Sep 7, 2020
What is Insurtech and why it is the future of the insurance sector
The Insurtech concept (also Insuretech) represents the commitment to innovation and development of new products and services within the insurance sector. The use of the latest technologies to expand and optimize the business model of an entire sector.
Insurtech continues what was started by Fintech and applies it to the insurance sector from an expert and focused perspective.
The Insurtech concept
Insurtech or Insuretech, made up of the English words Insurance and Technology, is the result of the convergence between digitization, disruptive innovation strategies and the insurance sector.
In recent years, and by the intense focus on Fintech, the insurance sector, closely related to banking and finance, has decided to accompany this sector forward to modernize, digitize and grow taking advantage of new technologies.
The recent application of innovative techniques such as artificial intelligence, machine learning or big data to the insurance sector, as well as the birth of startups, focused on offering this type of solution to create disruptive insurance products has strengthened and consolidated Insurtech.
The Insurtech ecosystem
Given the complexity and diversity within the insurance sector, Insurtech has been configured and structured in different ways. Insurtech organizations and companies have been born and evolved from and with different perspectives. That is why we can define and structure the Insurtech ecosystem through two different categorizations:
- Generalist: This way of approaching the Insuretech ecosystem understands its dynamics from an operational perspective, splitting the sector by the function of the different Insurtech companies:
Product distribution insurance, Insuretech technology providers (Value chain, security, big data, Risk & Fraud, customer experience), large digitized insurance companies and startup insurance companies with disruptive products.
- Sector-like: Like the sectorial division in the insurance sector, the Insuretech ecosystem can be divided and addressed in a sectorized way by the type of insurance service offered, taking into account that it incorporates all the dynamics, methodologies and characteristics of Insurtech:
Customer service, buyers, platforms, marketplaces and those categorised by reconverted traditional products: eHealth, Senior, Objects, Travel, Home, Life / Savings and Burial.
In this way, it has established a sector that, imbibing from Fintech, has been able to structure itself to evolve, grow and digitize.
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Insuretech innovative solutions
Banking and financial industries deal with much of the needs of the insurance sector. One of the most characteristic Insurtech innovations, shared with Fintech, beyond the creation of new types of products and services previously unthinkable, has been the reinvention of the customer onboarding process.
Regtech and Fintech were already using identification technology a disruptive solution to user registration needs in their KYC (Know Your Customer) processes and AML (Anti-Money Laundering) controls. The transposition to the digital sphere of this process resulted in eKYC (electronic Know Your Customer).
Therefore, the insurance sector has obtained the following benefits thanks to the inclusion of video identification in its processes:
- Reducing costs in customer acquisition.
- The possibility of expanding business globally, without borders.
- Automate customer acquisition while improving user experience.
- To be able to offer products, services, contracts and all kinds of procedures remotely and online.
- Improving security controls and fraud detection.
- Complying with the most demanding regulations regarding technical and legal security when acquiring new clients both in-person and online.
Regulations that affect the Insurtech
Insuretech, like the Fintech sector, must comply with a series of specific regulations and laws that fully affect its operations and activities. AML5 and eIDAS, well-known regulations in the banking sector, fully affect Insurtech:
- AML5, or 5AMLD (Fifth Anti-Money Laundering Directive), and the future AML6 allow, for example, that a user can become a customer in seconds via mobile phone anywhere if a number of technical and legal requirements are met. It is a basic regulation that must be complied with by all those businesses in the insurance sector that wish to digitize their customer acquisition processes. We can observe the same case in, for example, cryptocurrencies investments.
- eIDAS (electronic IDentification, Authentication and trust Services) focuses on contracting, regulating all aspects of electronic signatures for any type of management, including especially those carried out in sectors as delicate as banking, finance and insurance.
Download here for free our complete guide on AML5 and eIDAS, the two main regulations that affect the Insurtech sector.