How FinTech Impacted the Insurance Industry in 2018
Thanks to cloud computing and related technologies, customers are able to avail a service anytime they want to use it. This on-demand model of doing things provides convenience for the customers, enabling them to make transactions online such as managing their money.
As of 2017, there were already 5 billion people owning a mobile device. Whether it is a smartphone or a tablet, mobile device has accounted for 73 percent of the time the users spent on accessing the Internet. This shows that customers are becoming tech-savvy, allowing them to embrace financial technology (fintech) in terms of accessing financial services at their fingertips. This includes money transfers, bills payment, mobile banking, managing investments, and raising money. As a result, this minimizes the need of personally going to the actual premises (e.g. banks or wire transfer outlets) to transact.
Value proposition of FinTech driving its adoption
From the 2017 EY FinTech Index Report, most of the fintech users are within the 25-to-34 year-old age range as they have greater preference of managing their lives through electronic channels. Other values the consumers derive from using fintech include transparency, simplicity, and personalization. These, in turn, drive FinTech adoption among service providers in the financial sector, particularly within the insurance industry.
While electronic money transfer and payments are still the primary used FinTech service at 50 percent, insurance comes in second at 24 percent. This value is a great leap from insurance’s being the least commonly used service three years ago. The following are some benefits of fintech to the insurance industry:
Efficient customer profiling and analytics
With FinTech, an insurance company has a way to translate its customer data into in-depth analysis upon which to base future actions. Fintech also makes it easy to gather customer data, especially potential ones, making customer segmentation more efficient.
Highly personalized service provision
Due to improved analytics and profiling, an insurance company will be able to deal with their customers much more directly. Personalizing its services based on customer segment will have a positive impact on customer satisfaction. For instance, instead of the time-based insurance on vehicles, telematics is used to collect data of a customer’s driving habits, i.e. his or her usage of a car. This will become a basis for the insurance terms. In other words, FinTech personalization entails a usage-based insurance.
FinTech case studies
In order to reap the benefits of FinTech, some insurance companies are beginning to adopt this technology in their operations. One notable example is the Towergate Insurance Brokers. Aiming to achieve an intuitive “good enough IT”, this company started its cloud migration about twenty (20) years ago. Instead of developing its own applications, Towergate found more value in utilizing its vendors’ SaaS for its apps.
Then there is Generali France which released its virtual assistants based on IBM Watson’s AI. One of these is a voicebot. Since its launch in July 2018, Generali’s voicebot has averaged 60 percent out of 350 weekly insurance certificate deliveries. This move somehow improves customer experience.
Due to the proven track record of the benefits of utilizing fintech, insurance companies are looking to forge partnerships with insurtech (insurance technology) providers. One remarkable example is Anorak Technologies being able to raise $6.5 million in addition to its equity. Backed by AXA, the start-up Anorak will use the funds to further develop its technologies.
Given these current trends in FinTech, the insurance industry can make itself more competitive and desirable by partnering up with reliable fintech firms. Fintech is a medium in which to address consumers’ expectations of on-demand access to services, thus changing industries and companies for the better.