Insurance companies often face fierce competition with each other for many of the same customers. In the U.S., the car insurance market, for example, is dominated by a handful of major players. The 10 largest companies in the industry control approximately 72% of the market, according to Value Penguin by Lending Tree

The winners and losers of each year are determined by which companies pick up more market share. In 2019, Progressive notably gained more than a percentage point of the market share in the auto insurance industry. 

Insurance, however competitive, is an industry that seems entrenched in archaic processes. 

This might not be the case for long, though – the insurance industry is expected to change dramatically in the next five to ten years, according to McKinsey. The firm expects the industry to shift as customer expectations and technology rapidly evolve.

Insurance technology i.e. insurtech, or the innovative use of technology in the insurance industry, seeks to bring greater value to customers and companies. And it’s not going unnoticed. According to PricewaterhouseCoopers, “insurtech has become a powerful driver of change in the insurance industry.”

In fact, the number one risk facing the global insurance industry is technology modernization, according to PwC. To remain competitive, companies need to keep their tech improving and their processes modernizing. 

What is insurance technology?

Insurtech “is a term used to refer to technology designed to enhance the operations of insurance firms and the insurance industry as a whole.” Insurance technologies include big data, artificial intelligence, consumer wearables, and smartphone apps, which are ushering out the old processes of insurance for new ones. 

These new technologies are extremely valuable to insurance companies; insurtech companies offer pay-per-use and an emphasis on loss prevention and restorative services, according to PwC. 

According to Duck Creek Technologies, there are 8 top technology trends in insurance. 

Predictive analytics: Predictive analytics analyzes data to make predictions about the future. In insurance, technology is most used for: (1) pricing and product optimization; (2) claims prediction and timely resolution; (3) behavioral intelligence and analytics to predict new customer risk and fraud; (4) uncovering agent fraud and policy manipulation; (5) optimizing user experience through dynamic engagement, and (6) big data analysis. 

Artificial Intelligence (AI): In the insurance industry, like in many industries, artificial intelligence is helping companies to personalize experiences and make business processes more accurate and expedited.

Machine learning: Machine learning is the ability of a program to learn through a variety of algorithms. Machine learning is helping to improve and even automate the claims process by utilizing pre-programmed analysis. 

Internet of Things (IoT): Sharing data from smart devices can save customers money on policies. In 2019, 34.8 million homes in the U.S. were considered smart homes. Because smart home features increase safety and decrease energy usage, insurance companies can use them to better assess risk and reduce costs for consumers. 

Data: In the insurance industry, social media is more than a tool for marketing. Not only can social media analytics be used to increase sales, it can also be used to improve loss ratios

Telematics: Do you plug a device that monitors your car’s use and speed to get a better price? Telematics are like a “a wearable device for your car.” Telematics are thought to help both insurance companies and insurance customers by encouraging better driving habits, lowering claims costs for insurance, and making carrier to customer relationships more proactive than reactive. 

Chatbots: Chatbots are a growing phenomenon. Insurance companies can use bots to help customers apply for insurance or file a claim, freeing up employees to help with more complicated needs. For example, Geico offers Kate, a virtual assistant that can quickly help customers with information like the current balance on an auto insurance policy, the date of a next payment, or by providing access to policy documents 24/7. 

Drones: While it might be easier to imagine drones dropping off packages for customers than administering insurance, drones are gaining a role in insurance. For example, how does a virtual visit to assess risk or damage sound in the COVID-19 pandemic? That’s what programs like the Remote Visit application offered by FM Global are doing. Another example, Farmers’ Kespry drone program, was launched in 2017 to review roof damage following weather events, leading to faster assessment turnaround and increased safety for claims reviewers.  

Why invest in insurance technology?

The insurance industry is ripe for innovations of all kinds. 

According to PwC, Global insurance technology investments in 2018 totaled $4.15 billion.   2020 expedited the adoption of technology in the insurance industry. This is no surprise considering that insurtech facilitates things like virtual sales, virtual claims interactions and expense reduction, according to Deloitte.

Despite the pandemic-induced economic uncertainty, “insurtech industry investments in the aggregate appear to be as robust as ever,” according to Deloitte. $2.2 billion in investments in insurtech were recorded in the first half of 2020 alone. 

It’s not just disruptors to the industry to be on the lookout for. Legacy carriers that successfully adopt technology internally will also benefit in the long term. 

According to Sam Friedman, insurance research leader at the Deloitte Center for Financial Services in an interview with Insurance Business America: “I don’t see a behemoth insurtech out there that’s going to essentially end the insurance business as we know it, and take over massive amounts of market share….Where insurtech is having a huge impact is in helping insurers become better at what they do.”

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