InsurTech
The insurance sector is one such segment in the financial world that has not been able to become a mainstream industry regardless of its importance in consumers’ everyday lives. Being an integral part of financial and investment security, people understand its importance, but owing to the level of complications and ambiguity involved, many choose to steer clear of this particular segment.
The lost market of the insurance sector is one of the many incentives for creating a digitally-equipped system of providing insurance, now known as InsurTech.
Defining InsurTech
The creation of a digital setup for providing insurance to consumers, by employing technological innovations and solutions is called InsurTech. The technological advancements in the insurance industry empower it to create and administer insurance services at different levels as per the needs of the customers.
The Origination of InsurTech
With the insurance market not being able to grasp adequate ground to traditional financial institutions to enter this domain was immense. This led to banks and financial institutions acquiring and merging with insurance providers, to leverage the insurance expertise and tools to offer these services in-house.
Another aspect that influenced the convolution of banks with insurance providers was the customary requirements of consumers. In the process of making a purchase and getting insurance, like in the instance of buying cars, or jewelry, the involvement of insurance providers occurs in succession to the role of the banks. For such purchases, banks typically recommended insurers, but this tiny gap in the sequence of events, where customers needed to look for the best insurance providers suiting their requirements, made customers wary of the process; sometimes resulting in them neglecting the second step of the purchase of getting insurance, altogether.
Digital Solution for Embedded Insurance Options
Such lags and gaps in the system and procedures of purchasing and then availing insurances steered the attention of fintech companies to the gigantic scope of technology. With more and more financial institutions realizing the opportunity to partner with insurance providers and offer instant and in-house insurance services, the emergence of InsurTech became inevitable.
A study conducted by Pymnts Survey brought into light that customers were more receptive to availing embedded insurance options by banks than separately venturing to seek the best-suited insurer for them. This study revealed an insightful trend in customer behavior, where customers preferred getting instant and relevant insurance policies at the time of purchase itself.
The Opportunities for Financial Institutions
With the advancement of InsurTech emerging rapidly, the role of financial institutions has burgeoned extensively. Many new areas can be targeted by banks to offer improved insurance services to their customers.
Banks and financial institutions are one of the most trustworthy entities existing in the world, that have access to boundless data and information. Banks and insurers can use these two factors to build a niche in-house insurance market.
When people purchase plane or train tickets, companies nowadays offer instant insurance from their choice of insurer. The idea can be conceptualized and used in several other domains, where banks and financial institutions study customer activities and trends and provide insurance-related services without requiring any additional steps from the customers.
Another potential area that could use intelligent developments in the card market. Card providers, debit, and credit can partner with insurers to provide instant and customized insurance policies, where the customers use their cards to make purchases for travel, shopping, loans, etc.
With Great Power Comes Great Responsibility
While the InsurTech market has immense potential to expand and become an independent niche, banks must keep a few points in mind when selecting their partner insurance providers.
Most branches of fintech require the implementation and use of Application Programming Interfaces (APIs). With banks aiming to partner with insurers to offer embedded insurance services, it is imperative for insurance providers to have API-infused structures, to enable better and smooth transfer of data and technologies.
Banks should also keep track of the licenses the partner insurer possesses, as some domains and regions require special licenses, which otherwise could jeopardize the entire system.
A key point that needs to be streamlined in the InsurTech setup is the different and defined positions of both parties, namely, the financial institutions and the insurers. The typical structure of insurance involved a direct-to-customer approach, whereas, now with the involvement of banks, the corroboration of business-to-business and business-to-customer would be required.
To Conclude
InsurTech is a fairly new stream of fintech which is yet to get polished and streamlined completely. However, there are countless opportunities that this stream presents, which could give a massive boost to the insurance sector. With so many participants entering and merging into the bigger landscape of things, entities need to acquire niches, which would safeguard their position and values in this fast-moving world.
