What is Insurtech and How Is It Reshaping Insurance?
With outdated operational systems, analog processes, and poor customer experiences, the traditional insurance industry was ripe for disruption and innovation.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 By innovating on an outdated process and making insurance simpler and more accessible for consumers, insurtech has tapped into a healthy stream of revenue that was formerly monopolized by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.
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.