What Does Insurtech Mean?

Insurtech is short for insurance technology. It’s technology created for the insurance industry to make it more efficient and drive savings. 

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Below we cover how insurtech works, how many insurtech companies there are, why this type of technology exists, and more. We’ll also look at some examples of common insurtech to help you better understand this unfamiliar term. 

When Did Insurtech Begin? 

The word insurtech was conceived around 2010, a natural offshoot of the growing fintech movement. As new technologies unlocked possibilities in the financial space, consumers got used to the speed and convenience of banking and investing. 

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It makes sense that they’d come to expect the same degree of technological integration in their insurance companies. Thus, insurtech began, and the industry has been growing rapidly ever since. In 2020, only a decade after its start, $16.5 billion was invested in this space. This number is expected to grow in the future as even more technologies are developed. 

How Does Insurtech Work? 

There are numerous types of insurtech. Each of them works in their own way to improve the insurance business through digital transformation. Many of them are designed to make things more efficient and save insurance companies money. Here’s a quick look at a few different types of insurtech to help you see the diversity of this category. 

Artificial Intelligence

Many insurance companies rely on chatbots to manage and improve the customer experience. Chatbots can do things like use data to quote relevant premiums and even process claims, often faster than a person could. AI can also tackle repetitive tasks without error, leaving humans free to focus on more complex jobs.

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Machine learning (ML) is a component of artificial intelligence. This is the use of computer systems that can learn using algorithms and statistical models. Insurance providers use machine learning to predict future losses and create more accurate pricing models, which can lower costs for consumers and increase profits for carriers.

Big Data

Big data describes the collection and aggregation of large amounts of data. This information helps provide insight into human behavior and can be used by insurers to complete better risk assessments and to create more effective marketing materials.  

Internet of Things (IoT)

More things than ever are connected to the world wide web. This network of physical items that can send data is known as the Internet of Things. Insurance companies are taking advantage of these items and using them in innovative ways. Wearables and tracking devices are two examples of new products that are impacting insurance. 

Wearables

With wearable technology such as fitness trackers and their corresponding smartphone apps, healthcare insurers have more accurate information to use in the underwriting process. Insurers can also use wearables to offer incentive programs that encourage wellness among their members, like providing premium discounts or other prizes for reaching certain physical activity targets.

Tracking Devices

Many auto insurance companies offer a discount to consumers willing to plug a special tracking device into their car. This device collects real-time data about your driving habits, such as your speed, the rate of acceleration, and the number of miles you drive. 

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With the information from telematics, insurers can manage their risks a lot more accurately. This can lead to a reduction or increase in your auto insurance rates, depending on how you drive. 

Automation 

Automation technology helps streamline the insurance industry. It speeds up common insurance processes by carrying out a set of rules to run tasks, which frees up employees' time and provides a better customer experience. Some tasks that are typically automated include:

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• Claims intake
• Claims processing
• Regulatory compliance 
• Underwriting 
• Insurance policy updates 

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As insurtech develops even further, more tasks are likely to be automated. 

What Do Insurtech Companies Do? 

Some traditional insurance providers didn't embrace technology as quickly as many customers would have liked. This left a big gap that startups were able to fill when tech-savvy entrepreneurs recognized the need. 

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These companies use insurtech to provide insurance products at an affordable price, with an easy user experience that consumers have come to expect in today's world. 

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Insurtech businesses have opened in every area of insurance and technology, touching all aspects of the insurance value chain. And thanks to the digital aspect, these companies don’t have to be in large cities to succeed. They can operate from anywhere around the world, helping to lower overhead costs and allow for even more competitiveness.  

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Here are a few examples of companies in this space: 

Hourly

Hourly offers workers' comp insurance and payroll services for small businesses with hourly workers. Powered by real-time data, Hourly’s platform simplifies the highly complex workers’ comp process. It syncs your payroll data directly to your workers’ comp policy so you only pay exactly what you owe on your premiums, not an estimate. Its goal is lower audit risk, faster payroll runs, and better claims and safety services for small businesses everywhere. Hourly is a licensed insurance agent with products underwritten by various insurance companies.

Lemonade

A peer-to-peer (P2P) insurance company, Lemonade harnesses the power of AI to predict risk and quantify losses for customers, which helps improve the accuracy of its premiums. Lemonade also uses AI bots to manage the insurance process from end-to-end, offering quick quotes on policies and fast claims processing.  

FitSense

Rather than offering insurance directly, FitSense works with health and life insurance providers to analyze data from apps and wearable devices. This helps to ensure accurate underwriting and enables companies to provide competitive pricing. 

How Many Insurtech Companies Are There? 

It’s hard to get an exact number, as there’s some overlap between insurtech and fintech (financial services and technology.) However, as of 2018, there were over 1,500 insurtech startups around the world. When the pandemic happened and the demand for digital services soared, more businesses opened their doors, and latest estimates report there are up to 3,475 insurtech companies globally.

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Among the insurtech companies that exist, you’ll find they provide a variety of different services in the space, including: 

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• Digital brokers: Use technology to connect insurance companies and customers with paperless transactions. 
• P2P insurance: Connect groups of people who choose to work together to administer their own insurance plan.
• On-demand insurance: Allow customers to purchase insurance from their smartphone without interacting with agents or brokers.
• Insurance software: Create digital tools that streamline the day-to-day operations of insurance companies, brokers and agencies.‍
• Blockchain: Help insurance companies keep data private and information secure.

Insurtech Is a Win-Win

The world of insurance is evolving thanks to the solutions provided by technology companies. With insurtech, businesses can offer a better customer experience for less money—a win-win. Insurtech is growing, as is the ecosystem that supports it. It will be interesting to see the different business models developed to create and leverage technology, and how they influence the industry in the future.