenomenon. Although currently, only roughly 1 percent of the insurance market qualifies as “InsurTech,” it is an industry poised for growth. Traditional insurance companies, start-ups, and consumers see significant benefits from these innovations and will surely see additional conveniences and advantages as the technologies continue to develop.
Today, InsurTech is impacting the entire insurance value chain, from marketing to distribution, production design, underwriting, claims, and balance-sheet management. InsurTech shows up in all personal and commercial insurance lines, including property, casualty, life, and health. Specific applications of InsurTech include Big Data, the Internet of Things, wearable devices and telematics, artificial intelligence, Blockchain, and the interface between InsurTech and government regulation. In future issues, we will dive into each of these applications in more detail and their implications for the industry and society.
For now, know that that InsurTech is a benefit for the whole insurance industry, including individual and corporate consumers. It is creating more personalized policies with more options for all types of policyholders. Customer-facing applications with more players in the field will be the norm. InsurTech has resulted in and will continue to result in lower overhead to insurers, better pricing and underwriting, more efficient claims management, diversified players in the field, better and more options for small-to-medium-size businesses, and online procurement of insurance, among other things. InsurTech has and will continue to change and improve upon every aspect of the traditional insurance industry.