How Fintech complements Insurtech.
FinTech and InsurTech
Technology has had a profound impact on the world of business. The finance sector has benefited from recent developments in technology. This has allowed the birth of some new concepts – FinTech and InsurTech.
FinTech and InsurTech are short forms for Financial Technology and Insurance Technology, respectively. After the financial sector successfully adopted and demonstrated the growth capabilities of FinTech, the insurance sector could not stay far behind. That is when the concept of InsurTech was born.
What is FinTech?
FinTech is a concept that has gained momentum recently. It makes use of innovative technology to improve and automate the delivery of financial services. However, FinTech is a broad term covering payment, securities, investment, financing as well as financial advice.
According to the European Commission, FinTech can be regarded as the movement to bring transformative and disruptive innovation to financial services by applying new and emerging technologies that address consumer demands through automation.
It increases the efficiency of the financial sector by focusing on continuous innovation in business functionalities.
It brings forth radical breakthroughs that can create entirely new markets.
FinTech mainly focuses on three areas:
Traditionally the financial sector had been an industry where companies with an extensive portfolio of fixed assets created barriers to the new startup. With the advent of innovative technological infrastructure, neo-banks can now directly compete with the traditional large banks. The use of technological advancement helps fulfill the requirements of the digital customer effectively and efficiently.
As the customers get used to the extensive reach of technology, the demand for innovative and customized services has drastically increased.
FinTech heavily relies on technology for financial transactions online, thereby creating a massive demand for regulators to control the risk of money laundering, terrorist financing, etc.
From customer acquisition to customer servicing, technology accelerates the speed and lowers the cost of operations. The insurance ecosystem, in its entirety, needs a technological upgrade. In this regard, FinTech is playing an essential role in integrating technology across functions to provide the much-needed technical upgrade.
It is an amalgamation of the word insurance and technology. InsurTech has created for itself a unique space within FinTech.
Overcoming the traditional ways, when a customer wants to claim a policy, he/she needs to fill a form, scan it, send it via post to the insurer, and then wait for a cheque to deliver and get cleared. This process is time-consuming and easily avoidable now with the advancement in technology. Customers want the complete process automated, streamlined, and easily accessible.
Today, customers prefer an insurance provider that provides insurance cover according to their lifestyle. Every process right from the risk-free underwriting, on the spot purchasing, account activation to claim to process, everything is now automated in the insurance industry.
As consumer behavior changes, technological advancements, and digitization of insurance systems disrupt the insurance industry, InsurTech and technology startups have started focusing on innovation to redefine the customer experience through improvement in the customer’s journey. Insurers are actively seeking partners for technical support in creating InsurTech infrastructure that fulfills their online customers’ requirements.
FinTech is affecting the insurance industry in a number of ways:
1. Customer channels:
Many digital channels partner with insurers to embed their product into various products, which allow customers to find and choose the product that best fits their lifestyle. Partnership with insurance leaders and distributors allows for an improved trust factor in the consumer decision-making process.
2. One place insurance
Through the e-commerce methodology, insurers can provide flexible product options. Time-flexible, modular, and adjustable coverage has evolved to accommodate life stage, lifestyle, and wellness changes among policy seekers and policy-holders. Technology has allowed competitive product pricing through the use of data analysis and Artificial Intelligence (AI).
3. Digital FinTech IQ
An Insurer that understands the digital journey and accurately predicts its consumers’ future needs will always win the market.
4. Machine underwriting
Using technologies like Artificial Intelligence (AI), Machine Learning, and Algorithm Design, insurers can provide customized services that help to underwrite faster and easier.
5. Location free business
Digitization in the insurance sector made it possible for insurance providers to be unrestricted by geographical barriers. This has caused an improvement in cost efficiency, and its direct beneficiaries are the customers. By using digital algorithms, insurers can connect with the market in ways challenging to tap through traditional marketing channels.
6. Integrating technology
The integration of technology must be comprehensive, not siloed, across the organization. Customers usually interact with online insurance providers through websites or web-applications.
Additionally, the back-end processes should be designed to seamlessly connect them to the front-end processes with as little friction or technical mismatch as possible.
7. User experience
The use of new technology-based solutions forms the core of FinTech. It virtually guarantees an increase in customer benefits. FinTech aims to increase customer engagement in terms of usability, efficiency, transparency, and automation.
Why the insurer should consider FinTech:
Cutting-edge technologies like artificial intelligence, mobile banking, biometric verifications, big data drive growth across an industry today. By investing in these technologies’ development, companies make finance more accessible, secure, and reliable.
Another reason company implement FinTech solutions is to improve the Point-of-Sale (PoS) and Secure Payment Gateway experience for their consumers.
Insurance businesses use data to provide customized insurance products to its customers. FinTech allows the insurance sector to collect data, apply analytics, and understand real-time algorithms that help calculate the customers’ future needs. InsurTech players use technology in real-time to collect customer data, which allows them to get accurate customer behavior insight. This creates room for better engagement with the customers in real-time. Increased investor interest is fueling new entries into the emerging InsurTech sector; thereby, driving growth, competition, and innovation.