Historically, the insurance industry has been slow to adopt new technology. However, the rise of Insurtech firms has sparked a wave of innovation in the industry, resulting in the development of new and improved life insurance products.
In this article, we'll look at how Insurtech is affecting the life insurance industry and the new products that are resulting from it.
What Is Insurtech?
The term 'Insurtech' refers to the use of technology to improve the efficiency and effectiveness of the insurance industry. Insurtech firms are disrupting the industry by developing new and innovative products, leveraging big data and analytics to better understand risk, and providing more personalized and streamlined experiences to customers.
Life Insurance Insurtech
Many customers are dissatisfied with the traditional buying process and the complex, confusing nature of life insurance policies, making the industry ripe for disruption. Insurtech firms use technology to develop new and improved products that better meet the needs of consumers.
Offering more personalized policies is one of the key ways Insurtech is disrupting the life insurance industry. Traditional life insurance policies are frequently one-size-fits-all, but Insurtech firms are using data and analytics to create policies that are tailored to each individual's specific circumstances.
For example, an Insurtech company may use data about a person's health, lifestyle, and occupation to create a policy tailored to their specific requirements.
Insurtech firms are also making it easier for customers to buy life insurance. Traditional life insurance policies necessitate a lengthy application process, medical exams, and in-person meetings with agents.
Insurtech companies are streamlining the process by offering online applications, eliminating the need for medical exams in some cases, and providing customers with instant quotes and answers to their questions via chatbots and other AI-powered tools.
New Life Insurance Options
Insurtech firms are developing new and innovative life insurance products to meet the needs of modern consumers. Here are a few examples of products that have emerged as a result of insurtech innovation:
Life Insurance Based on Usage
Usage-based life insurance is a new type of policy that is based on the lifestyle and behavior of the policyholder. Insurtech firms monitor policyholder activity levels using data from wearables, such as fitness trackers and adjust premiums accordingly.
Policyholders who live a healthy lifestyle may have their premiums reduced, whereas those who engage in risky behavior may have their premiums raised.
Life Insurance for Digital Nomads
Traditional life insurance policies may not meet the unique needs of digital nomads, who are a growing segment of the workforce. Life insurance policies tailored to digital nomads are being developed by insurtech firms, with coverage that is flexible and adaptable to their changing lifestyles.
Life Insurance for Small Businesses
Micro life insurance policies are intended for low-income people who may not be able to afford traditional life insurance policies. Insurtech firms use technology to develop policies that are both affordable and accessible, allowing people in developing countries to protect their families in the event of their untimely death.
Life Insurance with Instant Issue
Life insurance policies with instant issue are intended to provide coverage quickly and without the need for a lengthy application process. Insurtech firms use data and analytics to instantly underwrite policies, allowing customers to purchase coverage in minutes rather than days or weeks.
The Advantages of Life Insurance Insurtech Innovation
The life insurance industry is benefiting from Insurtech innovation in a variety of ways, including:
Increased Customer Satisfaction
Insurtech firms use technology to give customers a more streamlined and personalized experience. This includes online applications, instant quotes, and AI-powered chatbots that can answer questions and provide assistance to customers 24 hours a day, seven days a week.
These advancements make it easier and more convenient for customers to purchase life insurance and receive assistance when needed.
Coverage That Is More Easily Accessible
Insurtech firms use technology to make life insurance more accessible to a broader range of customers.
Insurtech companies are enabling more people to protect their families and loved ones in the event of their untimely death by providing more affordable and flexible policies, as well as eliminating the need for medical exams in some cases.
Improved Risk Management
Big data and analytics are being used by insurtech companies to better understand risk and create policies that are tailored to each individual's specific circumstances. Insurtech companies can more accurately assess risk and provide customers with more personalized coverage by utilizing data from wearables and other sources.
Enhanced Competition
Consumers benefit from lower premiums and more options as a result of insurtech innovation. To remain competitive, traditional insurers are adopting new technologies and developing more innovative products.
Insurtech's Life Insurance Challenges
Despite the numerous advantages of insurtech innovation in life insurance, there are some obstacles that insurtech firms must overcome in order to succeed. These are some examples:
Regulation
Insurtech companies must comply with a variety of regulations and requirements in order to operate in the insurance industry, which is highly regulated. This can be difficult for startups because they may lack the resources or expertise to navigate complex regulatory environments.
Trust
Life insurance is a complex and often perplexing product, and many consumers are wary of purchasing insurance from startups or unfamiliar companies. Insurtech companies must work to earn consumers' trust by providing transparent and simple policies, as well as providing excellent customer service and support.
Data Security
Data and analytics are heavily used by insurtech companies to create personalized policies and improve risk management. However, data privacy is a major concern for consumers, and insurtech firms must take steps to ensure that data is collected and used responsibly and ethically.
Insurtech and Insurance Fraud: The Bad Kind of Disruption within the Industry
As with any technological advancement, there are potential risks that come with Insurtech, one of which is the higher rates of insurance fraud it may lead to.
It's estimated that insurance fraud costs the global insurance industry billions of dollars each year, and Insurtech might make it easier for fraudsters to carry out their illegal activities.
One of the ways Insurtech may lead to higher rates of insurance fraud is through the increased use of automated systems. The reason why this might happen is that startups use algorithms and artificial intelligence to make underwriting and claims processing faster and more efficient.
However, these automated systems may not catch all instances of fraud, as they may lack the intuition and experience of human adjusters. As such, a fraudster could manipulate data to make it appear as though a legitimate claim is fraudulent.
Additionally, Insurtech has made it easier for fraudsters to fabricate or exaggerate claims. As such, this may lead to fraudsters taking a picture of a pre-existing injury and claim that it occurred during an accident. Moreover, with the rise of mobile apps that allow customers to submit claims and supporting documentation, it might even be easier for fraudsters to submit false evidence to support their claims.
Another way Insurtech may lead to higher rates of insurance fraud is through data. Insurtech companies collect data on customers' behaviors, habits, and preferences, which can be used to personalize insurance products and pricing. However, this data can also be used by fraudsters to identify and target vulnerable, unsuspecting individuals.
Furthermore, the speed and convenience of Insurtech may encourage fraudsters to attempt to make fraudulent claims. With the ability to purchase insurance policies online and submit claims via mobile apps, fraudsters may feel emboldened to attempt to cheat the system.
Insurtech has transformed the insurance industry, making it more efficient and customer friendly. But, the focus shouldn’t be only on disruptive tech. Insurtech companies should also remain vigilant in identifying and preventing fraud, through the use of advanced fraud detection systems and human expertise.
Conclusion
Insurtech innovation is reshaping the life insurance industry by introducing new and innovative products that better meet the needs of modern consumers. Insurtech companies are disrupting traditional insurance models and driving increased competition in the industry by leveraging technology to provide more personalized and accessible coverage.
While there are obstacles to overcome, the benefits of insurtech innovation in life insurance are clear, and we can anticipate continued growth and innovation in the coming years.
