The Rise Of Insurtech Startups And The Implications For Traditional Insurance Companies

The Rise Of Insurtech Startups And The Implications For Traditional Insurance Companies

By Rajarshi April 27, 2023 - 403 views

Insurtech startups have managed to carve a sizable niche for themselves in the global industry sphere. They are at the root of the disruption in the insurance industry that has made traditional insurance companies sit up and take notice.

Insurtech startups are technology driven companies which are foraying into the insurance segment, offering greater innovation in insurance products, services, and experiences, while offering easy coverage options to a growingly tech-savvy customer base.

While they have not managed to obtain significant market share till now, it is evident that they represent the future of the insurance industry in a manner of speaking. This is what insurance companies in the conventional realm should monitor in order to stay ahead of the competition.

The growth of insurtech

The rise of insurtech startups has mainly been attributed to the digital transformation in insurance that they have made mainstream, in a manner of speaking. At the same time, they have enabled more customer-centric insurance products and improved service, while saving both time and money. These are aspects which are contributing to their rapid rise throughout the world. Here are some aspects that are worth noting in this context:

  • Investments have steadily gone up in the insurtech segment, touching a whopping $2.7 billion in 2015 alone. The average investment for each insurtech also went up to $22 million in this year. Needless to say, the figures have only grown over the last few years. 
  • Reports also indicate how the US and UK are key markets for insurtech players along with Germany. The Asia-Pacific region has a smaller market share for them, although it could be the quickest-growing region in the next few years. 
  • Insurtech startups are majorly focusing on the retail category, with 75% of their business concentrated here and the rest in the commercial category. Digital technologies and mobile/online channels are offering them quicker retail growth, with more youthful and millennial customers becoming predominant in the sector as compared to baby boomers. 
  • Digitally-savvy customers are not as loyal to companies and perceive financial offerings as interchangeable based on their evolving requirements. They prioritise convenience, speed, and remote transactions. This is the segment which is driving the insurtech boom worldwide. 
  • A majority of insurtech startups are flourishing with digital interfaces for customers and newer concepts that traditional players have only started exploring. 
  • Many such technologies have driven greater innovation in insurance, including usage-based products, peer-to-peer solutions, micro-insurance, and more. Several others are deploying technologies like ML, IoT, Blockchain, and AI for this purpose. 
  • India alone is witnessing huge demand for term life and health insurance, just as Africa and Southeast Asia, while categories like property insurance are also seeing sizable demand. 
  • The BCG (Boston Consulting Group) also reports how P&C (property and casualty) was the insurtech segment with the highest funding levels in 2020, garnering $3.4 billion, followed by health, multiline and life insurance plans.

What is the X-Factor offered by insurtech startups? 

What lies behind the disruption in the insurance industry, brought about by insurtech startups? What is their X-factor in a manner of speaking? Well, it is a combination of factors in reality. Some of these include the following: 

  • More competitive pricing of products through data analytics, AI, and IoT. 
  • Automated underwriting, risk evaluation, contract processing, and claims processing, based on analytics and predictive modeling. 
  • More personalised policies and recommendations based on historical data analysis and assessment. 
  • Better customer experiences through technological platforms, personalised services, digital application and documentation procedures, and swift self-service mechanisms. 
  • Greater efficiency and swifter information access without procedural delays.
  • More flexible, transferable, and specific options for catering to highly personalised needs. 
  • Lower operating costs for companies with digital and remote operations. 
  • Predicting, detecting, and plugging fraudulent claims and other activities. 
  • Swift claims management, with automated verifications, fraud detection, and back-end processes. 
  • Faster and more accurate data analysis for risk assessment and classification. 

So where does the traditional insurance sector go from here? Experts feel that going forward, there will be more collaborations between traditional and insurtech companies. Brick-and-mortar traditional players are already experimenting with digital platforms and innovative solutions for retaining their customer base.

They will increasingly want to reach out to insurtech startups for leveraging their technological expertise, while offering the reliability and brand value that they bring to the table. This could become a dominant trend going forward. Otherwise, the disruption that is afoot, could eventually see insurtech gaining ground as a concept itself, something that is already taking place worldwide. 


What is actuarial science and how does it relate to analytics?

Actuarial science is all about the assessment of financial risks in finance and insurance, with the use of statistical and mathematical methods. Actuarial science can apply analytics in order to classify, evaluate, and predict uncertain and future events. The assessment and identification of probable losses/risks can be accomplished by the integration of analytics into actuarial science. 

How can analytics be used in actuarial science?

Analytics and data science can use multiple techniques within the broader paradigm of actuarial science to make informed and accurate predictions about probabilities of risks. Some techniques include recognition of patterns, visualisation of data, and statistical modeling.

What are the benefits of using analytics in actuarial science?

Analytics makes actuarial science-related underwriting functions more efficient, enabling faster and more accurate visualisation of data, evaluation and identification of probable risks, recognition of vital patterns, and more accurate pricing/risk assessments.

What are the challenges of implementing analytics in actuarial science?

Technological integration and lack of awareness/knowledge about analytical tools are the major challenges towards the implementation of analytics in actuarial science. Also, the quality of data is another aspect that has to be taken into account.

Are there any examples of successful implementation of analytics in actuarial science?

One example could be using data analytics in actuarial science to evaluate the historical and present data of a customer along with identifying patterns in behavior and other aspects for calculating a fair insurance premium as per his/her risk levels. 

The Rise Of Insurtech Startups
Article Name
The Rise Of Insurtech Startups
Insurtech startups have disrupted the insurance industry with innovation in products, services, and experiences. They offer easy coverage options to a tech-savvy customer base.
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Indus Net Technologies
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