Insurtech 2.0: Digital Disruption in the Insurance Industry
Revolut enters into Insurtech in Ireland with Pet product — Car Insurance
According to data from AJG, more than $40bn has been invested in the Insurtech start-ups globally over the past five years. Yet, the insurance industry did not see any major disruptions in the recent times. But things are slowly changing.
With Revolut entering into the Irish market for car insurance products, the existing players might now feel the force of digital disruption. With the slogan, “Drive smart, save smarter”, Revolut is promising an easy and quick car insurance with no frills and fuss, revolutionizing the Irish market by offering upto 30% savings on Car Insurance.
Disruption with data has now become the new norm in the tech world. In a world where data is regarded as the new currency, digital tech competitors with large customer base are able to rapidly invade into new businesses. Alibaba — a Chinese e-commerce company that provides C2C, B2C and B2B sales services has leveraged their huge network of retail consumers and SME owners to enter into the consumer financial services market in China.
As Klaus Schwab, chairman of WEF said, “In the new world, it is not the big fish which eats the small fish, its the fast fish which eats the slow fish”.
Heavy regulations, large balance sheets and huge risks have kept the digital players from entering the insurance market all this while. While this explains why the Insurance industry was very slow to feel the digital and AI effect, the situation is changing and huge money is now being investing in the industry, which was once regarded as impregnable.
While the first generation of InsurTech 1.0 (2010–2015) startups focused on Customer service and marketing, the next generation of InsureTech startups are focusing on using tech for better risk calculation, claims and loss control, better underwriting and customer centric products. These new InsureTech companies are changing the way customer relationships existed in the insurance industry. The data and technology has now enabled the digital players to know their customers better, so that they can price, underwrite and evaluate risk more accurately and offer timely products and services.
The consumer behaviors are seen to be rapidly changing in the recent times. We are all looking for 24-hour access, innovative products, tailored services and faster processing time. With the new InsurTech companies in the market, customers can now name their price and choose the products that fit into their budget, receive faster customer services with a click, and opt for more flexible models such as pay-as-you-go where they are charged per mile.
In the auto-insurance space, new AI capabilities are enabling these companies to price their products and services based on the customer driving habits. Risk is calculated for each individual and products are offered accordingly. Data about how fast someone drives or how hard they hit the brakes might be new factors that affect the insurance premium than the traditional factors such as age and claims history.
As mentioned by Andrew Rose, CEO of US insurance comparison website Compare.com , to the consulting firm McKinsey’s magazine , “Insurers of the future will pay more of a risk avoidance role and less of a risk mitigation one”. This shift towards preventing the risk rather than insuring against the risk is a huge one, altering the way insurance industry operates.
Blind Spot & Forward Collision Warnings, Automatic Emergency Braking & Pedestrian Automatic Emergency Braking and all other driver assistance technologies are making vehicles safer and thereby reducing the number of accidents as well as insurance premiums. Smart devices and sensors are being installed in the vehicles to prevent the accidents and also lower the premiums as the driving behavior becomes more safe.
The existing insurance market players are now looking for ways to withstand the new tech players in the insurance space. The starting point is to understand the opportunities and threats of tech and AI. But it is equally important to understand the source of disruption and how the collected data provides value. But nonetheless, the new InsurTech companies are forcing the existing players to rethink the fundamentals and reinvent themselves.
Will the new age technology bring together the vehicle manufactures, insurers, road side assistance, parking, security, traffic control, legal services under a single eco-system with 5G V2X connectivity technology in the near future? Will smart mobility solutions create a paradigm shift in urban mobility? We can only wait and see!
