If you haven’t heard of insurtech yet, it’s time to get with the programme. This new buzz-word is short for insurance technology and it’s going to be a game changer.
The term echoes the more familiar ‘fintech’, an umbrella term for the wave of technological advances that have transformed the banking and financial services sector in recent years. Now, analysts predict a similar technology-driven transformation in the insurance industry – hence insurtech.
In this article we’ll take a look at the insurtech trends that are shaping up, what’s already happening here in Kenya and how your company and your staff could stand to benefit. Below are just some of the top trends to keep an eye on…
1. Expanding the reach of insurance in Kenya: Kenya was among the first countries to benefit from mobile phone-based insurtech. This has proved valuable in reality in part due to the poor standards of many competitors within the insurance industry. Although standard technology allows for the online submission of claims and information, many insurers still rely on outdated physical processes.
Kenya was among the first countries to benefit from mobile phone-based insurtech.
Jubilee Insurance has also recently introduced three new apps that will enable customers to access self-service and e-commerce platforms via their mobile phones. With Kenya’s high mobile penetration, this will inevitably continue to be a key area of focus and we can expect many more innovative mobile-based insurtech developments to come.
While the advent of smartphone apps and online portals are not new in terms of technology, the spreading of their use within the global market as well as Kenya has made an impact. The demand for true product portability and ease of use is combining with a level of technical competence to produce a new generation who demand and make use of disruptive technology.
Why this benefits you
From a small business perspective, it will be especially interesting to see how this area evolves. We may see innovations such as the ability for individual employees to manage their usage of their private health insurance on their phones. Potentially we could even see flexible benefits plans emerging, where employees can use a simple mobile interface to select their preferred mix of cover. This sort of facility could be a major plus point for companies looking to attract and retain top talent.
2. Technology-enabled microinsurance: Microinsurance – the provision of cover to lower-income households – has really taken off in sub-Saharan Africa, where many people are on a limited budget and mainstream insurers have failed to gain much traction. Insurtech has played a key role here by maximising the efficiency of microinsurance systems.
The unique model common to microinsurance, wherein premiums and low caps or coverage are offered, has long been available. The key innovation here is not the model itself, but its application. As flexibility and access are improved, businesses as well as individuals and families are taking note.
Why this benefits you
You may be thinking, ‘this is all fine, but what does this have to do with me as a business owner?’ Well, while microinsurance is typically aimed at individuals, families or small local groups, more recently some interesting products have arrived on the market aimed at SMEs. Even leading Kenyan provider Britam has got in on the act, to tap into the huge SME market here, which currently has limited insurance coverage.
So if you haven’t already, you may soon start to notice microinsurance products arriving on the market that meet some of your business insurance needs. Certainly something to bear in mind for the future.
So if you haven’t already, you may soon start to notice microinsurance products arriving on the market that meet some of your business insurance needs.
3. Cost-saving robot tech: The term ‘robot’ conjures up images from sci-fi films and fears of robots taking over the world. However, when it comes to insurance, robotic technology is already making some very positive differences.
Robo-advice is essentially machine-driven financial advice and it is already showing signs of shaking up the industry. The most significant benefit is that robo-advisors cost less than their human equivalent, so there are financial savings that can be passed on to the customer.
Elsewhere in the world, aggregators, or comparison sites, which are already well established in the consumer market, are now beginning to gain a foothold in the commercial insurance market. Even here in Kenya, they are enabling customers to compare insurance premiums from different providers.
A platform called MyInsure has recently been launched, which promises not only to help people choose their insurance cover and manage it through a handy app, but also to make life easier for insurance providers and intermediaries. Other benefits include improved transparency, which will help the industry as a whole and boost insurance penetration.
In another intriguing development, some insurers have recently begun to use drones to help them assess claims, both cutting the cost of human resources and improving the quality of assessments, which in turn reduces the incidence of fraud and keeps costs under closer control.
Why this benefits you
Robotic technology should help to ensure a leaner insurance industry overall, which will hopefully counteract the upward trend in insurance inflation that has been a feature in recent years. And reduced premiums bring obvious benefits for smaller companies or startups as they try to manage the costs of a growing business.
4. Better analysis using artificial intelligence: While insurtech is still in its infancy, we’ve already seen innovative use of artificial intelligence (AI) to make it easier to find relevant products, and apps that do anything from helping users manage different insurance policies to providing customised group coverage.
Accenture’s 2017 report, The Rise of Insurtech, found that insurtech deals in the priority technologies – big data and analytics, AI and Internet of Things – roughly tripled between 2014 and 2016, and AI deals continued to grow strongly in the first half of 2017. It’s clear that this technology is not going anywhere, so it’s up to you as a company to take advantage of it.
AI can be used to analyse big data – the huge collective pool of information gathered from interactions with customers – which has great potential to support decision making and could help all players in the insurance industry to work smarter. Add machine learning into the mix, harnessing the ability of computers to learn from past data patterns and programme their own future ‘improvements’, we could be looking at a recipe for taking the insurance industry to a whole new level of bespoke, streamlined service.
It also appears that most insurtech innovators are opting to work with mainstream insurance providers, rather than competing directly with them. According to the Accenture report, 94% of insurers say adopting a platform-based business model and engaging in ecosystems with digital partners are critical to their success, so it seems there are benefits for both sides.
Why this benefits you
Like robotics, AI is a new technology that has massive potential to increase efficiency in the insurance industry. If insurance brokers and advisors no longer have to sift through the seemingly endless policies available on the market to find one that suits you, they have more time to provide added value in other areas.
Your business could also benefit from using AI and machine learning to find policies that are a better match for your needs at a more attractive price.
5. More accurate risk assessments from connected technology: With traditional methods of underwriting, using actuarial tables, some customers would inevitably end up paying over the odds. However, the Internet of Things – the vast network of web-connected devices – is now helping to bring insurance premiums down for lower-risk customers.
A simple example is that of car insurance providers offering a discounted price to customers who are willing to have telematic tracking devices fitted to their vehicles. Rather than fixing their premiums based on an assumed usage, an accurate mileage can be recorded for every customer with a tracker. One innovative US provider is now even using this approach to offer pay-per-mile car insurance. Meanwhile, many health insurance policies are offering discounts for beneficiaries who wear a fitness tracker. While this area is yet to take off in Kenya, it has great potential and is definitely one to keep in mind.
A simple example is that of car insurance providers offering a discounted price to customers who are willing to have telematic tracking devices fitted to their vehicles.
Analysts predict that blockchain technology could have a similar effect on efficiency, as it has had in the banking sector, in particular by helping insurers crack down on fraud. This could be a major help here in Kenya, where fraud has been blamed for massively inflating premiums.
Why this benefits you
As with the cost-saving robot technology above, it’s clear that improved risk assessment can have a direct effect on your company’s bottom line by helping to bring down premiums.
Making insurance more accessible
According to research by McKinsey, only 25% of the insurtech to date has been aimed at the commercial segment of the market, with the majority being consumer-focused. But of that 25%, most has been aimed at SMEs and this figure is likely to grow.
Insurtech is here to stay, and the technological developments it brings should improve the overall efficiency of insurance provision and drive prices down. This might just make insurance a more viable option for some small Kenyan employers, who previously felt it was out of their reach, and enable others to expand the coverage they provide.
It might even make it possible for some SMEs to provide cover for informal workers – and that could change the lives of thousands of Kenyans for the better.