Saturday, Jan 28

Insurtech: the lifeline for insurance companies

Insurtech: the lifeline for insurance companies

The age of technological advancement with its witty innovations has disrupted how we conduct our daily activities. Just as telegraph erased time and distance in the 19th century, the rise of social media in the 21st century, and the penetration of fintech within the banking industry, so has insurance technology (insurtech) gradually paved its way through the traditional insurance industry, to save it from its fading essence in this digitalized world. The traditional insurance industry is characterised by primitive ways of handling insurance and its related issues.

It is typical of the traditional insurance era to find insurance companies handle premium collections and claim payments manually. But this should not be the case in a digitalised era where almost everything is fast paced. As expected, every change comes with resistance. In as much as some insurance companies have embraced new technologies in their operations, others are adamant and resistant to the change. The insurance landscape is taking a new turn, and any insurer who cannot thrive will have to either merge with other firms or face out completely.

Other regulatory issues such the proposed recapitalisation, in the case of Ghana’s insurance industry, may also lead some of these insurers to their early exit from the industry. Deloitte’s 2021 insurance outlook on “accelerating recovery from the pandemic while pivoting to thrive” revealed that, by conducting a survey on some 200 industry leaders indicate that, “Many insurers are in the early stages of underwriting transformation projects going well beyond automating routine, labor-intensive data gathering and processing tasks.

“The ultimate goal is to better leverage artificial intelligence (AI), alternative data sources, and more advanced predictive models to augment an underwriter’s capabilities and eventually transition them to higher-level, multifaceted roles such as portfolio management and greater interaction with brokers and large customers.” A practical example of the benefits insurers can derive from embracing insurance technology is in the case of Ping An Life Insurance Company in China and the case of Turaco and M-Kpoba in Kenya. The Ping An Life Insurance company used “advanced risk model on its smart underwriting platform that served over 18 million policyholders in 2019 and approved 96% of policies through automated underwriting, cutting average turnaround time from 3.8 days of manual underwriting to 10 minutes.” 


The digital age has emerged with creative innovations within the insurance industry. The survival of traditional insurance firms can be attributed to how well they embrace these new innovations in insurance technology into their operational activities. The rise of technology and its emerging capabilities in machine learning, blockchain, big data, artificial intelligence AI, cloud computing, telematics, aerial imaging, and claim automation among others, has created an ideal operational leverage for the traditional insurance companies to capitalize on, and have also contributed to the rise of some insurance technology companies within the insurance industry.

Findings from a research conducted by McKinsey & Company on some 2,000 global insurtechs reveal that, by employing AI and machine learning, insurance companies are able to reward their customers for avoiding risk in ways such as, safe driving and living healthier lifestyles. Additionally, they are able to accurately calculate and underwrite for life expectancies of their customers. Global investments and partnerships with insurtechs, peaked with an all-time record-breaking deal amounting to about €6 billion in 2020.

This attest to the fact that the insurance industry is beginning to embrace and utilize the digitalization capabilities that comes with insurtechs. Furthermore, from the research conducted by McKinsey & Company, it was revealed that by streamlining their research to focus on life insurance, health insurance, and property and causality (P&C) from 2010 to 2020, about one-third of the insurtechs were able to directly secure funding, whereas the remaining percentage had to rely on strategic partnerships with existing insurance companies. McKinsey & Company further indicated that “the strongest insurtech presence has been felt in marketing and distribution, with a number of insurtechs gaining footholds in investment and partnerships with traditional insurers.

However, increasing innovation is also evident in operational aspects such as policy servicing (especially in life), claims (especially in auto), and back-office functions and operations (especially in health)”. Considering these emerging technological trends, some insurance companies have been able to assimilate these technologies into their operations, whereas some other insurance companies have to resort to the able arms of insurtechs to enable them to fully operationalize technology in their activities. 


David Hollard, a former EY global insurance leader, in his article on the future of insurance indicated some of the challenges smart innovations such as driverless cars and smart homes among others, may present to the insurance industry. “How will insurance providers adjust to a future in which fewer people own cars, where smart sensors in homes and commercial buildings can detect risks and when the vast majority of customer interactions are automated”? He further recommended that the insurance industry should “take a look at the intriguing possibilities” that insurance companies can capitalize on to secure their survival within the insurance industry.

New areas such as cyber security has been of interest in the global space due to increasing cyber security threats facing most individuals and institutions. And areas such as credit insurance has become increasingly relevant within the insurance industry Jason Bisnoff, a Forbes wealth management industry expert, speaking on the future of insurance hinted that, insurtechs are exploring the capabilities of cloud-based technologies among others to address the insurance industry challenges. “These startups touch many corners of the insurance world, from individual homeowners, auto and life insurance to all varieties of small business coverage. And they’re bringing more efficiency and cloud-based processing to their respective markets”.

Additionally, in a survey conducted by Deloitte on over 8,000 insurance consumers from Australia, China, Canada, Germany, Japan, the United Kingdom and the United States of America revealed some growth opportunities within the insurance industry. Indications from this survey reveal that by simplifying how customers perceive and interact with products, leveraging on the strong demand for pragmatic home insurance products, and by carefully targeting delineated customer segments with new services, companies within the insurance industry can maximize their growth potential.


The digital evolution has successfully shadowed the primitive ways of doing things. The world has conformed with the technological advancements. The consumer of today appreciates smart innovative ways with regards to their insurance consumption preferences. Meanwhile, David Hollard revealed that, “From an aging population with limited savings to the multibillion threat posed by climate change, looming risks will have a broad scope collectively and a deep impact individually.

Insurance providers will need to offer different products because the way people buy and use insurance will change in fundamental ways” Going forward, for insurance companies to meet customer and industry expectations, and to be able to outsmart smart innovation advancements, they will have to align their operational activities towards the provision of multiple insurance services and products, personalized insurance product offers and defined user journeys, multiple customer touchpoints through various lines of business targeting.

Additionally, they should commit to maintaining regulatory digital compliance across all operational channels and customer journeys, the provision of personal customer care when insurance product self-service fails, ensuring data privacy and protecting online customers from fraud and identity theft in this era internet piracy. Also, they should advance to the digitalization of all customer interactions with their companies in terms of product searches, customer support, live chats, FAQs, contact forms, document uploads, chatbots, robo-advisors, premium payments, claims due and log-ins among others.

McKinsey & Company indicated that the existence of the Covid-19 crisis means that “digital-first for customers and intermediaries is no longer a choice but a necessity. Lockdowns and working from home have accelerated digital adoption and shifted expectations in the next normal, and interactions that are not digital or digitally enabled will no longer gain traction. As a result, leading players are moving quite aggressively on direct and digital, while boosting agent productivity through better tooling and customer self-service”. 


It is with no doubt Covid-19 has disrupted insurance service provision and has changed the way customers expect insurance services to be delivered. The COVID-19 pandemic and its resulting economic impact has shifted consumer and employee needs and expectations in the insurance industry. But while most of insurers have adapted quickly, some insurers are still likely to face lingering obstacles to growth and profitability in the year ahead. John Vaccaro, Head of MassMutual Financial Advisors disclosed that the core business of any insurance company remains the same amidst Covid-19.

The only difference, he outlined, has to do with the mode of service delivery. “At the end of the day, we still do the same thing. We meet a client, we conduct a needs assessment, we develop a plan, we implement that plan, and we review and monitor. We’re going to do the same thing tomorrow as we did yesterday, and the same thing we did 14 months ago. So, the core mission of what we do has not changed. And it’s still a people business, it’s one person meeting another person and making a connection, and having that connection for the next 30, 40, or 50 years.

Today we might have that meeting over Zoom, but the fundamentals haven’t changed: we’re helping people plan for their financial futures.” Furthermore, Rowan Chan, the Senior Vice President of Sun Life Canada, holds the same assertion as John Vaccaro. He stated that absolutely nothing has changed, rather, the advent of the pandemic has proven that clients need insurers now than ever. Also, clients need insurers they can trust. “The pandemic has not fundamentally upended what we stand for. In fact, it has demonstrated that clients need us more than ever. In uncertain times, people want a trusted relationship.

They want an adviser who really knows them and provides not just products but holistic advice on their health, wealth, and protection journeys. They want a firm that has a brand they can trust that they can rely on. When you have a trusted adviser, when you have a living plan, that really helps mitigate your risk when life throws you a curveball. At the same time, it will help you have a much higher chance of achieving your goals and dreams along the journey.” In Addition to Rowan Chan’s submission, Bernd Heinemann, Chief Marketing Officer at Allianz Germany, stated trust as the key ingredient in the insurance service delivery. “Trust always was, and still is, a key ingredient for buying insurance and satisfaction with an insurance product. During the crisis, the importance of trust increased. People turned toward bigger brands for that matter.

You want to rely on a company that will still be there in 20 years.” However, Binayak Dutta, Managing Director and Group CEO of FWD, disclosed that the advent of Covid-19 has caused insurers to evolve in their service delivery. “Our industry distribution models are definitely being pushed to evolve. We want to change the way people feel about insurance, and that means simplifying products and policies, and providing more clarity and transparency. We’ve also implemented various digital tools that provide more ease, for example, by allowing remote signatures.”

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