Fintech firms are reshaping the financial industry, giving the market with innovative value propositions, backed by progressive strategies and up-to-date business models.

Each company must allocate a share of its budget to technology investments. An important question is on the amount that should be invested and in which technology. These two questions help in understanding the peculiarities of the environment in which each business organization operates, and first and especially, that no one-rule-fits-all exists. A reasonable rate of uncertainty is always modifying and improving the results of a company’s action. Mathematical models often comprise exogenous parameters able to reflect the impact of uncertainty on their outcomes. Yet, their success is not always guaranteed.

Insurtech companies, as well as all other business organizations, have limited control over their external environment, which has recently shown some interesting developments. These developments show a clear technological implication.

It is interesting to examine two factors:
• To enhance the understanding of the elements that have significantly reformed the insurance division after years of technological stalemate
• To better analyze the levers on which insurance firms should rely on the near future

The insurance industry, as a whole, maybe positioned two to five years behind on the digital maturity curve when compared with the financial services industry altogether. However, going away from this mere technological issues, an interesting point to analyze deals with the changed expectations and needs of the customers.

The New Customers’ Needs and Expectations

Customers have significantly changed their way of conceiving the nature of the relationship with financial institutions. Therefore, financial institutions should not be tempted to remain static in their positions. They should look forward and try to anticipate their own competitors. Definitely, this is not as easy as it looks. Companies should be able to understand why their customers are changed, and how they can leverage this in order to find more effective approaches in enhancing their interactions and in building trust-based relationships.

Within the boundaries of their business plans, insurtech Startups should include the delivery of personalized value propositions to their clients. Several technologies may support this step. Suffice it to think about IoT: it should be now clear how it helps businesses in the delivery of personalized tasks. A simple example is wearables, such as fitness wristbands. By tracking and monitoring the main health indicators, these devices could send that information to an insurance company, which may be then capable of giving better and tailored services, such as proposing simple incentives to decrease premiums.

The nature of customer interactions has changed, thanks to technology. Presently, insurance companies mainly focus on pushing for new deals and contracts, with customers who are passively recruited and are not fully aware of what they are signing up for. This is a clear symptom of the so-called information asymmetries. Customers are pursued by agencies and brokers. They have been the main players in what has been identified as a “sales heavy” model.

The changing course is consequently moving toward an environment where the weight of customers is much more relevant. Insurance companies are becoming more and more aware of this. Consequently, they are moving to a much different relationship and much more interactive engagement. Relationships are developing toward “interaction”, where customers are becoming active and central players in an environment that is becoming day by day more “customer-pull.”

Finally, things are also changing for what concerns policy and underwriting processes. Customers are now looking for completely different approaches, mainly supported by tech innovations, such as Big Data Analytics and online portals.

The Impact of Technology

Technology is one of the most crucial elements to consider when dealing with the ongoing development of the insurance industry. Insurtech companies are completely aware of the strategical benefits of this lever: Startupbootcamp has analyzed over 1000 companies with the aim of identifying the areas where technology is supposed to have its major effects.

Information and Communications Technology (ICT) has been important for insurance companies. Still, ICT has not been important in insurance companies as it has been in banks.

Information and Communications Technology (ICT) is becoming more and more important for insurance companies. There are several reasons why this is happening. Several forces can drive innovation:
• Markets (3 Cs: Customers, Competition, Compliance)
• Technology
• Design
• Compliance

Information and Communications Technology is in continuous development. Several new solutions are important for the fintech:
• Mobility
• Big Data Analytics
• IoT
• Social media
• Robots and AI
• Blockchain
• Cloud computing

It is interesting to examine the technologies more visible to customers (which are also a driving force).

Mobility is extending at very high rates even in the presence of the current economic crisis, which is still affecting many economies in the world. The use of smartphones and tablets is increasing. The overall number of mobile phones is almost equal to the world population. The sales of smartphones and tablets are expanding faster than traditional dumb-phones and PCs. Mobile is heavily influencing the sales of insurance products. In some cases, it is the ideal solution. An example is travel insurance.

Big Data Analytics are technologies that are very important for insurance companies. Two uses stand out among the many: marketing support and risk management. These two technologies promise to move ICT from being a system of records to a system of engagement.7 In other words, ICT can move from being a big archive to the operational support of decisions in insurance companies, such as the decision to accept re-insurances, decide on the premium on new risks, and so on.

IoT is particularly relevant in the case of insurance companies due to the possibility to base on its customized services for customers, such as the pay-per-use or based on your health fitness and lifestyle.

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