How FinTech is Taking the Insurance Industry to New Levels
The insurance industry has always been a complicated but firmly rooted environment, but advancements in technology have collided with customer needs, creating systemic challenges for the insurance industry. Mobile players in the industry saw these challenges and introduced customer value with mobile solutions.
Compelled by the success of FinTech and InsurTech startups, the insurance industry is experiencing a systematic change in business operations. This echoes the transformation that banking industries skilfully made in order to enter the FinTech space. Banks partner with FinTech enterprises to enable operation at lower costs and reduce the reliance on legacy systems.
As a result of this partnership, banking institutions are able to retain clients, whilst FinTech companions improve the customer experience with mobile, user-centric solutions. Insurers should look to the banking institutions that have successfully entered the FinTech space as inspiration for digitisation.
The urgency for financial services to offer digital products hit the world hard and moved faster than originally anticipated. The insurance sector now needs to view entering the InsurTech environment as an opportunity to create partnerships. They can build mobile strategies focused on providing value in this increasingly digitised financial ecosystem.
Enhancing the Customer Experience with InsurTech
Financial service companies have gained an understanding of the demand for a mobile-first experience. PwC’s recent FinTech global report states that up until the COVID-19 pandemic and subsequent lockdowns, mobile applications were seen as a “nice-to-have” addition to electronic banking. The changing demands of the consumer in a post-COVID world, as well as advancements in technology, is forcing financial and insurance companies to adopt a mobile-first view of features and development.
InsurTechs have many advantages that insurance companies can and should leverage. These startups are free from legacy products and processes, and they can use emerging technologies to build brand new systems. As a result, they can target specific value pools instead of offering lengthy end-to-end solutions that don’t meet everyone’s needs.
By partnering with InsurTech enterprises, insurers can offer:
- Enriched Connectivity through the use of Artificial intelligence (AI) solutions.
- Personalised Product Offerings.
- Digitised inventory of their possessions data.
- Exceptional Digital Customer Experience.
- End-to-end automation.
Simon Taylor, the founder of Get Indemnity, explains how fintech has helped to overhaul financial services, by digitising key processes.
“This includes the proposition of online application forms, online customer portals to upload policies and documentation, omnichannel support to request feedback from customers and offering our services across mobile and apps,” he says.
Taylor considers that the insurance market will follow in the footsteps of the banking industry and allow for better integrations through APIs.
“Insurer’s legacy systems remain an obstacle, but the ability to capture and transfer detailed risk information creates efficiencies and provides underwriters with better data to price individual risks,” he says
Providing Value to Younger Clientele
Research from the McKinsey Global Institute suggests that 75% of InsurTech business has primarily served retail clientele.
Millennials and the younger Generation X customers favour mobile channels for financial transactions. On top of this, these segments tend to be less loyal to financial companies, and are more likely to swap financial services and insurance policies to fulfill their changing needs.
Younger age groups have been found to value remote transactions, convenience, and as little direct interaction with institutions as possible.
Winning young customers is worthwhile for insurers. Younger demographics are far more receptive to technological advancement than their older counterparts. Insurers can gain loyalty from younger policyholders by providing mobile solutions and optimising with InsurTech.
“This is a very crucial point,” explains Alfie Usher, founder of military price comparison, Forces Compare.
“Certainly in the military or some other organisations, you were guided towards a particular product or insurance provider, but now through the use of Fintech you can find more bespoke policies on your terms - and often get a lot of perks on top such as vouchers, points or more.”
“Getting young people to purchase your insurance product is so important for business because they could renew each year and for the foreseeable future.”
“But with Fintech today, insurers can offer far better premiums and products for young people - and not automatically overcharge them based on just their age, but taking thousands of characteristics into consideration.”
Eliminating Customer Pain Points
FinTech and InsurTech startups address and eliminate the most pressing pain points customers have with banking companies. This is what makes them so successful. Moving forward, a key area will be an increased focus on raising customer interest as well as encouraging interaction.
Policyholder pooling has become a popular social engagement tool to lower insurance rates, and immediacy when addressing customer pain points will become a growing tactic for insurers looking to digitise. To put it simply, if customers can’t get advice, information, or make claims at any time, insurers run the risk of rapidly losing out on business.