Top 10 Insurtech Trends In 2024
Insurtech trends show that a new era of embedded insurance, consumer-facing digital tools, telematics, the internet of things (IoT), rich data sets, artificial intelligence (AI), and machine learning is reshaping the insurance industry.
Author:Liam EvansReviewer:Habiba AshtonJan 12, 20243.3K Shares60.4K Views
Insurtech trendsshow that a new era of embedded insurance, consumer-facing digital tools, telematics, the internet of things (IoT), rich data sets, artificial intelligence (AI), and machine learning is reshaping the insurance industry.
Looking ahead to the years 2023–2030, the worldwide insurtech industry is predicted to expand from its 2022 valuation of $5.45 billion at a CAGR of more than 50%.
Problems that the sector has to deal with include things like inflation, unstable economies, cybercrime, political unrest, and weather-related crises. Adaptation and innovation are key for insurers to succeed and grow.
The insurtech industry is always adapting to new technology, shifting customer expectations, and a general thirst for innovation. In 2024, it's important to assess the leading trends that will shape insurtech and the important insights that will characterize the industry then.
A Greater Focus On ESG
The insurtech industry is no exception to the rule that ESG factors significantly at all levels. Expanding access to insurance helps create a safer world and a more inclusive society where people from all walks of life are safeguarded.
There is no way to separate this from ESG objectives, especially in regards to our community impact, inclusiveness support, and commitment to ethical business operations.
From the ground up, as workers look for ways to make a difference at work and hold their employers to account, and from the top down, as it becomes obligatory for boards and investors, ESG is gaining more and more attention in many organizations.
Even while ESG principles are gaining traction in Europe, their reach will grow as more and more businesses make them a priority and start using them to evaluate their suppliers and partners.
An Auto Insurance Revolution
It's more of a "boldish" forecast, but 2024 will witness the most significant disruption in the auto insurance industry. Original Equipment Manufacturers (OEMs) will increasingly take charge of their own insurance programs on a worldwide basis, as opposed to insurers and/or huge brokers directing these programs locally.
Manufacturers of original equipment, and EV OEMs in particular, are shifting to a software-driven business model. Because of this, they can provide a more integrated solution for their consumers, which makes it easier to include insurance.
They may increase the possibility of acceptance by selling insurance straight into their app or the car's computer, in addition to offering it online or through dealerships. There may be more chances to promote insurance at the optimal time when EVs begin to collect more data.
Customer-Facing Digital Tools
With embedded insurance's meteoric rise to prominence in 2024, it's clear that companies selling goods and services must center their efforts on the consumer.
Making the purchasing, renewal, and administration processes as easy and tailored as possible while keeping the customer's requirements and desires in mind is essential. The deregulation of the insurance market has also made many products similar, making technological advancements in the placement process the only option for agencies to stand apart.
Investing in user-friendly mobile applications and portals, online tools for submitting claims, smart forms with e-signature capabilities, and telematic apps allows insurance brokers and carriers to stand out from the competition by offering a superior client experience.
Companies that employ technology to improve the customer experience may really raise customer satisfaction by 15% to 20%, according to McKinsey.
Continued Emphasis On Rich Data Sets
A requirement for well-organized data for analytics and insights has arisen as a result of the insurance industry's growing dependence on technology to streamline operations and save costs.
Common problems like missing, out-of-date, or inaccurate information can lead to incomplete risk and faulty underwriting and pricing decisions, making data sourcing and completeness critical for the actual return on investment.
Rich data sets necessitate information that is both structured and accurately sourced in order to facilitate decision-making and power AI models. Insurance firms can use Verisk, Fenris, or HazardHub, among others, to validate and verify their data, or they can let their customers do it themselves. This way, they know their data is clean.
The advantages of data cleaning tools include validated data, less manual work, duplicate removal, accurate risk assessment, and better customer service. Clean data ensures accuracy and reliability in information handling, which in turn fosters customer trust and allows for better decision-making.
Insurtech Bankruptcies
Insurtech companies will go bankrupt in 2024. The truth is that a lot of insurtechs have bombed. But for the most part, this has gone unnoticed by them. Zombie firms have become commonplace, with many of our contemporaries having fallen victim to formal bankruptcy or having their assets bought off by risk carriers.
This is not something to celebrate, and I want to be clear about that. I am fully behind our insurtech team's mission to transform the insurance industry, and I hold my fellow insurtechs in the highest regard. Furthermore, the industry does not look good when these kinds of disasters occur.
How did this occur? We were the first to feel the pinch of a dearth of funding and VC money in late 2021 because traditional VCs didn't get insurtechs. It is to be expected that many did not survive the two years spent navigating this turbulent environment.
And it doesn't even account for those who had a muddled business strategy or couldn't bounce back from technological setbacks (more on that later). Meanwhile, tomorrow's major players will be the small group of insurtech pioneers who managed to survive.
AI And ML-Driven Insights
Insurance companies can enhance the accuracy of risk assessments by utilizing AI and ML to sift through massive volumes of data from diverse sources, such as customer information, Internet of Things (IoT) device data, and historical claims data.
More accurate policy pricing can be achieved through improved understanding and prediction of risks through predictive modeling, which utilizes an ML algorithm to process historical data. Simplifying the claims process with automation and chatbots powered by AI can save time and money.
By finding pertinent information and detecting fraud, image and text analysis can speed up claims assessment. Data extraction from unstructured data, like free text and documents, can be accomplished with the help of large language models (LLMs).
Chatbots powered by LLMs can also detect fraud, generate generic documents and emails, and provide customers with personalized recommendations. Insurance companies can acquire a better understanding of their customers' tastes and habits through data analysis, which allows them to provide more tailored policies and services and boosts customer engagement and loyalty.
Use Of Telematics And IoT
The insurance telematics industry is expected to grow from $5 billion in 2024 to $11 billion in 2028, driven by the increasing demand for electric cars. Telematic devices track drivers' movements, providing personalized safety advice and driving habits data.
Companies like Allstate, GM, and Tesla use this data to adjust insurance costs in real-time. Enhanced telematics can also help in real-time accident data and fraud prevention. The Internet of Things has also boosted telematics applications, particularly in fleet management.
Fleet management software can incorporate IoT sensors to scan and organize data, enabling real-time monitoring of fuel consumption, engine health, vehicle position, driver actions, and service records. This data gathering enables insurance companies to better meet client demands through more informed underwriting choices.
Strategic Investors Supporting Insurtech Businesses
The insurtech investment industry is shifting away from venture capitalists and toward strategic investors. Insurance is a complicated and tedious industry. But it's strong and won't break easily, too.
Although acquisition costs are extremely expensive, especially for direct-to-consumer insurtechs, it is important to remember that an insurance company's real worth lies in the compounding impact of its policies.
Contracts for insurance are renewed. And if you think that 80% of insurance contracts are renewed every year, then an insurance company's portfolio would be like an 80% compound interest savings account.
Putting money into such a savings account is something only fools would do, isn't it? Only those who are clueless about insurance, I suppose.
Insurtechs nevertheless need solid technological underpinnings and outcomes, notwithstanding this compounding impact. The results can be catastrophic if those factors aren't managed properly.
That is why I foresee a rise in investment activity from strategic investors with insurtech expertise and patience for the long haul in the years to come.
Plus, they're jumping on the bandwagon just when it's most advantageous, putting their money into the few champions who managed to weather the storm.
On the other side, venture capitalists will likely abandon the insurtech industry altogether in favor of the artificial intelligence (AI) gold rush after writing down a number of their unsuccessful investments in the sector.
Increased Scrutiny
Every field has its own huge scandal or fraud, such as Enron in the energy sector, Theranos in medicine, or Wirecard or FTX in finance. Insurtechs that deny most claims but offer big commissions to partners are an example.
Insurtechs may record their loss ratio as claims over net premium (NP) instead of claims over gross written premium (GWP) to avoid reporting an excessively low loss ratio, the ideal statistic to illustrate how much value you provide for society. GWP includes commission, NP does not. Reporting the loss ratio as claims divided by NP hides your commission expense.
I think authorities should outlaw corporations that pay more than 40% commission (rumors say some pay up to 70%) and immediately revoke their investments.
This violates any investor's code of conduct and ESG guidelines. Embedded insurance should protect individuals globally rather than just make money.
Insurtechs with intolerable technical losses may be disclosed. These players may have great growth metrics and loads of cash, but they're raising capital to offset technical losses, creating a vicious circle with no victor.
Similar to insurtech bankruptcies, we may witness stories of fast-growing enterprises with cloudy or chaotic business models. In summary, companies that raised a lot of money yet had no product-market fit used aggressive financing to mask this significant design problem.
Embedded Insurance
Customers value convenience and quickness when purchasing insurance since their time is valuable. However, the present procedure is laborious and intricate.
Application programming interfaces (APIs) have made it possible for insurance firms to address this issue by integrating their goods and services at the point of sale (POS).
This enables them to promote their products at the precise moment clients want them. By the year 2024, embedded insurance will have grown beyond the simple purchase of travel insurance with a plane ticket or vacation package.
Telematics allowed Tesla to be the first firm to provide point-of-sale (POS) auto insurance. GM Motors now provides comparable services to its consumers as well.
Both General Motors and Tesla are able to track their customers' habits and driving styles using these integrated solutions, which lets them adjust their monthly rates and incentives for improved driving.
This trend opens up new markets for insurance by improving the customer experience and reaching more people.
FAQs - Insurtech Trends
What Are The Current Trends Shaping The Landscape Of Insurtech?
Key trends in insurtech include the adoption of artificial intelligence for underwriting and claims processing, the rise of usage-based insurance models, blockchain integration for secure data management, and the emphasis on digital customer experiences.
How Is Artificial Intelligence Impacting The Insurtech Industry?
Artificial intelligence is transforming the insurtech industry by automating tasks, improving risk assessment through advanced analytics, enhancing fraud detection, and personalizing customer interactions. AI-powered chatbots and virtual assistants also contribute to streamlined customer support.
What Role Does Blockchain Play In Insurtech Innovations?
Blockchain technology is revolutionizing insurtech by providing transparent and secure record-keeping, preventing fraud, and enabling efficient and automated smart contracts. The decentralized nature of blockchain enhances data integrity and trust within the insurance ecosystem.
How Are Insurtech Companies Leveraging Data Analytics For Decision-making?
Insurtech firms utilize data analytics to gain insights into customer behavior, assess risk more accurately, and optimize pricing models. Advanced analytics also support predictive modeling for identifying trends and anticipating future industry developments.
Can You Elaborate On The Impact Of Telematics In Shaping Insurtech Trends?
Telematics, through devices and sensors, is influencing insurtech by enabling usage-based insurance. This technology monitors driver behavior, allowing insurers to offer personalized premiums based on individual risk profiles, and promoting safer driving habits.
Final Words
These ten major developments will likely influence the direction of the insurance sector as we approach 2024. Insurtech trends represent a sea change in the way people think about, create, and interact with insurance.
These developments highlight how the sector is adapting to suit the changing expectations of customers who are tech-savvy.
Jump to
A Greater Focus On ESG
An Auto Insurance Revolution
Customer-Facing Digital Tools
Continued Emphasis On Rich Data Sets
Insurtech Bankruptcies
AI And ML-Driven Insights
Use Of Telematics And IoT
Strategic Investors Supporting Insurtech Businesses
Increased Scrutiny
Embedded Insurance
FAQs - Insurtech Trends
Final Words
Liam Evans
Author
Habiba Ashton
Reviewer
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