If you haven’t read our previous articles on Insurtech, please give it a go on The Actuarial Club. We highly recommend you to read these articles in addition to this one to get a better understanding of Insurtech in India as well globally.
What are the challenges faced by Insurtech startups in the world?
Insurers Have Access to More and Better Data Than Ever Before. How are they going to manage it ? Insurers now have knowledge about more things, with more certainty than ever before.
While traditionally insurers’ ability to price the insurance products, underwrite the policies, detect fraudulent claims and manage them had been restricted by relatively limited data.(e.g., proposal forms or historical claims data), the amount and quality of available data is all set to explode in the coming years for this industry.
Insurers will soon be collecting, analyzing , interpreting and incorporating significant changes to be done( as reflected by study of data patterns) into their business models, the data created by the following modern day sources.
The modern day sources for data collection
- devices that monitor health with the help of physical movements and biometrics
- for proper identification of the policyholder while making the claim.
- wearable automobile sensors (personal, rental, and commercial) to sense driving patterns in case of motor insurance.
- home sensors to sense safety of property insured.
- sensors for business office operations and supply chains (e.g., crates and containers in shipping, cranes for construction or warehouses for storage)
- drones footage and satellite imagery
- Complaint cells and forums (e.g., Glassdoor)
- U.S. government websites for studying various world level indicators (e.g., data.gov, NASA)
- International organizations’ data for various estimates (e.g., World Health Organization)
- Google searches information, Map routes searched by the policyholder, their location and history
- Facebook, Twitter, LinkedIn, Instagram data to keep a check on the insured’s lifestyle, hobbies and activities, etc.
- The access to more and better data than ever might seem to be an advantage
- Rather than a challenge but this isn’t the case always.
Given the fundamental right to privacy of people whose data has been shared with the insurer, the insurer has to make sure that his technological infrastructure is much updated, resistant to a data privacy breach by handling all the viruses, bugs, and security attacks properly.
If it goes into wrong hands the security of policyholder’s personal data which might be used too dangerously these companies might have to face not just moral guilt but legal litigations against insecure storage of their customer’s sensitive data.
Also to enable themselves to get valuable insights out of this data, it is important for these startups to integrate with newer technologies capable of handling large data sets and find the right amount of staff with an appropriate skill set that can be given this task.
Lesser trust amongst people
Despite their tremendous efforts to market themselves and their products by spending large amounts on advertising, it has been seen that they are not able to create the much-required trust. To engage policyholder’s wealth with them for long run.
As a large segment of our country relies on the goodwill of the insurance companies and on the mouth to mouth publicity. The initial phase of expansion for these startups has been miserable.
However, Insurtech startups are coming with a very smart idea to integrate big and renowned insurers with them. They join as funding partners or as venture partners in policy and product making to gain the trust of a wide population.
The innovation in the insurance domain demands changes in the normative framework to sustain itself in the long run. Customers are constantly evolving, and so are their expectations.
There is a need for the regulatory bodies also to evolve. The retrospective approach followed in the present scenario to the real-time monitoring of financial situation of a company. Because of the virtue of abundance of technology in the market which they need to adopt and the training of their workforce to develop such skills.
Not tapping the underprivileged sections of society
The rural section of our society is provided insurance by Traditional insurance companies (Who are proportionately much greater than the urban tech-savvy section).
This enhances their customer base and affects their profits. Being focused on digital and online presence is the major disadvantage of insurtech startups. They cannot be a provider of insurance to a remote village which might not have access to internet. Also, people might not have any know-how of using smartphones or the internet.
So this makes insurtech a sweet offering limited to a percentage of a huge economy which limits its scope to capture budding as well as underdeveloped markets.