Insurtech Strategy in a Time of Crisis: 4 Practical Examples of How Insurance Companies Are Turning Technology into a Competitive Advantage

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In a hyper-competitive business landscape, insurance businesses often find themselves stressed by many factors to deliver results and innovate quicker, compounded with the intensified frequency of offering better customer and operational efficiency, and growing returns on investment (ROI).

Moreover, insurance providers have to stay watchful and comply with continuously changing regulations in order to decrease operational uncertainties. On top of that, they have to ensure speedy time to market while outperforming their competitions and employing top talent.

Besides, in the current ever-changing business environment it is essential for insurance companies to align their business with IT.

In this article, we’ll cover 4 practical examples of how you can transform your insurance business with the help of technology.

They are: 

• Utilizing state-of-the-art technology
• Fueling agility and flexibility
• Making use of big data
• An exemplary customer focus

Utilizing state-of-the-art technology

Technology brings to the table some very useful tools for insurtech to promote growth and development and to foster the information exchange between internal and external stakeholders. It makes tasks easier to do and strengthens the insurtech infrastructure.

According to Accenture’s Technology Vision 2019 report, 96% of insurance top management state that the speed of innovation in their companies has grown over the past three years due to emerging technologies. 

New technologies, such as distributed ledgers, artificial intelligence (AI), augmented reality (AR) & virtual reality (VR), and quantum computing are kick-starting the insurance industry progress and providing outstanding business opportunities. For example: 

• Distributed ledgers will augment the data networks by getting rid of the need for third parties, as well as providing substantial cycle times and efficiency gains.
• AI is already improving the insurtech customer experience and re-enforcing data-driven decisions.
• AR & VR offer new opportunities for people to interconnect and immerse in the world around them while leaving out traditional barriers like distance.
• Quantum technology guides us in tackling the toughest computational challenges in new revolutionary ways.

Why it matters

With the help of technology, the insurance business can:

• Improve operational efficiency
• Enhance its communication with customers
• Safeguard its security and privacy 
• Have a competitive advantage over its rivals
• Simplify the existing processes
• Implement new projects and initiatives 

Examples

A UK-based insurance startup, Tractable, utilized AI to quicken accident and disaster recovery by using a computer vision to reproduce the visual damage evaluation, instead of humans conducting these assessments. It closed $25 million of Series C funding in March 2020. 

With the help of AI algorithms Tractable can assess vehicle damage in a few minutes and speed up claim settlements. AI helps to reveal any possible inaccuracies that may lead to substantial cost savings. 

What is more, the insurtech startup claims that it sped up the appraisal procedures by processing photos of areas affected by natural disasters, like hurricanes, and predicting the costs needed for repairs.  

Multinational insurance firms like Ageas, Covea, and Tokio Marine are making use of Tractable’s platform to deliver the next wave of tech innovation to accident and disaster recovery victims worldwide and make data-driven decisions that significantly refine the customer experience.

Fueling agility and flexibility

Nowadays, insurtech firms have an essential strategic need for agility and flexibility in their organization, so they can promptly react and adjust to the expanding insurance requirements and thus provide an overarching value in every area of the business.

Flexibility is an absolutely indispensable component of agility. The old methods and processes were not built for the speed and scale that we see taking place now. A let’s-wait-and -see-how-it-goes attitude is destructive in the long-term as competitors are maturing and improving every day. 

An agile approach allows insurance organizations to adopt a flexible iterative approach and shift their technological capabilities towards adapting to the quickly changing client needs. 

Being agile has a well-recognized impact on the insurance industry: it speeds up product delivery from 200% to 400%, decreases the development costs from 200% to 300% and achieves 90% employee engagement. 

Many smaller insurtech firms and startups are adapting to the clients’ demands and expectations faster than the large players. An agile transformation across the insurance enterprise offers advantages from an iterative approach and cross‑functional collaboration to embracing the entire potential of technology.

Why it matters

Agile processes in insurance harness change. By reorganizing itself in order to meet the needs of the market, an insurance firm can:

• Quicken time-to-market
• Improve project visibility
• Address ambiguous requirements
• Eliminate risks from testing too early and too often
• Improve alignment between teams and management

Many insurance firms have invested in building agile teams and they work according to the Scrum methodology, but do not make the fundamental change of front‑to‑back work delivery across their enterprise and IT environments.

In a fully agile enterprise, all business operations are immersed into the continuous cyclical process of discovery, prioritization, building, operating, analyzing and evaluating.   

Common roadblocks to the agile transformation of insurtech companies are the following:

• A lack of coordination and collaboration in strategic planning that may lead to misperceptions, conflicting priorities and incomplete execution.
• A lack of synchronization between different methodologies, like waterfall, etc.
• A lack of automation may lead to slow development progress and can stall a project. 
• A lack of leadership and commitment can jeopardize the overall project quality. 

To build an effective agile process, an insurance company may use the following tactics:

• Apply a progressive process in defining what needs to be built.
• Use a cross-functional and collaborative approach to strategic planning.
• Make the most of an iterative and repetitive planning cycle.  

Examples

The big giants understand this need and are making acquisitions to reinvent the insurance arena into what we see now. In January 2020, Amazon, J.P. Morgan and Berkshire Hathaway announced that they are teaming up to resolve the rising healthcare costs and are planning to revamp the insurance industry. They rolled out their venture, called Haven, to 30,000 employees in the US. With Haven, employees don’t need to pay deductibles. Instead, they can earn money each month by fulfilling specific wellness activities, like keeping their blood pressure below a certain target. The money they earn can be used to cover a visit to a doctor or the cost of medications. 

Making use of big data

Established processes and structures in large insurance companies are not that easy to change. Slow processes, outdated IT infrastructure, and reluctant customer services can make an insurance business stagnate. 

Not surprisingly, 89% of companies perceive big data as a revolutionary step towards digital transformation. Big data helps insurtech firms to:

• Gain a better understanding of customer behaviors
• Obtain insights that can be used to grow an insurtech business
• Enable real-time decision making
• Identify new sources of revenue
• Discover new products and services that can be offered to customers
• Foster better development outcomes

Why it matters

World-class insurance firms utilize the benefits of business intelligence (BI), advanced analytics and big data in real-time, unlike in the past when it took several days or weeks to compile a report. Insurtech companies can access customers’ behaviors, sentiments and engagement to forecast future customer behavior and to analyze movable assets as well as enumerate business transactions without the unneeded third-party approvals. 

Incorporating BI and advanced analytics into your processes will improve your business performance and build a competitive advantage. 

Examples

Here’s where new players come onto the stage. They are revolutionizing insurtech and designing data-driven experiences. WeFox Group, a German insurtech startup, has grown its revenues over $100 million and serves more than 500,000 customers, which makes WeFox Group a leading insurtech provider in Europe. The WeFox Group has several insurance brands, of which one of them is One Insurance, which enlarged its revenues tenfold in 2019, to $30 million. 

Interestingly, One Insurance’s loss ratio (the percentage of premium insurance earned to that which is paid in claims afterwards) is below 40%, which is much better than the industry average. One is Germany’s quickest growing provider for third party liability and household insurances. 

The competitive advantage One has is in its ability to make use of big data and understand risk in a much more technology-driven way. It uses predictive risk insurance and geotriggering – so that insurees can build short-term insurance around their life. It also allows insurees to assess the risks and rewards, and create custom insurance packages.  

An exemplary customer focus

Present-day insurance customers have high expectations of insurtech providers. According to Accenture’s Global Consumer Pulse research, only 29% of insurance customers are happy with their current insurance providers, and as few as 16% are going to buy more from them. 

According to McKinsey’s research, the five key factors driving customer satisfaction are:

• Claims settlement speed 
• Simple communication with the insurer
• Professionalism and insurer knowledge 
• Insurer etiquette and culture
• Smooth, simple, and transparent processes

It may be surprising to find out that ‘settlements paid’ ranks in 12th place, while the insurer’s knowledge, professionalism, etiquette, and politeness are much more important. In other words, the users care more about the service than about getting paid. 

Why it matters

An exemplary insurance provider will utilize digital innovation to obtain insights, offer personalized services and scale, and profoundly collaborate and connect with its customers. It will excel at delivering a tailored customer experience to the various segments and will build trust within its brand. Insurtech providers that take the initiative to provide their clients with a wider range of high-quality products and services are better positioned to obtain a leading role in the industry.

Therefore, insurance companies that exploit the full capabilities of digital transformation and adapt to the needs of current and potential customers are likely to have the advantage, and win the customer’s heart and business. 

“When we talk about digitalization with the representatives of large firms, topics such as systems and interfaces, artificial intelligence or automation, quickly come up. These are all interesting and important aspects. But it is still the users and customers who make decisions and work with business applications. This is not about communication between machines, it’s about a company’s relationship with its customers,” says Jan Webering as he explains the approach. Jan Webering is the CEO of Avenga and has been supporting companies with his team since 1999 to master the digital transformation.

Examples

A great example of a digital-first insurance company is Lemonade Insurance. It’s clearly outperforming its competitors and has invented a new insurance business model based on behavioral economics, technology, and digitalization. The main value proposition is “instant everything,” with 90 seconds to get insured and 3 minutes to get paid. With this simple offering, Lemonade quickly won customer loyalty through providing a personalized approach and being very easy to use. Lemonade uses AI and chatbots to allocate insurance policies and allows its users to file claims on desktop and mobile (via Lemonade’s iOS and Android apps) without engaging with insurance brokers. Corporate social responsibility is another feature of Lemonade’s business model, as a part of its profits go to nonprofits of the customers’ choice, in the Lemonade’s annual “Giveback” program. 

Conclusion

Technology has substantially changed the insurance industry. It’s an unstoppable process and insurtech businesses are embracing it by implementing innovative digital technologies and models to make the insurance processes easier and to provide a seamless digital experience to their customers.

These 4 examples of technological disruption in the insurance industry are not new. However, the successful implementation of digital technologies is crucial to match the speed of insurance firms’ actions to the speed of business opportunities. These actions are not trivial because they can improve business performance and customers’ lives, and ultimately disrupt how we measure our milestones.

By reorganizing your mindset to manifest agility and flexibility, and also by implementing AI, big data, and AR & VR in your insurance company, you can get on the path towards sustainable and persistent growth and development. 

Transform your insurance business together with Avenga

Statistics show that 71% of insurance businesses are in the midst of technology disruption. It means that now your organization has a powerful opportunity to gain a competitive advantage.

Avenga can bring together a team of industry experts, software and test engineers, as well as data scientists and business analysts to empower your path to transformation. 

With over 20 years of experience, 9 innovation hubs and a leading position as a product development outsourcer (PDO), Avenga offers scalable solutions that outrun the disruption tempo.

Working with 2,500 remarkable people located in 5 countries, we can deliver innovative solutions and accelerate your performance. 

Join us on your transformation journey.