Factors and Enablers Driving the Growth of Insurance Tech Industry

Insurance technology or insurtech is emerging as a high-growth, high-potential market segment with a promising future. With its exponential rise, one may fear that it is merely an overhyped trend rather than a reliable business growth media. However, those who have been observing the industry closely know that the rise of insurance tech has been sustainable for the past few years. In this blog, we will be looking at the various factors and enablers that have accelerated this growth and regulated it over time.

InsurTech, a portmanteau of “insurance technology” is a relatively new term that refers to any emerging technology that helps insurance businesses deliver services in better, faster ways. Insurance tech helps insurance players derive more value in terms of savings and efficiency from their current models.

The rampant growth of the insurance tech industry stems from the following factors and enablers:

1. Rapid digitalization of business models.

2. Growth and consolidation of internet technologies.

3. Rationalization of business transactions.

4. Change in customer behavior and rising customer expectations.

5. Saturation of the insurance industry, which calls for differentiators.

As a culmination of these insurtech trends, the sector is touching new highs with a valuation of USD 2.55 Billion for the Q1 of 2021. This growth corresponds to a 180 percent markup from the spending in Q1 2020. These numbers also indicate that the digital solutions have recovered from the impact of the COVID-19 pandemic and exceeded its growth trajectory. Also, the overall investment in insurtech companies has increased significantly.

Here are some latest insurance tech trends:

Artificial intelligence, and its subset of machine learning, remain one of the leading insurtech trends as major influences behind the fast-paced growth of new technologies in the industry. AI and ML have a broad range of applications that can considerably streamline onboarding and customer experience.

Chatbots and virtual assistants are the most prominent use case of AI in insurance. They help boost customer service. The rapid in connected device usage has enabled insurance companies to leverage AI for behavioral policy pricing or value-based pricing.

Predictive analytics is amongst the essential insurtech trends affecting the industry. Big players across the globe have already started making the most of this emerging technology for improving their business models.

Insights offered from data analytics are used to simplify the customer journey and offer value at every touchpoint. This enhancement of customer experience increases conversion rates, which in turn contributes to higher profits.

A crucial development impacting the insurtech industry is blockchain. The adoption of blockchain technology enables insurance companies to streamline and modernize their business operations. Blockchain maintains a record of immutable data through its distributed ledgers. It makes the information tamper-proof and ascribes accountability at all stages. This transparency will add more value to insurance business operations.

The major applications of blockchains are fraud and abuse prevention, P&C claims settlement, reinsurance, and medical claims processing.

Cloud computing is amongst the biggest insurance tech trends redefining the future of the industry. Due to the dire need for remote self-service applications, Cloud computing, especially Software as a Service has been on a steady rise for the past few years. Today, insurance companies are using the cloud for several processes. It offers several areas of applications for insurers. Insurtech companies that leverage cloud-based technology can help insurers find unique solutions for improved customer experience.

Owing to factors like changing customer expectations and widespread internet penetration, insurance companies across the globe are leveraging innovative digital solutions to scale their business and offer a personalized customer experience. Hence, it becomes clear that insurance tech is here to stay and will continue helping businesses in the future.