Top Five Trends Driving Growth in Insurtech
The pace at which insurtech is growing has caught the attention of the investment world and is creating buzz for venture capitalists and angel investors who want to get on the gravy train before a degree of maturation sets in. The next 12 months will see a range of new trends emerging and booming as digital insurers explore new innovations and market demands.
Indeed, according to a recent Insurance Revenue Landscape 2025 report by Accenture, experts predict global insurance industry revenues to grow to $7.5trn by the end of 2025. We took a look at the top five trends driving growth in insurtech
1) Legacy systems are out, digital insurance is in
There’s no question that legacy systems are now the dinosaur in the room. Over the past two years, many incumbents have struggled to maintain services and provide adequate products for a rapidly changing market. Now acceptance is well and truly here, and the race to implement digital offerings is on as innovative startups continue to disrupt the marketplace. Recently, a report from CB Insights and Gallagher Re revealed insurtechs have attracted more than US$15.8bn in investment over the past year, and are scaling at pace as a result.
2) Telematics, UBI and electric vehicles in InsurTech
Usage-based insurance cover is now becoming a mainstream offering, from supporting the gig economy, to covering fleets and private customers, technology and a wide range of data sources, as well as increased connectivity has resulted in an explosion in the space. Not only that, but the electric mobility market is is expected to grow from $171bn to $725bn by 2026 - a CAGR of over 27%. By 2030, data also suggests there will be 115 million electric fleet vehicles operating globally. Innovative, customer-centric insurers that offer market-driven products and services will enjoy a competitive advantage in terms of risk, sustainability and ESG targets.
3) Cloud platforms an advantage for InsurTech
Digital operatives have taken advantage of the services available on the cloud, such as data storage, collection, aggregation and application. By using cloud-based technologies, they are able to connect to the wider business ecosystem far more easily, therefore increasing their scaling opportunities. Internal, on-site, difficult to update systems of yesteryear are now ripe for dismantling.
Cloud services drive innovation – which in an increasingly fast-changing world, is an essential survival tool. According to McKinsey, the average worker spends 20% of their time looking for information. Labour-intensive tasks are managed far more efficiently, freeing up time to work on innovative projects. The cloud enables businesses to stay ahead of the curve through continuous creativity and new ways of working.
4) InsurTech, ESG and green initiatives
Rather than just greenwashing their data to look better, the latest insurtech startups are genuinely invested in ESG mandates, often going beyond the necessary requirements to forge sustainable partnerships with investors that have similar interests.
Their impact is notable because they then attract customers that are looking for companies aligned with those objectives. The question of risk management has also motivated insurers to adopt ESG regulations. A recent study by ABRDN cited that 81% of respondents identified it as a key driver and that insurance companies are long-term investors, so the long-term risks ESG challenges pose, provide significant risks to them. Furthermore, over 65% of life insurers said that their long-term investment horizons prompted their adoption of ESG practices.
5) 5G, Big Data and InsurTech impact
The continued roll-out of 5G globally has resulted in increased connectivity, but also many more data sources to access. KYC insights are sharper than ever before, and the management of Big Data has become a key subject for insurers. The use of data, as a result of these enhanced technologies, has shifted. Rather than using information from a few data sources over a period of a decade, companies are now using multiple data sources over shorter periods of time, through IoT channels, and gaining greater insights.
Speaking about the issues surrounding Big Data collection, connectivity, and management, Sean Russell, Senior Data Governance Consultant at DTSQUARED, explained, “The customer is at the heart of the insurance industry and the main driver of modernisation, including the use of big data to provide improved service to the customer. Relevant up-selling and cross-selling opportunities can be developed by reviewing data on existing customer buying habits and policy requirements."
He added,“A better customer experience is made possible through insights gained from the review of customer interactions and transactions, including everything from call-centre interaction to top line policy information. Even new products, bundled offerings, and services can be developed using insights gleaned from data collected on existing buying trends cross referenced with geography and consumer demographics.”