What is Insurtech and How Is It Reshaping Insurance?

All Tags

By The Boost Team on Oct 26, 2022

9 min read

With outdated operational systems, analog processes, and poor customer experiences, the traditional insurance industry was ripe for disruption and innovation.

Enter insurtech, the multi-billion dollar industry that is changing the insurance world.

What Is Insurtech?

The term “Insurtech” combines the words “insurance” and “technology,” and has multiple uses in the industry. “Insurtech” can be used to describe the innovative technology developed to improve the current insurance model, the companies that create that insurance technology, or tech-focused companies that sell insurance.

How Is Insurtech Reshaping Insurance?

Insurance technology, and the companies that sell and create that technology, are making waves in the insurance world. By innovating on an outdated process and making insurance simpler and more accessible for consumers, insurtech has tapped into a healthy stream of revenue that was formerly monopolized by legacy insurance carriers. In 2021, the global insurtech market size reached $3.85 billion and is expected to reach $5.45 billion by the end of 2022.

Insurtech offers simple, efficient, digital solutions that promote consumer ease and confidence, increasing their likelihood not only to convert but to renew their policies.

In the past, complex, difficult-to-navigate, and slow insurance buying processes were a barrier to both insurance sales rates and post-sale customer satisfaction. If a customer wanted to make a change to their policy, they would need to call their provider and wait on hold until a rep could help them. When a customer filed a claim, they would have to wait weeks to receive a physical check in the mail.

Insurance technology is creating a smoother, more convenient digital process for customers to buy and manage their insurance policies. Besides making it easier to buy insurance in the first place, insurance technology can enable all-digital management of policy lifecycle transactions that would have once required a letter or phone call, such as adding coverage, filing claims, and updating personal information. This is good for insurance providers as well as customers, as better customer experiences lead to higher retention rates.

On the carrier and agent side, insurance technology can dramatically increase workflow productivity, the number of policies sold, and, ultimately, income. Insurtech enables workflows that are highly efficient, entirely digital, and largely automated. Unencumbered by manual processes, insurance agents and brokers can focus on the high-value aspects of their work–consulting with customers, and selling and managing more policies faster. More policies sold equals more revenue.

Insurance technology also enables services like embedded insurance, where insurance can be seamlessly purchased as part of a different, related transaction. For example, companies that sell pet-related products can offer pet insurance as part of their checkout flow. Airlines can sell travel insurance on tickets, at the same time that a customer books their flight. Crypto custodians can sell crypto wallet insurance to people who hold wallets on their platform. Without leaving their purchasing flow, customers can buy insurance by simply checking a box and adding to cart.

This kind of innovative access to insurance has opened up the market to new entrants. Before, the insurance market was monopolized by traditional, large insurance companies, but now non-insurance companies can easily sell targeted insurance products to their customer base. Enabled by insurance technology, more businesses can tap into the revenue of the insurance market and contribute to its growth.

Insurtech Companies: Where Did They Come From, and How Do They Work?

Insurtech companies began to emerge in 2010, as an extension of banking’s “fintech,” to automate and improve insurance processes through the use of big data, machine learning, and other innovative technologies.

There are two primary varieties of insurtech companies:

Tech-focused companies that sell insurance
Companies that create technology related to insurance

Many traditional insurance products are one-size-fits-some, and processes like signing up, submitting claims, receiving funds, and making changes to policies tend to be cumbersome and slow. The tech-focused insurtechs that sell insurance are changing that narrative by providing great customer experiences, easy purchase processes, and more personalized products.

To create a product lineup that suits their business objectives or to offer the most competitive insurance available, these companies will often partner with a variety of insurance providers. They then offer a frontend experience where customers can purchase insurance products from the insurtech’s curated lineup. In order to digitally run their business, companies that sell insurance need technology, which leads us to the second variety of insurtech companies.

Also referred to as “insurtechs,” other companies exist to design products and technology that make insurance-buying processes and experiences more efficient. The technology they create is also called “insurtech,” which we will unpack in the next section.

What Is Insurance Technology?

Insurance technology is designed to improve aspects of the insurance value chain, including marketing, distribution, policy origination, underwriting, services, and claims, which usually involves automation. Not only does insurtech make insurance more accessible, convenient, and efficient for both insurance providers and customers, but the tech also provides better products. For example, insurtech uses data to build more cost-effective products or products that have the right coverages based on what you know about your customer.

On the buyer side, insurance technology gives modern consumers an easy, digital experience when buying or managing an insurance policy. On the carrier and agent side, insurance technology increases workflow productivity, the number of policies sold, and, ultimately, revenue.

What Kinds of Technology are Considered Insurtech?

There are a few different systems that make up the typical insurance company’s tech stack: a policy admin system, an agency management system, and in some cases, carrier portals.

Policy Administration System

The policy administration system (PAS) is the most essential piece of the insurance tech stack. The PAS is the system of record and technical underpinning for all-online insurance transactions. It’s used by the insurance business to track the lifecycle of every policy or quote they manage.

Rating, quoting, underwriting, document generation, document storage, billing, endorsements, cancellations, invoicing, and more are all recorded and transacted by the PAS. This includes things like generating a quote based on information provided in an online form, modifying the policy’s coverage endorsements, or generating the appropriate documents for a new policy and facilitating delivery to the policyholder.

Every insurance provider requires a PAS to help facilitate their business. That being said, not all PASs are created equally, and their capabilities can vary significantly. For companies trying to deliver great online experiences, a robust PAS is essential. PAS capabilities have implications for compliance and data processing, as well as customer experience, so choosing the right PAS is a crucial decision.

Agency Management System

The next important piece of the tech stack puzzle is the agency management system (AMS). An AMS is essentially a Customer Relationship Management (CRM) system, but more robust and insurance-specific. Through the AMS, an insurtech company can track their customer’s policies, renewals, premiums, endorsement requests, billing, and invoicing. The AMS records potential leads, stores information on various products, and tracks commission rates per carrier. It can even give marketing insights about who the insurtech should target with what products and track the entire lifecycle of client policies.

For example, let’s say that a broker just sold a cyber policy to a client. That agent would then create an account in their AMS for the customer, and the AMS would record the effective dates for the policy. Through the AMS, the broker can set tasks to remind them of important timelines like renewal dates and expiration dates, which takes the pressure off of the broker to manually track them. Whenever those dates arise, the AMS will send the broker a message to remind the client to renew their policy.

Insurtech companies also use the AMS to identify cross-sell opportunities across multiple lines of business. Oftentimes, insurtech companies will engage in multiple lines of business and use multiple carriers to access a greater variety of products. The AMS can track the insurtech company’s existing customers, identify which lines of business each customer has selected, and help connect them to a complementary insurance product.

Carrier Portal

Insurance agents and brokers sell policies on behalf of an insurance carrier, and often they need to interact with the carrier to get approvals, documents, or other requirements.

A carrier portal is an interactive portal connected to the carrier’s policy administration system, which brokers and agents can access to get what they need when they need it. The carrier portal gives brokers and agents the autonomy to manage their policies without having to directly contact the carrier for every request.

Once an agent has logged into the platform and generated the required certificate, quote, application, or any other necessary transaction, the carrier can then rate it and determine whether or not they can give back a premium—often referred to as “underwriting” or a “declination.” Carrier portals are specific to each carrier, so if an insurtech company has multiple lines of business with multiple carriers, they would need to rely on an AMS to consolidate the varying data.

Technically, carrier portals are adjacent to the insurance tech stack–they’re not essential for insurtechs to run their business, and they’re provided by a carrier rather than being a system built or chosen by the insurtech. For companies with carrier partners, however, the carrier portal can be an important part in their day-to-day technology.

These insurtech systems work together behind the scenes to improve the insurance process. The PAS is the foundation that tracks the lifecycle of every insurance policy, the AMS is the system that allows agents to transact business against the PAS, and carrier portals allow agents and brokers to self-service their business.

Build, Buy, or Integrate?

These insurtech systems are essential for companies to sell insurance, so every company has to consider how or where they will acquire that technology. One option is to build them in-house, however, building a policy administration system or an agency management system in-house is an extremely difficult and expensive undertaking. Building a PAS alone that supports one insurance product can take two to three years to complete, with several million dollars in development costs.

Another option is to buy from a vendor that specializes in PAS or AMS software. There are many options for this kind of third-party technology. While it can be less intensive than building an AMS or PAS from scratch, buying and outsourcing the custom development work required to integrate with these systems can still be very time-consuming and expensive. The more customization you require, the longer and more expensive it will be.

The third option is to partner with an insurance as a service company, such as Boost. Boost provides the entire infrastructure necessary to support an insurance program, including a state-of-the-art PAS, the insurance products themselves, and post-purchase customer support.

Boost Insurance: An Insurtech Company

Between the two varieties of insurtechs–tech-focused companies that sell insurance and companies that create technology related to insurance–Boost is the latter.

We are an insurance-as-a-service company, which means we provide everything a business needs to launch or expand an insurance program. This includes both a wide variety of white-label, customizable insurance products built in-house by our team of insurance experts, delivered through our robust, industry-leading PAS. We provide fully digital and automated workflows, we handle claims, data, and regulatory management in-house, and we are backed by our managed reinsurance facility.

We know that building insurance products and systems from scratch can take multiple years and millions of dollars, so we have crafted a solution that is simpler and more affordable. We partner with other insurtech companies that sell insurance by providing them with innovative, customizable white-label products to add to their lineup, or we work with them to build brand-new products that address new risks in the market. We also work with non-insurance companies to enable them to distribute white-labeled, embedded insurance products.

We’re set up to help a wide spectrum of insurtechs –from startups looking to enter the market, to larger companies that have been selling insurance for years and want to add new products to their offerings. With Boost, adding a new insurance product to your lineup is as simple as connecting your digital front end to our platform via API.

There is so much opportunity in the insurtech space, and it only keeps growing. Insurance technology is transforming the insurance process to be more efficient for carriers, insurtech companies, agents, brokers, and customers alike.

If you want to learn more about insurance-as-a-service through Boost, contact us, or dive into building your insurance program with Boost Launchpad.

Explore Popular Categories

Boost News Insurance 101 Insurance Infrastructure New Product Development White-Label Insurance

Explore Popular Tags

Business Owners Insurance Captive-as-a-Service Crypto Insurance Cyber Insurance D&O Insurance Data in Insurance Embedded Insurance Employee Spotlight Growing Your Business Guides Insurance Industry Management Liability Insurance Parental Leave Insurance Pet Insurance Reinsurance Why Boost

Share this Article

Selling Non-Admitted Insurance Products vs Admitted: What's the Difference?

May 12, 2023

When it comes to insurance, there are two major regulatory types: admitted and non-admitted. Admitted insurance refers to insurance products that have been licensed by the Division of Insurance (DOI) in the state where they are being sold and are subject to state regulations. In addition to meeting state standards on things like price, coverage, and packaging, admitted insurance products offer additional protection to their end buyers - if the carrier fails, the state will pay a certain amount of its outstanding claims. Non-admitted insurance, on the other hand, refers to products that are not licensed or approved by the state DOI, and do not have the same financial protections from the state. There can be many benefits to offering non-admitted insurance products, but because they aren’t regulated by the state, there are unique responsibilities that agents, brokers, and insurance have to keep in mind. In this blog, we will break down 3 important areas where non-admitted insurance products differ from admitted insurance products, and explain the implications for agents and brokers. By nature, non-admitted insurance products exist to cover hard-to-place risks that most admitted products won’t cover — whether that be insuring a barrier island home that is frequently at risk of flooding or covering Beyoncé’s voice in the event of injury. To sell non-admitted policies that cover these unpredictable, difficult-to-price, high-risk situations, regulations require an agent or broker to first get several declinations from separate admitted insurance carriers. The exact number can vary by state, but the standard is typically three declinations. A declination is a written refusal of an admitted insurance carrier to issue an insurance policy. To get one, the agent or broker will have to fill out an application or written request for coverage to each insurer, and then wait for the insurers to return documents that decline each request. This process ensures that the agent or broker has done their due diligence in attempting to place the risk in the admitted market, and that they understand and accept responsibility for offering a non-admitted policy. This process of getting three declinations often has to be done for every policy sold. Going back to our examples: say an agent goes through the usual process to find an insurance policy for their client’s island home: they make inquiries to three carriers for admitted products, are declined three times, and eventually place the risk with a non-admitted product. If their client’s next-door neighbor then calls and asks the agent to find them a policy as well, the agent would generally have to once again try for three different admitted products before moving on to the non-admitted market. There can be state-specific nuances to the compliance requirements regarding declinations. In some states, there may be exceptions to the declination rule if no equivalent product exists in the admitted market. For example, crypto wallet insurance is a first-of-its-kind insurance offering, and only currently exists as a non-admitted product. In some states, this means the agent or broker selling it can be absolved of having to do the due diligence of getting three declinations from admitted carriers. Some states also allow for getting the declinations once, and then using it for all similar risks going forward. In that case, the agent in our above example wouldn’t need to get three new declinations for the neighbor’s house - the risk would be similar enough that they could use the declinations they had already received as justification for placing their client with a non-admitted product. Every agent and broker needs an insurance license to sell insurance products, and most will need more than one. Insurance is licensed at the state level, so a license is required for each state you intend to sell in. There are also different types of licenses required for selling admitted and non-admitted products. Here are the four types of licenses an agency will need to sell non-admitted insurance products. Current agents and brokers will already have the first two license types but may need two additional license types to start selling non-admitted products. The basic license required for selling insurance is known as a “producer” or “agent” license. This is obtained by completing a pre-licensing course and passing the required tests in a particular state which allows an individual to sell insurance in that state. An agency or brokerage will also have to attain an “entity” or “agency” license. This license allows a company (rather than an individual) to sell insurance within the resident state. Selling non-admitted insurance products requires an additional non-admitted license. In most states, the non-admitted license will have an entirely separate license number from the individual license. Finally, selling non-admitted insurance products requires a surplus lines license. While non-admitted products don’t have to go through the intense approval processes with the DOI, the companies that create these products do need to submit articles of incorporation, a list of officers, and various financial and company information to the surplus lines office, which is run and regulated by the state. Any agents or brokers who wish to sell non-admitted insurance policies also need to be licensed by this office. Both admitted and non-admitted insurance products are subject to taxes in the states where they are being sold. While every state has its own taxes and fees, there are some standard differences between how admitted and non-admitted insurance products are handled across the board. The major differences boil down to how and by whom taxes and premiums are calculated and collected. For admitted insurance products, taxes and fees are generally included in the premium, and are calculated and remitted by the insurance carrier. The broker or agent selling the product doesn’t usually need to concern themselves with taxes for these products, since those are the carrier’s responsibility. Non-admitted insurance, on the other hand, is not so simple. For these types of insurance products, the premium calculations are handled by the insurance carrier, and the taxes and fees are calculated separately by the broker or agent. The broker or agent is then responsible for collecting those taxes and passing the money on to the appropriate state government(s). The process goes something like this: The insurance carrier determines the premium amount and sends that information to the agency or brokerage, along with the policy documentation and a state disclosure form declaring that the non-admitted product complies with state regulations. From there, a broker or agent has to calculate Excess and Surplus lines (E&S) tax on top of the premium and any surplus lines fees. Many agents and brokers also add an administrative fee for non-admitted products to help offset the greater administration costs. Once the total amount is calculated, it can be shared with the policyholder. Once a policyholder makes their payment, the broker or agent will have to send the premium payment to the carrier, remit the taxes to the state, send fees to the surplus lines office, and take the administrative fees for themselves. For this process, agents and brokers typically use a state-specific surplus lines agent management system (AMS) to file the product, policy, policy number, effective date, expiration date, line of business, E&S carrier, and the premium amount. The AMS will also calculate and reconcile the taxes, and then that state will send them a bill at the end of the month, quarter, or year (depending on which state they are selling in) to settle the remaining taxes. In short, non-admitted billing is much more operationally burdensome for brokers and agents to support versus admitted, which is why adding on an additional administrative fee is very common. Non-admitted insurance products are an important part of the insurance market and can help provide vital protection for hard-to-place risks. Being equipped, informed, and licensed to sell these products can open up lucrative new lines of business for agents, brokers, and insurtechs. If you want to learn more about selling non-admitted insurance or getting your insurance licenses through Boost’s licensing-as-a-service, contact us.

Offering Insurance: Build, Partner, or White-Label?

Nov 1, 2021

So you’ve heard that the insurance market is set to pass $700B gross written premiums this year and that changing consumer expectations are creating big opportunities for companies that haven’t traditionally offered insurance. Now what? If you’re ready to get started with offering insurance, your options fall into three general buckets: build and sell the insurance product yourself from scratch, partner with an insurance company to offer their product, or work with an insurance-as-a-service provider to offer white-label insurance products. So, which is right for your business? We’ll go through what’s involved with the top 3 options, as well as some pros and cons to be aware of. Your first option for offering insurance to your customers is also the most intensive: you can create the insurance products you want to offer, in-house. With this option, you would essentially create a business within a business: an insurance agency that operates as part of your company. As with most business-DIY options, the big advantage of building your own is that you can create exactly what you want. You’ll be responsible for the concept, design, operations, compliance, and tech, so you can approach each area in a way that centers your business needs. Building a new business from scratch is never easy, but insurance is a particularly difficult vertical to get into. It’s complex and heavily regulated, and getting started requires a significant investment of time and money. How significant? Here’s a quick overview of the steps you’d need to follow to create your own insurance products and offer them on your website. All in all, you’re looking at a multi-year timeline to build your insurance products in-house from scratch, with a considerable financial investment as well. And that’s not even considering the ongoing financial investment to maintain them - long-term program management requires significant resources. Besides just the effort involved, the long lead time for getting an insurance product to market means that by the time you get there, the market may well have changed. On top of time concerns, there’s another disadvantage you should weigh before going the build route. Everything we just covered about starting your own insurance program probably falls outside your company’s core business and specialization. What’s more, recruiting and hiring the right people to manage it may be significantly more challenging than hiring the right people for your core business. It’s often difficult to know what to look for when hiring for a completely different skill set, outside your core industry. Once you’ve brought all these new people on board, you’ll also have to manage them in an area where your core leadership has little experience. Consider whether the benefits of building it yourself outweigh the inevitable distraction of running an entirely separate secondary business within your company. Instead of creating an insurance product yourself, you might choose to partner with an established insurance company to offer your customers their product. In this scenario, you would have a link on your site for the customer to buy insurance. When the customer clicks it, they would be taken to the insurance partner’s website to buy the product from them. This is sometimes called affinity marketing, or click-through affinity. In this situation, you would be essentially acting as lead gen for your insurance partner. Your partner may pay you a certain amount per click, but after that you would not participate in the transaction. Your insurance partner would complete the transaction, collect the premiums, and own the insurance relationship with the customer. A click-through insurance partnership like this is both fast and simple to set up. After you’ve worked out the details of the partnership agreement, all you’ll need to do is add the link on your website to direct customers to the insurer. A partnership like this is also relatively low-commitment. Because you’re simply passing web traffic on to the insurer, you can later switch insurance partners or even remove the insurance option from your site altogether with a minimum of disruption to your business. The easy setup of a click-through affinity partnership also comes with considerable drawbacks. Because you’re just providing a link to your partner’s signup form, you lose control of the customer immediately after they click the link. Whatever comes after that is up to your insurance partner. If the customer has a negative experience during the process, it might reflect badly on your brand for offering the referral. Even if the experience is a good one, losing control of the customer comes with another big downside: you also lose control of the revenue. The insurance customer relationship will be with your partner, and they’ll collect the premiums. While a click-through partnership is a fast and straightforward way to connect your customers with insurance, it also removes one of the major benefits of offering insurance on your site in the first place. With this option, you won’t see the kind of regular recurring revenue that you would if your company were able to collect the premiums. Further underlining that it’s not your product (or your customer), with this kind of partnership you’ll have little to no input into the insurance product you’re offering. Your insurance partner will build, develop, and sell the products that best fit their business interests, which may or may not be a good fit for your particular customers. As just another marketing partner, you won’t have much influence to try and get a product created that closely matches what your customers need from insurance. A relatively new third option is to work with a company that offers insurance-as-a-service, and white-label the insurance product they provide you with. If you aren’t familiar with insurance-as-a-service, it generally works like this: insurance-as-a-service providers are companies who have already done the work we outlined in Option 1 (Boost is one example). They’ll have all the necessary state licenses to create their own insurance products, and they will have already negotiated with licensed carriers to back those products. A good insurance-as-a-service provider will also already have built the necessary technology to offer an embedded insurance product experience. Your company can then sign on with the provider to offer one or more of the insurance products they’ve created, under your own brand name, on your company’s website or app. Unlike affinity partnerships, partnering with a white-label insurance-as-a-service provider doesn’t simply generate customers for someone else. Your company will be the one selling the insurance product, on your own website. The customer will buy the policy from you, and you’ll be the one to collect the premiums and own the ongoing customer relationship. White-labeling an insurance-as-a-service product offers many of the advantages of building it yourself, but at a fraction of the time and cost. Because your partner will have already done the heavy lifting on things like operations, technology, compliance, and capital, you can easily offer the right insurance products for your customers - and get to market in a dramatically shorter timeline versus trying to create an insurance company from scratch. A white-label insurance product also allows you to reap the full business benefits of offering your customers insurance: While white-labeling an insurance-as-a-service product is much faster and easier than building one yourself, it’s still more involved than simply adding a link to your website. Working with an insurance-as-a-service provider may take longer to implement than partnering with an insurer for click-through affinity since you will be building the full experience into your website rather than just linking out to an insurance partner's website. Selling white-label insurance policies also requires an important additional step: someone at your company will need to be licensed as an individual broker, and then sponsor a license for your company. You may recall this as Step 1 in the build process - the broker license is required to legally sell insurance, which your company will do with its insurance-as-a-service products. This sounds much more intimidating than it actually is. The insurance licensing process itself is relatively simple and straightforward. However, it does require additional effort from one of your employees (usually a senior executive who is unlikely to leave the company). The other good news is that not only is the licensing process easier than it sounds, but once it’s done, it’s done. You’ll need to maintain it with fees, renewals, etc, but you won’t need to go through the process again as long as that employee is still at the company. A good insurance-as-a-service partner will also help you with this step, so you can check the box and start offering insurance to your customers as soon as possible. The insurance market is changing quickly, and there’s never been a better time for new entrants to take advantage of the embedded insurance opportunity. Depending on the route you take to get there, however, the cost, time to market, and experience for your customers can vary a great deal. When starting on the road to offering insurance, it pays to carefully consider your budget, your timeframe, and your business goals, so that you can choose the option that’s right for your company. Is insurance-as-a-service the right option for you? Boost can help get you started. Contact us today to learn more about your options for offering the different ways to offer insurance with one of our Boost product experts.

The top 3 takeaways from our embedded insurance consumer survey

Embedded Insurance Survey Results: What We Learned From Consumers

Feb 3, 2023

You may have heard that embedded insurance is a big opportunity to grow your business, but are your customers actually interested? We wanted to get the story straight from the source, and so in Q4 2022 Boost surveyed 650+ US consumers. We asked about their experiences with insurance, how they felt about their current insurance options, and what mattered most in their insurance purchases. Here are the top 3 things that we learned from our consumer insurance survey results. [See Full Size] In our insurance survey, a whopping 73% of consumers had either already bought insurance from a non-insurance brand, or would be interested in doing so. While price was mentioned most often, other reasons included brand loyalty and convenience. Trust was another important factor. 62% of respondents were interested in buying financial products from a trusted brand, rather than a bank. For millennials, the number went up to 95%. First movers might have an advantage here as well. 20% of our respondents had never been offered financial products from a retail brand - but they liked the idea. All this is promising news for companies outside the traditional insurance sphere who are looking to build revenue and customer loyalty with embedded insurance. If you can deliver the product and experience consumers are looking for, the appetite is there. It’s hardly a secret that convenience is crucial to customer experience in the digital age, so it comes as no surprise that it was important to our respondents. 59% told us that they’d be more likely to buy insurance if it were offered digitally, as part of a related transaction. Younger consumers were more likely to be enthusiastic about digital insurance: nearly 70% of respondents aged 18-29 were interested in buying insurance directly through a transaction on a retail website. For half of our respondents, embedded insurance wasn’t a novel idea. 50% had already bought embedded insurance at least once, at the point of sale in a related transaction. For many consumers, insurance is a long-term purchase. 68% of our survey respondents told us they’d had the same insurance provider for at least two years, and 10% had had the same provider for more than five years. For retailers, insurance could also be an overall boost to retention. 62% of respondents said that when a retailer offered protect-your-purchase options, they were more likely to be repeat customers. Learn more about offering embedded insurance in our free guide, or contact us to get started.