From streamlining processes, improving agility, reducing operational costs, and improving customer satisfaction, InsurTech startups are quickly changing the face of insurance.
The insurance industry is on the brink of a significant disruption, and FinTech innovations and emerging technologies like IoT, artificial intelligence (AI), and machine learning (ML) are at the heart of it. The rise of the sharing economy and InsurTech is also changing the face of insurance.
Many traditional insurance companies are quickly realizing the benefits of these new technologies and incorporating them into their strategies to get an edge. However, some insurers are still reluctant to invest in this new wave of insurance.
If you’re still using legacy systems and outdated technology, you’re missing the opportunity to become proactive. It’s time to change your approach and join the front-runners.
One way is by partnering with InsurTech startups to leverage their agility and innovation. Doing so can help you reduce operational costs, improve time to market, respond more efficiently to changing customer expectations, and overcome many of the challenges of traditional insurance companies.
What is InsurTech?
InsurTech is the use of technologies like AI, ML, and data science to create efficiencies and cost savings in the current insurance model. It allows you to evaluate risk, underwrite policies, price and customize product offerings, and process contracts and claims more effectively.
InsurTech startups are driven by the demand to improve customer experience. These tech-fueled startups typically focus on applications traditional insurance companies have less incentive to pursue, such as social insurance, ultra-customized policies, and the extensive use of big data and IoT in assessing risk profiles and pricing premiums.
For example, many traditional insurers today use basic data groupings when pricing premiums. This results in a price disconnect.
InsurTech startups are stepping in to address this issue by helping insurers build more finely delineated groupings of risk, price products more competitively, and better serve their clients. Additionally, they are using technologies like AI and ML to automate tasks, streamline claims processing, and custom-fit services for their customers.
Challenges facing traditional insurance companies
Some of the obstacles traditional insurance companies must overcome to stay competitive include:
1. Outdated legacy systems
Currently, many traditional insurance companies are running on complex, rigid, and outdated legacy systems. This can be problematic in many ways.
First, it’s difficult to achieve a single customer view and gather actionable customer insights as most of the data in legacy systems is siloed in multiple sources across the organization. Additionally, these systems often lack interoperability, making it difficult to integrate new technologies like geographic information systems (GIS).
Moreover, legacy systems don’t allow insurers to fully leverage digitization, automation, and data analytics, which are crucial for improving operational efficiency and delivering a seamless customer experience.
2. Lack of agility and flexibility
Traditional insurance companies often lack the agility and flexibility to keep up with the rapidly changing insurance landscape. Their bureaucratic structures and hierarchical decision-making constraints often get in the way of their ability to innovate, create new products, and adapt their business models to new customer needs. Compounding these challenges are the high operational costs, which leave little room to maneuver.
3. High operational costs
Maintaining the legacy systems and manual processes of traditional insurance companies can be expensive. Similarly, the price of physical infrastructure and paper-based documentation can quickly add up, making it even more difficult to provide affordable and efficient insurance solutions.
4. Difficulty in keeping up with changing customer expectations
Consumers’ preferences are constantly changing, with more demands than ever. Today’s tech-savvy customers expect insurers to provide accurate pricing and risk assessment, personalized offerings, convenient self-service options, and quick response times, to name a few.
Traditional insurance companies, burdened by legacy systems and complex processes, often find it difficult to meet these evolving expectations, resulting in customer churn. For example, they may struggle to provide a user-friendly digital interface, offer real-time policy management, or leverage data analytics to personalize their offerings.
Strategies for staying competitive
Here are some useful tips to help you stay competitive:
1. Collaborating with InsurTech startups
Partnering with InsurTech startups can help you streamline processes, become more agile, reduce operational costs, improve customer satisfaction, and maintain higher security and data governance standards.
For example, InsurTech startups can help you leverage big data and IoT to gather more comprehensive data sets, in real-time, resulting in a better understanding of customer characteristics and habits. These data can then be fed to predictive AI and ML models for better risk assessment, accurate pricing of premiums, and fraud prevention.
Additionally, they can help you deliver more personalized and on-demand services, making it easy to pivot when customers’ preferences and market conditions change. The operational efficiency introduced by these companies through digitization and automation also means you’ll require less paperwork, manual labor, and costs, resulting in more flexibility.
Another way InsurTech startups increase organizations’ competitiveness is by improving data security. Insurance companies are usually a top target for threat actors, as they handle huge chunks of valuable data every day. This is a major concern because data breaches can cause significant financial and reputational damage.
Fortunately, InsurTech startups can help you leverage blockchain technology for unalterable record-keeping, ensuring reliability and security in information storage.
2. Embracing innovation and new technologies
Embracing the digital revolution is an excellent way to stay competitive. In addition to joining forces with InsurTech startups, you must consider the most suitable ways of operationalizing data science, AI, ML, and other emerging tools and technologies in your company to optimize claims processing and management.
Similarly, you must develop more innovative products to attract new customers and keep the existing ones happy.
3. Developing a culture of agility and experimentation
Agility is a crucial competitive advantage in today’s rapidly changing business landscape. Therefore, you should consider fostering a culture of risk-taking, experimentation, and continuous learning in your organization. The best way to do this is by training employees on the latest technologies and encouraging them to be innovative and challenge traditional norms.
4. Investing in digital transformation and modernizing legacy systems
If you’re using a legacy system, it’s time to modernize with the many options available. For example, you can migrate to a modern enterprise platform like Duck Creek, Majesco, EIS, or Guidewire to support your long-term business objectives.
Similarly, you can consider transitioning to a DevOps framework, modernizing your claims management system with ASP.NET AND C#.NET, or moving critical workloads to the cloud for higher performance, scalability, and agility.
Stay competitive with Susco
In today’s competitive and constantly changing insurance landscape, you must prioritize the customer experience. In addition, you must invest in new technologies and innovations or risk losing out to the new wave of digitally savvy competitors.
But this can be challenging. Partnering with a reputable InsurTech company like Susco to help with your digital transformation can boost your chances of success. Whether you want us to be your sole development resource or to augment your internal team, we can deliver.
Book a consultation with our experts today to learn how Susco can help you stay competitive.