Product Innovations in the InsurTech

InsurTech is a crucial part of the insurance industry that is pushing for unparalleled developments and changes. The power of investments is one of the key driving forces for Insurtech’s growth globally along with the rising demands in the market and the emerging technologies. Many legacy insurance companies are partnering with InsurTech startups by funding them as they identify them as the potential game changer for the industry.

It is important to know that with every major leap in technology, the insurance industry has quickly adapted it with its new products and risk evaluation methods. In recent years, there is an exponential growth in the InsurTech product offerings. 

Let us explore the InsurTech product innovations of the recent past and how it has empowered customers and enhanced the efficiency of the insurance industry.

Products innovations in InsurTech

• Parametric insurance

Parametric insurance or index-based insurance is an innovative development in the Property & Casualty insurance space that is designed to pay out the pre-defined amount based on the triggered event or on 3^rd party data. The product relies on data and automation technology. Unlike traditional insurance policies that involve a lengthy process to payout based on the actual loss that occurred in each case, parametric insurance fills the gap by paying based on the size of the catastrophic event such as the magnitude of the earthquake, amount of rainfall, etc. Here is how the parametric insurance works:

Key benefits of parametric insurance are:

• Simplicity with only a two-step process for payout and speed payout mechanism
• Offers transparency on the data used – For example, 3^rd party data would be from the United States Geographical Survey or from the National Oceanic and Atmospheric Administration. 
• Offers competitive pricing with a streamlined underwriting process
• The policy can be custom-built as per the requirement of the customer
• Effortless claim resolution to enhance customer experience

The Insure Tech Startups pioneering in parametric insurance are – Exante, FloodFlash, Parachute Insur, Swiss Re, Floodbase, Eoliann, and many others.

• AI (Artificial Intelligence) driven cover

AI-driven insurance products are a new trend that is transforming every subsect of the insurance industry. Unlike traditional insurance policies, AI-driven products are highly-personalized and more accurately priced as they are designed by analyzing more specific data (historical claims, social media activity, credit score, etc.) of the customer. AI has helped InsurTech companies to make the optimal use of data to design innovative and customer-centric policies.

There are various AI-driven covers that are on the rise. For example, many fintech insurance companies are designing products based on data from connected consumer devices such as home assistance, smartwatches, and more. As per IoT Analytics, the global number of connected IoT devices is expected to grow by 16% in 2023 to reach 16.7 billion active endpoints.

• Embedded insurance

Embedded insurance product offerings are on the rise with the rapid increase in internet penetration and mobile usage. Embedded insurance refers to the selling of insurance products bundled with any service or product that customer purchase. This brings coverage or offers protection to customers directly at the point of sale. Here are a few examples:

• Offering travel insurance coverage at the time customer books a ticket
• Host protection insurance offered by Airbnb
• Insurance offered by the car rental companies at the time of renting a car
• Insurance offered at the time of buying a cellular device

With many fintech insurance startups making their way to the embedded insurance landscape, the market is expected to grow rapidly. The below report by Grand View Research shows the future growth forecast for the embedded finance market (including the embedded insurance market).

The following are the benefits of embedded insurance:

• Offers customer-centric coverage
• Hassle-free insurance purchase
• Accurate risk assessment and pricing accuracy
• Creates enormous opportunities for insurance companies with the flexible approach
• Increased coverage as it closes the protection gap

The Insure Tech Startups pioneering in embedded insurance are – Element Insurance, Simplesurance, Qover, Penni.io, and many others.

• Telematics insurance

Telematics insurance is revolutionizing the auto insurance sector. Telematics insurance works based on the data collected by the telematic programs and devices such as plug-in devices, mobile apps, Bluetooth beacons, etc installed in the vehicle. Data derived helps in calculating the risk level and policy pricing. It is also called pay-as-you-drive insurance, usage-based insurance, and pay-per-mile insurance. Telematics insurance helps both the insured and the insurer in many ways. Here are some of the benefits:

• Increases efficiency
• Improves road safety
• Risk-based pricing reduces the cost
• Reduces operating costs for the insurer
• Data-driven investigations help in fraud detection
• Boosts service excellence

As per the industry report published by Mordor Intelligence, the global telematics insurance market is valued at $2.75 billion in the current year and it is expected to grow at a CAGR of 18.53% to reach $12.70 billion by 2028. As per their study, here is the overview of the global insurance telematics market.

The Insure Tech Startups pioneering in embedded insurance are – DriveQuant, IMERTIK Global Inc., Octo Telematics SpA, Towergrade Insurance, and Unipolsai Assicurazioni SpA.

• Blockchain

Blockchain technology which has a wide range of applications has made its way to the insurance industry. Many fintech insurance companies already leveraging this technology in different ways to offer innovative insurance solutions. Here are four important features of blockchain in insurance offerings:

Here are some examples of insurtech companies leveraging blockchain technology in their insurance offerings:

• A leading InsurTech company Lemonade is using blockchain technology to offer instant climate insurance to vulnerable farmers. 
• A digital insurance company named Black. insure is offering blockchain-enabled insurance solutions to insurance companies, brokers, and managing general agents by empowering them to launch their own insurance products.  

Changing customer demands, rapid technological innovations, and emerging new risks are going to be strong reasons for fintech insurance companies to launch new innovative insurance products in the future. However, the dynamism can depend on the insurance companies’ prompt response to change and ability to innovate new products on emerging insights.