Most insurance companies acknowledge that major change is coming and the insurance world is excited about the changes that InsurTech may bring. Recently we have seen reports in the media that local insurance companies are spending significant amounts of money in partnering with various InsurTech companies in an effort to embrace the changes.
InsurTech is effectively the use of technology to innovate and facilitate efficiency and cost savings in all areas of the insurance industry. It has both a disruptive and transformative effect on the retail and commercial parts of the insurance industry. It is likely to lead to radical change in practice development, distribution, modelling, underwriting and claims and administration practices. Its effects are multifaceted and it has the potential to improve the way the market operates.
But it may also result in outcomes that are of concern to regulators. Awareness, mitigation and management of risks associated with the use of InsurTech are vital in a sector undergoing rapid change. Although the insurance market has always been innovative, the growth of InsurTech has lagged behind the rest of the financial services sector. That said, InsurTech is gathering momentum and there is an industry wide shift from a ‘product-centric’ to a ‘customer-centric’ model. This is likely driven by change in consumer expectation in conjunction with technological advancement.
The key question for businesses: are they satisfying their legal and regulatory objectives?
One of the significant features of InsurTech is the paradigm shift from protection of risks to prevention of risks. With the increase in available data and the ability to process it, insurers are now able to improve customer service and deliver a more personalised service to suit individual customer needs creating a competitive differentiator. It is likely that smart contracts using blockchain technology will automate contracting and streamline processes.
The key question for businesses looking at the technology is whether they are satisfying their legal and regulatory objectives. This will be one of the key challenges which will need to be overcome by insurance companies in order to enable them to keep up with the technological changes ahead.