<h3>Technology is combining with traditional industry practices to create: insurtech. How is data analytics transforming insurance providers and platforms?</h3>
“There’s not going to be a single industry that will be disrupted more by the contextual data revolution than insurance,” said Julian Teicke, co-founder and CEO at Wefox Group.
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<h3>What challenges are facing the insurance industry?</h3>
Complacency, according to Julian, represents the biggest issue facing insurance. He painted a stark picture of an industry in stasis.
To some, insurance – in its current form, at least – is a mechanism for delivering shareholder value, but not consumer value. As Julian put it: “For the last 200 years, insurance was the best business model in the capitalistic world.”
Julian believes that, rather than trying to grow, insurers try to wring more profit from their existing customers with higher premiums and opaque product bundles.
Incumbent insurers, he argued, have little incentive to change, as the model is not only profitable, but reliable.
“You pay back a little bit less to the customer than they paid in,” said Julian. “So, essentially, it&#8217;s a money multiplication machine.”
“There&#8217;s no urgency whatsoever [from large insurers],” he continued. “A big revolution is happening beneath the surface, and it’s going to be a big one for the incumbents.”
<blockquote>There’s not going to be a single industry that will be disrupted more by the contextual data revolution than insurance.</blockquote>
– Julian Teicke, co-founder and CEO at Wefox Group
<h3>Six ways insurtech will transform insurance</h3>
Julian outlined what he believes are the six advantages insurtech has over existing models:
<ol>
<li>Insurers don&#8217;t focus on fast growth. Rather, they focus on collecting incremental increases from existing customers. By peeling away these existing customers, insurtechs can grow rapidly.</li>
<li>Insurers don’t make a lot of money from the risk business. Julian explained that, for every US$100 that comes in, US$80 is for claims, US$10 is for administration, and US$10 is for sales. The margin on any given transaction is “not very big” – merely plus or minus US$10. Technological innovation increases the risk margin by finding ways of analysing data to reduce the loss ratios.
<li>Adopting a data-led approach reduces administrative costs. With straight-through processing and automation, administrative waste can be cut and efficiency increased. Speed and reduced costs are in the interest of both the insurer and the customer. </li>
<li>Using data increases sales efficiency by finding more promising leads, and provides an opportunity for selling more bespoke insurance bundles.</li>
<li>Technology can make reactive financial protection proactive. This helps customers reduce their risk. By using contextual data to prevent risks from happening, customers will not have to make a claim in the first place.</li>
<li>Insurers are struggling to attract talent. Put simply, established insurance companies can be a boring workplace for enthusiastic engineers. The failure to attract top tech talent means insurtech can win by creating better corporate cultures.</li>
</ol>
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