Innovation in Insurance: 5 Ways Insurtech Startups Are Disrupting the Market

Meaningful change is sweeping through the modern insurance market, largely owing to the technological advancements spurred on by insurtech startups.

As convenience and demand for personalization become prominent policyholder demands, insurtech solutions are helping traditional insurers modernize for the digital age and grow operations despite the mounting competition.

Below, we’ll dive deeper into the insurtech revolution and consider the five prominent disruptions.

The Insurtech Revolution in Insurance

If it seems like the rise of insurtech startups came out of nowhere, you wouldn’t be entirely off the mark. According to a report from Grand View Research, the global insurtech market size is set to experience an impressive CAGR of 51.6% between 2023 and 2030. This doesn’t account for the significant growth already charted by insurtech startups over the past few years.

As insurtech startups have grown their market share, they’ve played an increasingly influential role in the insurance market. That’s because many of their solutions are designed to address age-old challenges and make the insurance space more agile, efficient, and policyholder-friendly.

The positive disruption these solutions offer is sending waves throughout the industry, driving insurers to evolve their operations and make them more suited to the modern industry demands or risk becoming obsolete and beaten out by more innovative players.

1. The Role of Insurtech Startups in Risk Assessment

One of the biggest ways insurtech startups are revolutionizing the insurance space is how their solutions are reshaping the traditional underwriting process. Advanced technologies like data analytics and artificial intelligence are helping insurtech providers offer more accurate and up-to-date risk assessments. Especially for insurance processes that are as data-intensive as underwriting and risk assessment, modern technologies are completely transforming how these processes are completed.

Research from McKinsey shows that digitized underwriting supports better loss ratios and profitability for insurers. The same research found that leading P&C insurers in Europe and North America who built advanced data and analytics underwriting capabilities saw loss ratios improve three to five points, new business premiums increase 10-15%, and retention in profitable segments increase 5-10%.

Many of these improvements come from the fact that modern insurtech solutions can process large datasets from a wide range of sources quickly and efficiently in a way that wouldn’t be possible through manual work alone. Such programs can process unstructured data alongside claims history and traditional structured data to provide insurers with a more comprehensive and well-rounded risk assessment during underwriting than was previously possible or feasible.

Plus, predictive modeling capabilities that many insurtech startups leverage give insurers the ability to predict the likelihood of future claims and potential risks for a given policyholder based on the vast data available they generate. In turn, this allows for more accurate pricing and precise underwriting decisions that support the insurer’s risk management objectives.

2. Customer-Centric Solutions: How Insurtech is Transforming the Insurance Experience

Today’s consumers expect the same level of convenience and personalized service from insurers as they expect from other service providers and companies. While the traditional method of insurance was to offer one-size-fits-all policies, the modern approach now includes much more personalized and data-driven policy recommendations, pricing, and online access to insurers that weren’t available just a decade ago.

Insurtech startups help insurers meet these rising consumer demands and offer more policyholder-centric solutions that leverage technology for better convenience, personalization, and overall satisfaction.

One key way that insurtechs do this is by powering convenient mobile apps where policyholders can manage all details of their policies, initiate a claim, access important policy documents, renew or cancel insurance coverage, and more–all at their own convenience. Rather than needing to visit a physical office or wait to speak with a representative over the phone to access such information, user-friendly mobile apps provide the convenience of access that modern consumers are looking for.

The growing availability of consumer data is also assisting insurtechs to offer insurers more personalized services. These startups leverage big data and advanced analytics to create highly customized insurance products based on the individual’s data, preferences, and behavior patterns. The insights gleaned from such data help insurers tailor their coverage options and pricing to meet the specific needs of each policyholder, thereby boosting their satisfaction and loyalty.

3. Blockchain in Insurance: Exploring Secure and Transparent Transactions

The integration of blockchain technology and insurtech solutions is helping support more secure and transparent transactions in the insurance sector. The applications of blockchain are widespread, though its use in the insurance space has the power to reinvent how insurers handle payments, contracts, claims payouts, and more.

The data reinforces just how quickly blockchain use is growing in the insurance space. It’s reported that globally, blockchain in the insurance market was valued at $496.9 million in 2021. It is projected to grow at a CAGR of 52.4% between 2022 and 2031, ultimately reaching an estimated market value of $32.9 billion by 2031.

The basis of the blockchain’s power comes from its decentralized organization with an immutable ledger that no one person or group can change, delete, or alter. All transactions that occur on the blockchain are visible to all parties. This drives better transparency throughout the insurance ecosystem, promoting less fraud and better transaction security.

Because of this greater security and transparency, there’s less of a need for intermediaries to handle payments and billing, which can help reduce costs for both insurers and policyholders, in addition to making operations more efficient and streamlined. Insurtech startups that can help insurers adopt blockchain technology will provide immense value as the world turns increasingly digital and the drive for better margins and profitability intensifies.

4. AI-Powered Claims Processing: Streamlining and Accelerating the Settlement Process

Artificial intelligence (AI) has many possible use cases across the insurance industry, including claims processing. Certain insurtech startups utilize AI to help streamline claims processing workflows for better efficiency and accuracy. Traditionally, claims processing is a resource-intensive task, requiring a claims adjuster to manually review the details of the claim before it can be settled. However, using AI-powered chatbots and other processes helps diminish the reliance on human workers to initiate and process claims.

This more efficient claims processing can improve the policyholder experience, eliminating some of the friction and delays that were typically expected when filing a claim. AI-powered processing systems can be programmed to collect claim details from policyholders, ask follow-up questions, verify coverage, update the insurer’s system, and more without human intervention.

Another key advantage that AI-powered claims processing provides is better fraud detection and prevention. In fact, it’s reported that about 60% of insurers are already using AI to detect fraud. AI-powered predictive analytics models help insurtech startups identify patterns associated with fraudulent claims by analyzing historical data. Thus, these programs can work to predict and flag potentially fraudulent claims for further review, reducing the potential for financial loss.

5. Telematics and IoT: Revolutionizing Risk Management in Insurance

Lastly, the advent of telematics and Internet of Things (IoT) devices and their use by insurtech startups is shaking up the market. These devices can gather real-time data, supporting more accurate risk management assessments and personalized coverage and pricing.

Telematics can be used to help insurers offer usage-based insurance. Specifically for auto insurers, telematics devices can be installed in vehicles, tracking data like speed, braking, and acceleration to transmit back to insurers in real time. Based on the assessment of the collected data, drivers that are deemed to be “safer” may enjoy discounted or lower premiums for the lower perceived risk they post to insurers.

Another example of using IoT devices relates to connected home devices, including smart sensors or home monitoring systems. Insurtechs offering such devices help homeowners detect potential hazards and risks like water leaks, fires, or break-ins in real time for early intervention, mitigating the amount of damages that insurers will need to pay out to settle a claim. These insurtech devices add a level of security and safety that may earn policyholders discounted premiums.

Transform Operations with Insurtech with Insuresoft

Insurtech-powered industry disruptions don’t come without their own challenges. However, there’s no doubt that insurtech startups are quickly transforming what was traditionally a slow-moving and analog industry. These ongoing transformations are likely to continue over the coming years, especially as new startups emerge and find new use cases in the industry for emerging technologies like AI, machine learning, and data analytics.

With Insuresoft, you can access core insurance technology that helps you shine. Modernizing insurance operations for the digital age can feel complex and complicated, but with Insuresoft’s Diamond platform, insurers can feel empowered to seize innovative opportunities and power forward in today’s dynamic marketplace.

Insuresoft is a trusted technology partner to many leading P&C insurers, providing the all-in-one enterprise software they need to efficiently complete core insurance processes, unlock powerful business intelligence, and offer a top-tier policyholder experience. Contact us today to learn more about our innovative technology solutions.