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Insurance Technology (InsurTech) Research Reports

Insurance Technology (InsurTech) Research Reports

Insurtech refers to the use of technology innovations designed to squeeze out savings and efficiency from the current insurance industry model. Insurtech is a combination of the words “insurance” and “technology,” inspired by the term fintech.

The belief driving insurtech companies and investments by venture capitalists in the space is that the insurance industry is ripe for innovation and disruption. Insurtech is exploring avenues that large insurance firms have less incentive to exploit, such as offering ultra-customized policies, social insurance, and using new streams of data from Internet-enabled devices to dynamically price premiums according to observed behavior.

Insurance is an old business, one of the oldest financial businesses and it tends to favor those with deep pockets and long experience in the market. Traditionally, broad actuarial tables are used to assign policy seekers to a risk category. The group is then adjusted so enough people are lumped together to ensure that, overall, the policies are profitable for the company.

This approach does, of course, result in some people paying more than they should be based on the basic level of data used to group people. Among other things, insurtech is looking to tackle this data and analysis issue head-on. Using inputs from all manners of devices, including GPS tracking of cars to the activity trackers on our wrists, these companies are building more finely delineated groupings of risk, allowing products to be priced more competitively.

There is also interest in the use of apps to pull disparate policies into one platform for management and monitoring, creating on-demand insurance for micro-events like borrowing a friend's car, and the adoption of the peer-to-peer model to both create customized group coverage and incentivize positive choices through group rebates.

Although many of these innovations are long overdue, there are reasons why the incumbent insurance companies are so reluctant to adapt. Insurance is a highly regulated industry with many layers of jurisdictional legal baggage to deal with.

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