Date: 20 April 2021
Author: Devin Partida
Most discussions about fintech focus on banking or investment technologies. While peer-to-peer payment services and stock trading apps constitute a considerable portion of what it has to offer, there’s more. One of the most exciting and fastest-growing, yet less publicized, applications of fintech is insurance.
New technologies have already transformed the insurance industry, whether people realize it or not. Many investors are keen on this trend, as insurance technology companies’ funding soared from $4.4 billion to $6.8 billion between 2018 and 2019. As more companies in the industry pursue digital transformation, this will only continue to grow.
Fintech is transforming the insurance industry for the benefit of both consumers and providers. Here are five ways that’s happening.
1. Automating Underwriting
Underwriting is essential to any insurance business, but it can be slow and tedious. Fintech companies are minimizing inefficiencies by using artificial intelligence (AI) to automate much of this process. AI algorithms can analyze a customer’s records, reports and related information to evaluate risk and produce quotes far faster than a human could.
These tools eliminate persistent pain points for customers that come with traditional, inefficient underwriting methods. Minimizing human involvement in this process can also help remove bias, ensuring customers get the fairest rates and payouts possible. Machine learning algorithms like this also get more accurate over time as they learn from more data.
2. Accelerating the Application Process
Before the fintech revolution, it could take weeks or even months for applicants to receive approval on insurance policies. That process now typically takes mere hours, if not minutes. This remarkable speed increase is primarily due to AI and mobile apps.
Mobile apps enable customers to fill out applications from anywhere using easy-to-understand, user-friendly forms. AI algorithms can then analyze this data to determine if an applicant qualifies for a given policy or not, flagging it for human approval. This efficiency lets providers help more people at once and improves customer satisfaction.
3. Streamlining Claim Filing
Fintech services can also streamline the traditionally laborious process of filing an insurance claim. Many major insurers now provide a way for customers to file from an app, often taking a few minutes at most. These services make the process more straightforward for users and help organize necessary information for the insurer.
Typically, these services involve taking pictures to expedite the process, but some go further. Cutting-edge insurtech systems can aggregate data from smart devices, satellite imagery and other sources to provide a comprehensive picture of the event in little time. This wealth of digital data can make insurance payouts more accurate in addition to streamlining the claims process.
4. Appealing to Younger Customers
Traditionally, insurance isn’t something that falls high on younger adults’ list of priorities. Fintech meets the digital needs of a digital-native generation, helping insurers appeal to a younger clientele. Offering cutting-edge services can draw these customers away from competitors, and they can benefit from finding the right policy for them, not just what their parents use.
Millennials and younger customers value convenience and remote access, both of which are features that insurtech provides. By embracing fintech services, providers can appeal to groups that wouldn’t otherwise give much thought to insurance. This can also improve customer retention, which is a growing concern since younger consumers are less company-loyal.
5. Personalizing Policies
A 2019 study revealed that 73.7% of uninsured adults say they are uninsured because it’s not affordable. Another 18% said they couldn’t find a plan that meets their needs. The personalization insurtech provides can solve both of these issues.
AI algorithms can analyze an applicant’s insurance needs and financial standing to create a customized plan. This can include specialized pricing within predefined company limits. Tools like this can make worries about non-ideal plans or excessive expenses a thing of the past. Providers would gain more customers, and additional consumers could enjoy the security of insurance.
Fintech Will Revolutionize Insurance
Just as fintech has forever changed banking, it’s revolutionizing the insurance industry. From mobile apps to deep learning algorithms, modern technology is reshaping how the sector operates.
Some of these insurtech innovations are still in their early stages, while others have already become industry standards. Before long, many cutting-edge technologies that lie on the fringes today will likely see widespread adoption. Both insurers and the insured will benefit when that happens.
Devin Partida is a FinTech writer and blogger, as well as the Editor-in-Chief of ReHack.com.