The Transformative Opportunity of Insurtech-as-a-Service

While the insurance industry has been slow to adopt new technologies, insurtech companies are now driving disruption in this space.

The insurance industry is changing, and the pace of change is accelerating. Insurtechs have already started to focus on becoming more digital and pursuing sustainable development to improve the future of the sector.

These opportunities may not be as hot as autonomous vehicles or virtual reality, but they will still transform how businesses operate. So here's a closer look at how insurance companies and insurtech incumbents alike may leverage these opportunities.

Insurtech-as-a-Service for Digitalisation

While the insurance industry has been slow to adopt new technologies, insurtechs are now driving disruption in this space. Nonetheless, digitalisation does not necessarily imply upending existing insurance companies. In reality, there's a lot more potential in assisting them with insurtech services to help them digitise their operations.

Insurers can improve their operations by automating procedures, increasing customer satisfaction, and boosting transaction speed using sophisticated technology and data analytics. Artificial intelligence and machine learning can also help insurers become more predictive and understand their customers better, allowing them to provide a higher level of service.

The insurtech industry can further leverage its potential by partnering with existing insurance providers instead of competing against them. According to a paper by Hitachi, "Insurtech as a Service ... delivers an organisation's end-to-end technical estate as a managed service."

It's a win-win situation since instead of maintaining an in-house army of developers, it allows insurance firms to focus on their customers, service offerings, and financial development. Insurtech companies also benefit from this arrangement since they can scale their businesses more quickly and provide a better level of service.

The rise in digitalisation also means there are numerous insurtech related verticals to focus on, including risk, innovation, cybersecurity, insurance products, marketing strategies, distribution channels, operations management systems, and talent acquisition. In short: All processes need to be digitised.

Insurtech-as-a-Service for Sustainability

While many people are still not fully aware that climate change is an existential threat, there has been a steady uptick in demand for sustainable products across all sectors of the economy. Climate change is also a significant concern for insurance firms and insurtechs since the increasing frequency and intensity of natural disasters have been driving up costs.

According to a study by Capgemini, "Insurers undeniably carry the financial burden of climate change-induced natural disasters on a more significant level compared to other financial services sectors." They can adapt to this change by embracing new technologies and ensuring they are prepared for future catastrophes. This move towards sustainability also includes better risk modelling, pricing models (and premiums), mitigation strategies, and resilience planning.

In addition to helping insurance companies digitise, Insurtech-as-a-Service companies can also help insurance firms integrate ESG (environmental, social, and governance) factors into their products. For example, insurance companies can better manage risk by using more accurate data on climate change patterns to determine which areas are more likely to be impacted by natural disasters like floods and hurricanes.

Legacy insurance companies can also pay Insurtech-as-a-Service providers to monitor the environmental impact of their products, such as car insurance firms determining how many miles a policyholder drives, hence providing them with helpful information on how they could reduce their CO2 footprint.

A research paper by Debevoise & Plimpton also notes, "Risks related to, and the approach generally to, ESG issues can also impact a company's reputation. With the advent of viral social media, customers can easily express displeasure, with wide exposure, at how companies, particularly those that are public-facing, have handled ESG issues."

Why is Insurtech-as-a-Service so effective for insurance companies?

Insurtech-as-a-Service is so beneficial for insurance businesses because it allows them to concentrate on their core strengths. The concept of Insurtech-as-a-Service is based on Software-as-a-Service (SaaS). The main distinction is the former only focuses on providing insurance companies with the tools, data analytics, and integrated services they need to operate more efficiently.

The insurtech industry is now emerging as an essential tool in helping insurance companies go through digitalisation and become more sustainable through technology. This is one of the most challenging problems facing insurance companies, since they are inherently risk-averse when it comes to embracing change.

In conclusion, the issues that beset the insurance industry are severe, but there is optimism. This level of enthusiasm is because Insurtech-as-a-Service offers a way of transforming insurance companies into tech-savvy, sustainable businesses on a scalable and large scale.