Disrupt and innovate: The future of insurance

There are three key areas in which the future of insurance is already being influenced.

As the world develops ever further and faster into a technology and data-driven place, traditional industries are experiencing enormous disruption. The outlook is clear: adapt or get left behind. This has been discernibly true within the insurance world, where up until now a lack of innovation and adoption of digital experience has seen it lagging behind. However, that is quickly changing.

There are three key areas in which the future of insurance is already being influenced, and where it will likely find itself being defined. Financial tech developments, the advent of the Internet of Things, and burgeoning social entrepreneurship will all play a huge role in shaping our interactions with and understanding of insurance. By looking at each of these factors, we can begin to gauge the seismic shift about to occur in this most historic of industries.

The evolution of fintech and its embrace of insurance

Fintech, or to drop the portmanteau, financial technology, has long been developing partnerships and investments in a variety of areas. Peer-to-peer lending, blockchain and online currency payments have typically been the favoured arenas for investors to use fintech to optimal effect. However, in the last few years this has begun to change and the development of insurance services has become increasingly popular. And why shouldn’t it? Insurance is historically a safe bet, evolving into its modern form during the Enlightenment era. Subsequently, it has ridden out the last 400 years as one of the soundest global industries, even surviving the 2008 financial crash relatively unscathed. The big change, however, sees these insurtech start-ups not seeking to overturn large, traditional insurance companies, but rather partner with them.

One of the biggest parts of the new cooperation between insurance and financial tech companies has been the introduction of the plug and play model. Opening up sizeable new markets through the formation of strategic partnerships between insurers and online businesses, especially those working in e-commerce, this has become an enormously important and influential part of the industry. Forging these horizontal connections enables companies to disrupt traditional practices and engage with a much broader customer base.

For those willing to make the jump, the rewards are great: simplesurance recently made the news after it secured $21.2 million funding to branch into the UK market. With their one-click service solution, the Berlin-based start-up specialises in providing insurance for e-commerce products and has since 2016 been backed by global insurance giant Allianz.

The benefits of partnerships such as that between Allianz and simplesurance typically span to both companies and their customers. Where startups are often unable to raise sufficient capital and access certain distribution channels, large insurance providers are able to step in and assist, while benefitting from the startup’s use of digital innovation, flexibility, and new markets.

The Internet of Things and insurance as a ‘Living Service’

It’s an inevitability with outcomes so far ranging we cannot yet know their scope. The Internet of Things is one of the big topics of the moment, and already in evidence in various ways. In the future we can expect to see it be extensively rolled-out to areas of our lives we previously might not have imagined to be tech-compatible.

As has been widely discussed, businesses of all kinds can expect to find actionable consequences from IoT integration in various arenas. For insurance, this will certainly be the case. The aggregation and analysis of big data will make charting value propositions substantially easier and more accurate. The key areas in which IoT will force changes are in home, life, auto, and health insurance. With the use of information gathered through smart devices fitted to your home appliances, car, or even yourself, your personal insurance plan can become entirely customisable.

IoT-assisted insurance is estimated to save insurance companies vast sums of money. By throwing out the reactive model of claims assessments and instead focusing on prevention and early detection, a more proactive management of customer relationships can be adopted. In the auto industry alone, IoT car safety technology is expected to save insurance companies $45 billion in the next five years alone as a result of the reduced number of crashes.

Breaking down barriers through social enterprise

Our future is set to be fraught with social and environmental problems, the solutions to which will inevitably need to be found in order for our continued survival. Increasingly, it is social entrepreneurs and enterprises that are stepping up to this challenge. Making enormous inroads in the fields of healthcare, mobility and sustainable agriculture, small groups of individuals are gaining traction as the agents of global change. By working alongside these groups, insurance companies are once again demonstrating a proactive approach to handling future events which may have extreme consequences on their business.

With new social enterprise initiatives come the opportunities for further partnerships between public and private bodies. Already, we have seen successful cooperation between social enterprises and healthcare providers: the funding enables small schemes to bring new innovations to the greatest number of people, while for the healthcare insurers, future costs are mitigated by the implementation of preventative measures. On top of this, there is an increasing consensus that companies need to invest more heavily in forms of corporate responsibility: millennials’ affinity for social causes is well documented and many companies are recognising the large returns that reflecting this will have.

Insured for a more connected future

Whatever exactly the future holds, it has become apparent that insurance companies are waking up to the need to change their operational model. Small groups and start-ups are able to harness the power of digital developments and social impetus. By forming partnerships with them, large insurers can not only broaden their market but develop a better, more proactive method of working. From what we can see, this can only be a good thing both for everyone involved.

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