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The 11th Annual InsurTech (ITC) Connect is a high-level conference and exhibition highlighting the latest insurance technologies developments. Speakers from the insurance industry give their thoughts on cutting-edge technologies that improve clients’ experiences, company efficiency, and business models.
In this post, we list the key highlights and takeaways from this year’s ITC Connect 2021.
Availability of hi-fidelity data
Availability of more and better data and technology has led to better products. One example of this would be GM Onstar. It has been able to offer better insurance coverage because they have a greater level of precision telematics data. In addition, the use of telematics can prevent incidents and help offer more accurately priced products such as those offered by Metromile, which offers car insurance based on how many miles you have driven rather than irrelevant criteria.
Data Governance concerns
The main concern in data governance is who has ownership over the data and how to keep it safe, so it doesn’t get into the wrong hands. This type of data is also considered patient health information (PHI) or personally identifiable information (PII). Different real innovators in the market are using better data for insurance underwriting, which means doing a better job at pricing risk rather than just coming up with new technologies for digital distribution channels.
Increasing Cybersecurity concerns
Session in this year’s ITC Connect also focus on the increasing number of cyber security concerns from the CRINK countries – China, Russia, Iran, and North Korea. Rob Joyce, the new NSA chief, recommends a “Sand and Friction” security strategy to uphold US safety from these attacks. It is a business enabled by internet security loopholes and cryptocurrency payment convenience.
Increasing opportunity to eliminate inefficiencies with AI and ML
AI and ML are now being used in a variety of different use cases. However, the usual challenges of applying AI/ML models in the field are still present. The general theme of “Human assisted, but machine lead AI/ML” was present, and there was substantial discussion about handling data more effectively.
There is a lot of room for improvement in the insurance industry when using AI/ML. For example, in eCommerce, 100 FTEs drive revenue of $1B, while 800 FTEs are required to do the same in insurance. In addition, it takes an average of 56 days to process an insurance policy from start to finish. Hence, there is still plenty of room to eliminate inefficiencies.
Increasing unstructured data
According to Gartner, more than 70% of insurance claims processing data is now unstructured, i.e., videos, emails, photos, etc. As a result, insurers need to start leveraging this unstructured data to improve claims processing. Snowflake just announced support for unstructured data and focused on the benefits of automation and AI, especially around claims processing.
Multiple providers and startups exist today with products around Claims automation for Auto, Home, and other insurance. Reduction in time and cost of claim processing is the critical focus for these tech companies. Additionally, products built around fraud prevention and self-reporting using AI engines include ID Analytics and LexiFi.
Several companies are working on the same issues, and these are just a few examples of the ones that stood out. Other areas are telematics-based insurance products, improved user experiences through chatbots and digital assistants/AI integrated into our daily lives and the usual machine learning use cases that we all know.
Plenty of opportunities for IT service providers
The C-suite is becoming more tech-savvy. As the traditional role of the CIO comes into question, this gives way to a new role of an “IT leader.” This leadership role allows them to take on more of a hands-on approach to IT issues. Many organizations are finding that they have to worry less about “business versus IT” because it’s clear that shadow IT has become much more acceptable and even preferred in some cases. The consensus seems to be that the market is now becoming well established and plentiful where there were limited options for low-code and no-code solutions.
Small and medium insurers are looking to upgrade and rebuild their IT ecosystem based on best-of-breed solutions. They are looking for add-on products on top of core insurance platforms for improving digital customer experience over the web, phone, and other media. Concerns and challenges around system integration, support, and ownership of all these components are genuine. There is ample opportunity for system integrators with deep insurance domain knowledge. This opportunity also highlights Insurtech’s struggle with getting the right talent. Startups and more prominent established companies are all facing this challenge of high turnover in India and the US and access to the right talent. In addition, innovation in products, the cloud, new services, and applications is driving many technology investments. Therefore, the need for talent is very high across companies.
Open API becomes the default expectation
An open API enables customers to interact with their insurance company through digital channels in the insurance industry. Whether that means interacting directly through a phone call or connecting through email, social media, or chat, customers want seamless interactions without having to jump between different websites and apps.
An open API also provides a better customer experience because it creates a higher level of automation and less room for human error. For example, an insurer does not have to manually update customer information or update policy documentation with an open API. Instead, it provides resources to access these resources from any number of digital channels. As a result, fewer errors with more complete and automatic data exchange from an open API ultimately provides a better customer experience.
In the insurance industry, the necessity of having an open API is not based on a lack of innovative technology or restrictive regulations. Our approach with APIs is just the opposite – OpenAPI makes insurance companies more competitive today and over time as we continue to innovate.
Optimism on Decentralized Finance
Decentralized Finance (commonly referred to as DeFi) is a blockchain-based form of Finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments. Instead, it utilizes smart contracts on blockchains, the most common being Ethereum.
On November 19th, Armor.fi, Nayms, and Breach Insurance joined the panel discussion led by Munich Re in New York for their annual meeting. The core idea seems to be “Tokenization of risk” – being able to break up the risk bundle and price the pieces separately and offer them to various investors via capital markets.
Insurtech is disrupting the incumbents
New and innovative insurtech companies are disrupting the incumbents with better products and focus on the end-consumer experience. The new insurtech entrants (e.g., HIPPO, Root, Lemonade, etc.) focus on the end-consumer. They offer a better user experience (e.g., buying quickly via internet/mobile device) and more innovative products (e.g., car insurance based on miles driven) than the big incumbents (Geico, Progressive, Allstate, etc.)
The incumbents will not be able to compete just by spending on creative TV ads. Incumbents focus on brokers/agents as their primary customers, while the new innovative Insurtech focuses on end-consumer buyers. The incumbents have good profitability but lack top-line growth, while the new insurtech companies show remarkable top-line growth but are yet to demonstrate good sustained profitability. The capital markets are looking for both – growth and good profitability.
Parting thoughts
Insurtech Connect 2021 was a great event that showcased the latest technological innovations in the insurance industry. The speakers talked about how new and innovative InsureTechs have been disrupting incumbents with better products and more focus on end-consumer experience while also touching on key takeaways from their presentations such as optimism for decentralized Finance, high turnover of talent among insurers, need for open APIs to meet customer expectations, etc.
