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The total insurtech industry value in 2022 was $5.4 billion.
Revenue forecast for 2030 is $152 billion.
Grand View Research, Insurtech Market Size, Industry
Report, 2022-2030
Digitalization in the financial sector and innovation in bank
products and services are evident today. For example, personalized,
fast and user-friendly services offered by the open banking system
in banking are among the most concrete developments of digital
transformation. In this way, many transactions can be easily
handled online without going to the branches. From this point of
view, we can say that financial digitalization, which started with
the banking sector, also affected the insurance sector. In fact,
Sigortam.net CEO Bora Uludüz states that 16 billion dollars
have been invested in insurtech startups worldwide in 2021, and
that there have been more than 30 unicorns in this field to date.
In this article, where we discuss the concept of insurtech, which
changes the dynamics of the insurance industry globally, we will
explain the digitalization in the insurance industry, which is on
the way to becoming a trend, its importance and the technological
tools in the insurtech model.
What is “Insurtech”?
Insurtech is a combination of the words “insurance”
and “technology”, inspired by the term fintech.
Conceptually, it is designed to increase cost savings and
efficiency by integrating technological innovations into the
existing insurance industry. Therefore, it aims to transform the
classical premium collection and compensation payment structure in
the insurance sector into an innovative and user-oriented sector
with the use of big data and customer expectations. It achieves
this goal by offering ultra-customized policies, social insurance
and new generation insurance products. Premiums of the insured are
determined dynamically as a result of the analysis of their
behavior with the data obtained from their internet-enabled
devices.
Unlike companies based on traditional insurance understanding,
insurtech based companies use basic data to identify risk groups.
For example, it analyzes the geographical location tracking and
smart wristband activities of the cars belonging to the insured,
and prices the products more competitively by using inputs from all
kinds of similar devices, and creates better defined risk groups.
It uses deep learning-trained artificial intelligence (AI) to
identify risk groups and accurate pricing models.
It is also useful to explain the concept of Insurtech with
examples to make it more understandable. Insurance companies also
benefit from the QR code application that has entered our lives.
With the feature of getting offers with a QR code, drivers can
quickly select the vehicle insurance that suits them by scanning
the QR code on their vehicle license. Users who want to have life
insurance can quickly handle services such as application or
renewal of their policies through the mobile application. To get
expert help, it is enough to talk by video. The customer, who
reaches the suitable offer in terms of each insurance, is included
in the system with a credit card and mobile signature and can
purchase the policy.
Why Choose Insurtech Based Companies?
- Insurtech cares about customer needs and
experiences.
The Customers learn more about choosing insurance product
coverages and getting personalized service. The policyholder
explores and explores options using the internet and mobile
applications. Instead of going to a branch or speaking to a
representative, insurtech’s future is insured with an online
agreement, by identifying the most suitable product for
customers.
- Insurtech increases productivity. Many insurtech companies
allow users to quickly access the information they need at any
time, without getting bogged down in the process, without having to
wait for office hours or an available representative. - Insurtech stands for individuality. Due to the innovative
nature of information collection and data processing, many new
tools have been developed to better detect the true needs of each
individual. This not only improves pricing, but also offers more
reliable and consistent coverage based on historical data. - Insurtech provides flexibility. Modern insurtech offerings are
more likely to have flexible, customized, short-term or
transferable plans. Rather than being locked into long-term
arrangements, insurtech has a priority to provide individuals with
a specific scope of products and services for a specific need over
a specific period of time. - Insurtech reduces operating costs. While traditional insurance
companies operate in physical locations, insurtech-based companies
network with customers around the world by working remotely. With
the online company model, there is less overhead, insurtech
companies that eliminate a physical office or staff have minimal
costs. Due to the lower costs, it often offers its customers lower
prices.
Innovations Driving Insurtech Change
Changing the shape of the process required to be insured,
insurtech continues to pursue its goal of being permanent in the
sector thanks to the range of technologies used, growing and
developing. One of the most notable technologies utilized is
artificial intelligence. AI systems now allow certain tasks that
previously required human intervention to be performed solely based
on technology. For example, where previously it was necessary to
interact with agents to answer customers’ questions, chatbots
now allow the customer to get help solving their problems without
speaking to a human. Another technology is seen as machine
learning. In its simplest terms, machine learning focuses on the
use of data and algorithms and is the compilation of predictive
models from the data obtained. If future data is integrated into
the model with machine learning, it can already “learn”
or continually “assess” how to calculate appropriate
premiums based on demographic or risk profiles. Developed
automation tools, on the other hand, appear when insurance
customers fill out an online document, save it or issue a
ready-to-sign policy. Insurtech is also developing in conjunction
with innovative hardware technologies. For example, drones can be
used to determine the value and damage of properties or to inspect
insured claims. Especially since drones have the feature of taking
high-resolution photos and videos, they are being used by many
industries, and this contributes to reducing costs in most
companies. We can say that another insurtech tool based on physical
innovation is the internet of things. Although a digital concept,
IoT relies on the interaction between physical products and
software. For example, auto insurers now commonly use devices that
measure vehicle speed, handling and driving habits to reward
positive driving habits or penalize negative driving habits. The
US-based company Avinew is seen as a pioneer in the insurtech
industry in IoT technology. The company offers lower premiums to
customers who change their driving habits, choose less risky routes
or use an automatic driving system. With “big data”,
insurance companies now calculate their premiums based on the
smallest details. Companies that analyze the risk profiles of their
customers according to their habits and characteristics both
calculate premiums and offer appropriate insurance products with
the millions of data they collect. So much so that the company
called Dacadoo, founded in Switzerland, collects data from
customers’ devices such as phones and smart watches via API.
The data collected allows Dacadoo to assess risk in real time and
create individualized profiles, positive or negative.
What does the law say?
While innovative steps in the insurance sector are progressing
slowly, there are many reasons why established insurance companies
are not in a hurry to adapt. Most Insurtech startups still need the
help of traditional insurance companies to handle underwriting and
manage catastrophic risk. However, as it attracts consumers with
its refined model and user-friendly approach, it can be said that
established players are warming to the idea of insurtech and are
interested in purchasing some innovations. The insurance industry
is a highly regulated industry with a multi-layered legal
structure. A number of changes have also been made in Turkish law,
in the field of insurance, especially with the impact of the
COVID-19 pandemic. For example, in the 5th article of the
Regulation on Information in Insurance Contracts, it is possible to
provide information in the digital environment. For this purpose,
3DSecure concepts were included for the security of permanent data
storage and payments made by debit or credit card in case insurance
contracts are made at a distance. Permanent data storage is the
recording of the transmitted information in media such as text
message or e-mail, when it is not possible for the parties to come
together in a physical environment. In such cases, insurance
companies are obliged to record the information text, for example,
if they inform about the insurance contract via e-mail or text
message. At the same time, it is foreseen that the conversations
will be recorded in cases where the information is made through the
call center or telephone. In addition, through the relevant
legislation, remote appraisal procedures are provided at the time
of damage, and remote examination services are provided within the
scope of health insurances, regulated by the Regulation on the
Delivery of Remote Health Services.
Adoption of insurtech methodologies to ensure the
confidentiality of personal data creates some reservations by
companies. The tracking devices, which can detect whether the
customer actually stops at the stop signs, also track the
customer’s location, the places he has visited and how long he
has stayed at these locations. As a result of this follow-up, many
data are processed with the use of artificial intelligence
technology. In such cases, it is important to comply with the KVKK
and board decisions in order not to cause violation of the
fundamental rights and freedoms of the persons whose personal data
are processed.
Result
- Insurtech is the use of technological innovations designed to
make the current insurance model more efficient. - Insurtech enables products to be priced more competitively
using technologies such as data analytics, IoT and artificial
intelligence. - Insurtech is used to process claims more effectively, assess
risks, process contracts or warrant policies. - Insurtech is like fintech in that both leverage modern
solutions that revolutionize every traditional industry. - There are some problems for Insurtechs, especially due to
regulation and reluctance of established insurance companies to
work with them.
The insurance world is developing rapidly thanks to the
solutions offered by technology companies. With Insurtech,
businesses can deliver a better customer experience for less money.
This creates a win-win model. It will be interesting to see the
different business models developed to create and leverage
technology and how they affect the industry in the future.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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