InsurTech Playing Critical Role In Shaping Insurance Sector Potential

The Global Insurtech Market Size is expected to grow to USD 166.4 Billion by 2030, exhibiting a CAGR of 39.1% during the forecast period from 2022 to 2030.

InsurTech Playing Critical Role In Shaping Insurance Sector Potential

InsurTech is playing a critical role in shaping the insurance sector potential and providing more humanised, resilient, sustainable, secure, compliant and competitive enterprises, while managing risks and enhancing reputation.

“The foundation of insurtech is the idea that the insurance sector is open to innovation and disruption. Insurtech is pursuing opportunities that large insurance companies have less incentive to pursue, according to stock analyst Marshall Hargrave, by offering highly personalised policies, offering social insurance, and using new data streams from Internet-enabled devices to dynamically price premiums based on observed behaviour.

The term “insurtech” refers to the application of technological advancements to the current insurance industry model in an effort to lower costs and increase efficiency, the speaker continued. The term “insurtech” combines the words “insurance” and “technology,” and it was developed from the term “fintech.”

The 2008 US Subprime crisis accelerated the growth, maturity and adoption of Financial Technology (FinTech). This was augmented by the rise of Mobility, Payment Wallets, Cloud, Big Data, Artificial Intelligence/ Machine Learning (AI/ ML), AI powered chatbots, Robotic Process Automation (RPA), Internet of things (IoT)/ Wearables, Blockchain, Platform-as-a-Service (PaaS), and Infrastructure-as-Service (IaaS).

SaaS was also extended beyond CRM and Collaboration functionsInsurTech is a branch offshoot of FinTech, focusing on improving effectiveness, accuracy and efficiency across the customer lifecycle.

It is also helping crystallise insights from the imploding Big Data sets from the customer, employee and channel “digital dust” across the Asia Pacific (APAC) region, and leveraging these for product innovations, operational excellence, proactive total experiences and other areas.

Insurers have been considering the increasingly stringent Regulatory, Compliance, Compliance, Privacy, Data Interoperability and Cyber Resilience frameworks and guidelines across Asia and worldwide, and have been fine-tuning their Risk Management and Operational strategies accordingly.

This Gartner Research shows that more than half of respondents in the insurance sector stated that the pandemic has resulted in accelerated funding and rising budgets for digital innovation through 2023, and Insurance CIOs are the primary custodians on value-generation from these digital transformation and optimisation initiatives.

The COVID-19 pandemic has undoubtedly disrupted Insurance, Banking, and other Financial Institutions forever. A superior digital customer experience is a definite competitive advantage for all players as barriers to entry are being reduced.

Innovation in InsurTech has accelerated Digital Transformation and Optimisation across APAC, driven by factors such as younger populations, low insurance penetration, rising adoption of mobility and 5G connectivity, increasing incomes and trends of health, accidental and travel risk & awareness, growing automotive and home acquisition, acceptability of embedded insurance and microinsurance, popularity of startups and capital funding, and diversity in preference for traditional bancassurance and agency vis-à-vis digital channels.

The Global Insurtech Market Size is expected to grow to USD 166.4 Billion by 2030, exhibiting a CAGR of 39.1% during the forecast period from 2022 to 2030. APAC is the fastest growing region for InsurTech, with 50% of the market being accounted by China and India.

This research from Mordor Intelligence banks provides insights into the APAC InsurTech ecosystem, such as the higher rise of non-life vis-à-vis life, the emergence of India as the 2nd largest InsurTech region, the preference for channel partners/ agents/ banca in Malaysia and Singapore, and the large ecosystem of more than 300 InsurTech providers.

Innovation in InsurTech is driving opportunities in Singapore, Japan, India, and APAC, with Singapore maturing as a Financial Services and Wealth management hub, Japan’s aging population, India’s rise of middle class, younger population with increasing life, home, health and accident insurance awareness, rebounding of the automotive and real estate sectors, IRDAI’s drive towards composite Insurance licenses, and the vast Insurtech startup.

APAC is also seeing a trend of rising private sector and foreign ownership proportion across Insurance providers, with a rise in autonomy for foreign partners and relaxation in restrictions.

Insurers and their ecosystems strive to provide the best omnichannel customer experience across digital and traditional channels, leveraging Cloud, Big Data, AI enabled chatbots, wearables, mobility and IoT, drones, Extended Reality, blockchain and other technologies.

Insurance sector and other Financial Institutions are now going beyond proactive product suggestions and innovative usage-based offerings to offer Intelligent Chatbots, virtual collaboration with channels, tailormade customer segmentation-based marketing and promotion, seamless onboarding, renewals, claims and appeals management, and personalised proactive customer service.

They are also embedding Insurance into Wealth Management, Holistic Health and Lifestyle offerings, leveraging alliances and 3rd party products, and improving & optimising their books.

InsurTech is also value-adding to the Application Modernization function using the cloud and Intelligent automationInsurtech is enabling cloud powered geolocational services, IoT, leveraging data insights and elastic computing in underwriting, claims and appeals management, enhancing field service, risk and Fraud Management, and augmenting Regulatory and Compliance functions.

It is also helping to ensure compliance and adherence to Regulatory frameworks, filing SARs, Business Continuity Planning (BCP), Disaster Recovery and backups, and other stringent governance considerations.

Innovation in InsurTech is enabling token-based ownership and payments, smart product pricing, document management, agency operations, sentiment analysis, and blockchain/smart contracts powered Decentralised Insurance.

Insurtech players and providers are leveraging Cloud enabled open Application Programming Interfaces (APIs) and Hybrid and Multi Cloud ecosystems to facilitate Automated and Active data management, Data Ops, Storage as a Service (StaaS), and Carbon Footprint tools for Insurance companies. For employees, Insurance majors in APAC and elsewhere are expected to continue to deploy cloud desktop tools throughout 2023 and beyond.

Insurance sector must consider sensitive policyholder data, legacy technical debt, regulatory requirements, data management hygiene, integration issues and vast customer and agency populations when implementing risk management, underwriting and pricing models.

They must also consider solid business use cases, change management, risk management, cyber security, compliance, regulations and governance, and have an ethos of moving beyond cost optimisation to cross functional cloud economics and leverage the cloud to add more business value.

CISOs are proactively looking at incorporating cyber security and resilience tools, designs and processes. They are deploying Cloud Security Platforms such as Secure Access Service Edge (SASE), Cloud Access Security Broker (CASB), Cloud security posture management (CSPM), enhancing IoT device security by design, incorporating DevSecOps & AI/ML in their proactive threat hunting and response systems, and reducing VPN dependencies.

This McKinsey paper highlights the importance of cybersecurity in FSI companies extracting the maximum value from the cloud.

Risk Management has undergone a sea change due to the popularity of Insurtech. Chief Risk Officers are revamping their policies to include Incident Response Systems, Robust Backups, Recovery & Restoration points, Disaster Recovery strategies and systems, Business Continuity Plans, Insurance Coverage and Policies, Negotiations with the adverse actors, legal contracts and handling organisational reputation during adverse cyber and physical crises.

Progressive Insurers are also providing helplines & assistance for customers, agencies and employees, awareness programmes, information resources, self-assessment tools, best practices and other guides for the customers, agents, employees, contractors and general public during steady state and during an adverse event.

Data Literacy, change management, skilling and talent pool challenges across the Providers, channels, employees and suppliers must be balanced with competitiveness and optimised customer acquisition and channel management costs.

It is important to foster an organisation culture of trust, cross departmental handshakes, business IT alignment, change management and open communication, strong feedback mechanisms and incorporation of risk and security.

InsurTech is essential for improving insurance penetration, innovations, customer and channel experiences, operational excellence, competitiveness, and adherence to compliance and regulatory guidelines.

APAC’s tremendous growth potential in the Insurance space is being augmented by 2023’s continuing geopolitical conflicts, recessionary signs, natural disasters, more stringent privacy regulations & compliance, and increasing focus on future proofing and resilience.

Insurance leaders must stay up-to-date on the developments in InsurTech, such as Decentralised Insurance, Metaverse, Web 3.0, blockchain, generative AI and synthetic data, and cloud computing.