For many years the provision of insurance products and services was a cumbersome, labour intensive and expensive process for insurance companies that could often prove equally time consuming and frustrating for customers.
Recent technological developments, especially in the areas of big data and AI, have revolutionised the industry in a trend generally characterised by the term insurtech. While insurtech has only emerged in the past decade, its expansion has surged in recent years.
According to one estimate by the research firm Mordor Intelligence, the global insurtech market is estimated at $8.6 billion (€7.97 billion), forecast to rise to $32 billion by 2029 – an annual growth rate of 30 per cent. The firm cites streamlining the claims procedure, enhancing client communication and the desire and newfound capacity to integrate automation as the key drivers of this growth.
Insurtech provides numerous advantages for customers and insure providers alike. For consumers, the self-service nature of the approach provides an opportunity to get a more personalised service, reflecting their actual requirements. By eliminating the need to engage with an insurance company representative, consumers can explore the options that suit them at a time that also suits them.
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However, for now the big winners in this space are the insurance providers. One of the areas where companies are reaping most benefit is claims. Traditionally the claims management process involved manually reviewing every case, determining what compensation to award, then processing that compensation claim. Now, companies can automate processes such as this while at the same employing algorithms to detect fraud.
“The most significant trends have yet to surface for the consumer directly – rather, they’re being embedded into internal systems and processes that the provider is developing,” says Enda Brazel, managing director, financial services, at Bonkers.ie.
“The areas of underwriting and claims management are the first major areas of the insurance cycle that providers have been seen to tackle, with insurtech solutions augmenting the mainframe ‘green screen’ systems which still run the core of the insurance and banking industries.”
The low-hanging fruit of business process improvements, enabled using technology and AI processing, will undoubtedly improve the cost profile of insurance businesses, which can then focus on passing on those cost benefits to the consumer, says Brazel.
“Once processes are more streamlined, and underwriting more targeted, with its associated cost reductions, then the consumer will benefit and the insurer will broaden their use of insurtech and AI to additional areas in the insurance life cycle,” he adds.
Moreover, Brazel believes that the real benefits of insurtech for consumers will soon be realised in terms of innovation in product and service offerings.
“The more comfortable that insurers become with large data sets, and the required near-real-time analysis for bespoke underwriting, the more willing they will become in considering evolving insurance products, such as fractional insurance,” he says.
“The ability to buy, for example, three days’ insurance cover when borrowing a car, at a reasonable cost to the consumer and a reasonable and underwritten risk to the insurer, will be game changing and open new markets such as temporary insurance cover, fractional insurance, and other variations on insurance that are impossible to underwrite at a reasonable cost at present, simply because the data analysis isn’t available.”
Cian Morrissey, of Morrisey Wealth Management, says he is seeing much more use of AI when it comes to underwriting certain life insurance and mortgage protection policies.
“At one of the main life houses, the majority of cases submitted to an AI underwriter are approved,” he says. “Some other life companies use a technology developed by underwriters to ask important questions which could lead to an approval. It is quite sophisticated, and even if there are underlying conditions, the technology is able to, in real time, ask clients for further information.
“Many clients get approved instantly without a human underwriter’s review. This frees up the human interaction for the more complicated cases. And, of course, if the technology in place is unable to auto-approve an insurance policy, a person will then review it in the traditional way.”
While advances in technology are making financial services more efficient, Morrissey says there is still a role for humans in the process.
“When it comes to financial planning in general, while technology is an excellent tool, clients still want the personal touch and generally a face-to-face meeting when making important decisions. For products like pensions and investments, the human touch is still very important”.