Fintech is a perfect model for disruption in insurance
As a result of the digital revolution, the financial services have seen an influx of new technology that has been dubbed ‘fintech.’ These new technologies have already contributed to the moulding of modern day financial institutions, and fundamentally changed the way financial services are structured, provisioned and consumed. Investment in financial-technology (fintech) companies grew by 201% globally in 2014, indicative of the huge shift in mindset.
‘Instech,’ the current buzzword for disruptive tech within the insurance industry, has been a late bloomer in comparison, with technology startups and innovation just starting to make a dent. Although this late start leaves insurance well behind, it could give the advantage of hindsight, allowing insurance companies to learn from similar industries to prepare for inevitable change.
A good place to see some potential fintech trends that could extend to insurance, especially insurance product development, is in the banking industry, like insurance it is highly regulated and cautious of risk, but in comparison they have started quickly adopting new technologies.
Here’s a look at 4 big fintech trends that could impact insurance:
Enigma, a company that “creates technologies that unify data, whether public or private, so that it can be brought to bear on the world's most important problems.” Is an example how technology startups are making big data accessible, and manageable for banks and financial advisors.
Already close to essential in fintech, insurers need to become familiar with big data, a technology that could enable a complete in-depth understanding of insurance consumers. Insurers could start to fully understand where customers are in the decision process, what event originated a decision being made, as well as the interaction points a consumer harnesses, and that’s only the the tip of the iceberg.
Customers now expect companies to have an understanding of what is happening in their life, their own unique situation. Banking is starting to adjust to this new consumer demand, creating more personalized products, with a higher level of segmentation.
This need of personalization especially comes to fore in critical times of need, like when someone’s making a claim. AIA Vitality, which has been launched in Australia and Singapore, shows how this can be applied to insurance. AIA offers rewards for getting involved in healthy behaviours, a great example of insurers personalising their product offerings based on individual differences.
It has become the norm for consumers to desire and expect product and service information at their fingertips at any time and in any place. Many consumers are now conducting business and extensive information searches online, and tools like Backbase are making banking endlessly accessible.
Insurers need to recognize this shift in business operations. A recent study conducted by IBM shows the way consumers want to interact with their insurance providers has changed. Instead of the traditional channel approach to insurers interactions with customers (which infers a one-way communication pattern), customers are now wanting access to information, not just to be given it when the insurer deems appropriate.
Machine intelligence may sound like something out of a sci fi movie, but it’s revolutionizing the way so many industries make decisions, the financial sector included. FinGenius, for example, provides “Human-like reasoning and cognitive computing for complex data.”
This type of technology is proving itself extremely powerful. With machine learning, the slow, meticulous process of strategic decision making can be accelerated, without any loss of accuracy. This ability will become essential to insurance, an industry that relies on data, and mathematical accuracy to make informed decisions.
It wouldn’t be a complete list of disruptive technologies without mentioning the cloud revolution. Banks are starting to take advantage of robust, secure cloud based infrastructure. With early security concerns being resolved, the speed, scalability and flexibility of the cloud has had a strong pull.
Cloud based payments processing company Currency Cloud is one of the vanguards of Fintech cloud innovation. Their example shows it’s not long before more and more of the uncertainty falls away, as the security of cloud computing proves itself again and again.
When the risks of the cloud diminish, as with most disruptive financial technologies, insurance will not be long to follow.