What Is Insurtech?
- Insurance 101
- What Is Insurtech?
If you pull out your phone right now, you can download an app that will call someone to deliver your lunch, trade shares from the stock market, apply for a mortgage, and then buy a new car all in one afternoon.
With the advent of powerful technology designed to make traditionally inconvenient tasks more manageable, there’s almost nothing you can’t do from your phone. This includes getting and buying insurance. In an industry dominated by large-name insurance companies, new carriers are starting to pop up that focus on digital innovation, called insurtech companies.
Read on as we break down everything you need to know about insurtech and how it’s changing the industry.
What Is Insurtech?
Insurtech, short for insurance technology, is a term used to describe the new and innovative ways some providers are using technology to change insurance. It’s a broad term that encapsulates many different enhancements across the industry.
Insurtech companies look to capitalize on new markets, or enhance offerings in existing markets, that some traditional large insurance companies either haven’t done or aren’t able to do.
Insurtech companies use all sorts of data to drive decision-making. As more data has become available over the years, and access to information has expanded in the Internet age, companies are using it to their advantage.
For example, today you can get flood insurance from dozens of private companies. Just a few decades ago, your only choice was the government-backed National Flood Insurance Program. Even though that program is still operational today, and still running at a loss, private flood insurance companies have found ways to offer higher coverage limits with competitive rates and a smaller waiting time than the NFIP, and they have managed to stay profitable doing so.
According to McKinsey and Company, a financial services firm, investments in insurtech companies totaled about $140 million in 2011 but climbed to about $2.7 billion in 2015. The future looks promising for insurtech, and people are taking notice.
Insurtech companies exist in property insurance, health insurance, and life insurance. As you might imagine, they’re very digitally focused.
Insurtech companies usually emphasize convenience and customizability. For instance, getting a policy entirely online and seeing how different factors affect your rates in real-time is very appealing. You don’t need to wait for when the carrier is open during business hours, and you may not even need to speak with anyone if you don’t want to. You can get a policy any time from anywhere.
But insurtech describes much more than just the ability to quote policies online. The term describes a business model driven largely by data-focused decisions that simply didn’t exist in the past. These companies can (and do) use artificial intelligence and machine learning to identify risks and calculate premiums in an evolving underwriting process. They may also emphasize e-commerce and social media more than a traditional insurance company or agency.
An example of insurtech-style innovation is Universal Property and Casualty’s Fast Track claims operation. The company can issue claim payments on the spot to policyholders if needed. Streamlining the claims process is made possible through advancements in technology that weren’t possible years ago.
As of now, insurtechs mainly focus on consumer insurance. Social media and online marketing tend to draw millennials, which are generally the target audience. Getting younger policyholders means long-term business.
But, the proliferation of insurtech companies marketing and selling commercial lines of insurance will likely increase in the near future, too, as the business evolves as a whole.
Clovered and Insurtech
At Clovered, we know that insurance is great — it’s just hard to understand sometimes. That’s why we’ve created an ever-updating archive of information that breaks down confusing industry jargon into layman’s terms. We exist at the intersection of technology, insurance, and real people. With our online quoting tool, we can quickly pair you with a policy that fits your unique needs.
We partner with several of the country’s top insurance providers, including many insurtech firms, to bring you the coverage you need at the price you want. We conveniently offer homeowners, renters, condo and landlord insurance online, as well as auto and flood insurance through one of our many licensed agents. And, if you ever have any questions or just want to talk to a real person throughout the process, we’re always happy to chat.
The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.