Insurtech refers to various technology-enabled innovations that allow insurance firms to deliver superior and streamlined customer experience. In the current age, it is impossible to imagine the future of the sector without insurtech.
Touted as a key driver of growth and innovation, insurtech is set to reshape how the insurance sector operates. The projected CAGR (Compound Annual Growth Rate) of the global insurtech market is predicted to be a whopping 48% between 2021 and 2028.
So is this the right time for your insurance firm to integrate with an insurtech platform?
The answer is a resounding YES — read through the paragraphs below to discover why we say that.
How will insurtech impact the insurance sector?
The most significant impact of integrating with an insurtech platform will be on the reduced churn and uptick in gross premiums. Using insurtech, insurers can offer innovative products to their customers and market them in a lesser amount of time compared to the traditional route. Moreover, digital integration will result in a better front-end user experience and cut down on the need of employing middlemen.
Another key area where insurtech integration can make a real difference is an increase in the productivity of the operations team. Insurers spend a significant amount of time managing workflows across various departments within the firm, which can lead to unnecessary bottlenecks. But embracing a digital solution means better workflow mechanisms that can contribute towards better performance of the entire organization.
Reduction in costs is also a major pull for insurers to consider digital integration as legacy systems often pose serious challenges to efficient project management. By leveraging the power of technology, companies can not only increase their overall efficiency but also position themselves as worthy a competitor in the market.
Let’s take a look at specific use cases of insurtech platforms benefiting insurance firms:
Embedded insurance
Embedded insurance is one of the easiest ways to offer personalized insurance products to customers, based on their needs. An embedded product is usually purchased during a commercial transaction involving another product or service. For example, purchasing auto insurance during a car purchase is an example of embedded insurance.
There are various strategies that insurers use when embedding their offering along with another product. These include:
- Bundled: where the insurance product becomes a value-add to the product/service the customer is purchasing. For example, complimentary travel insurance when you purchase flight tickets.
- Linked: where the insurance product is offered as an add-on to the underlying product or service during the sale. For example, if you purchase a mobile phone and a retailer gives you the option to insure your mobile device at the time of checkout.
- Related: here the insurance product doesn’t become part of the transaction though it may be offered during the life cycle of the transaction. For instance, when you are prompted to add on a medical insurance plan at the time of booking a health check-up.
Insurtech can gather useful insights to help insurers decide which strategy would be more appropriate based on their offering and target audience. Insurers can also use the data for identifying cross-selling opportunities and opening up new revenue streams.
Digital distribution
Even though there have been changes in the insurance sector over the past couple of years, very little has changed when you think about insurance distribution. Agents and brokers continue to play a crucial role though customers may opt to purchase the policy directly from the insurer’s website or through an aggregator.
Opting for digital integration offers access to several insurtech products that link several independent agents with multiple insurers to sell insurance products more efficiently and in a cost-effective manner.
Product building
Product innovation is critical to surviving in a hyper-competitive market such as the insurance sector.
Not only does insurtech simplify the entire process of getting, managing, and understanding insurance for the end consumer, but it also encourages firms to price their products more competitively and address the needs of their customers. As a model, insurtech propels firms to offer more value to the end customer, as customer satisfaction ranks above everything else, including increasing operational efficiency.
In some cases, digitization also nudges the business to completely overhaul the current business model to improve the overall customer experience.
Take, for example, how Covergo’s product builder supports the creation, configuration, and management of your insurance products at a lightning speed without writing a single line of code. Even if you have no tech background, you can still benefit from the product builder platform and develop products, no matter how simple or complex.
Are there any potential challenges of insurtech transformation?
There are a few bottlenecks for insurtech integration to happen effectively. Here are a few critical ones to consider:
Limited option of integration for firms with legacy platforms
In the case of insurers who have legacy IT platforms that are almost close to their expiry, the option of integrating with insurtech is limited.
Even for those who consider “refactoring,” which involves an alternation of the internal structure of an existing IT system without changing the core functionality, the results are not completely fruitful. Though it allows insurers to upgrade their technology, the costs can be much higher than anticipated which completely negates the purpose as insurtech is aimed at bringing the costs down.
And this is where partnering up with the right insurtech platform can make a real difference. Over time, APIs have emerged as the go-to solution for insurance firms who want to digitize their business, thanks to the multiple product configurations that APIs offer.
CoverGo offers 1000+ insurance APIs that can seamlessly integrate with process, legacy, or third-party systems. Our APIs are agnostic to the use case which makes them the perfect companion for your business, regardless of your size or scale of operation.
Insurtech processes are not easy to adapt to
Firms with legacy systems may find it slightly challenging to adapt to an insurtech platform as the existing systems aren’t designed for integration.
This may prompt some insurers to opt for building the system architecture from scratch to fit their unique requirements and aid a seamless integration. However, there are several disadvantages of this approach such as higher costs, longer timelines, and greater risk, compared to what a readymade insurtech platform offers.
Additionally, this approach may result in solutions that are not sufficiently innovative to sustain in the long run.
Delays in the approval process
Several insurance firms have long-drawn internal approval processes that slow down the integration.
When there are several stakeholders involved, who have conflicting opinions on the issue, it can take much longer to reach a consensus. In fact, several insurers have a perception that insurtech platforms lack adequate knowledge about legacy systems, making it difficult for them to suggest the right solution.
This can also increase the cost and time of implementing the new technology.
Challenging legal requirements
Given that the insurance sector itself is heavily regulated, integration with an insurtech platform is also rife with several legal issues.
The top concern is about data protection as insurtech involves a large amount of data collection. Similarly, while smart contracts that form the bedrock of insurtech accelerate the resolution of claims and promote quicker settlements, a lot depends on the type of legal framework available in the country where the insurance firm operates. Jurisdictions, where blockchain and smart contracts are not recognized by the legal system, may pose challenges for the insurance firm adapting to insurtech.
How to choose the right path?
Weighing pros and cons is a crucial exercise for any business that wants to try out something new. The case of the insurance sector is no different.
But the challenges posed by insurtech integration can be easily ironed out by parenting up with the right platform. Given that the benefits can help you to stay ahead in the game, it’s time to get in touch with CoverGo to schedule a demo right away.
You can take full advantage of the seamless insurtech integration CoverGo offers to achieve your goals without overshooting the costs.
