The insurance business revolves around measuring and pricing risks. In short, it’s a business about caution. Perhaps that’s the reason why insurance companies have lagged other industries, such as banking, in adopting new technologies that offer more powerful analytics capabilities. But the insurance industry’s reluctance to adopt new technologies is breaking down. So-called insurtech is one of the industries drawing investor interest as startup companies test and market new software solutions, Coin Journal reported, citing a report from CB Insights and KPMG. Insurance companies are interested in using Internet-of-Things technologies to identify and mitigate risk, while also incorporating other technologies that identify fraud, improve efficiency, and cut costs.
Financial services quickly embraced new technology because its use in improving profits was readily apparent to bankers and investors. Gathering information in real-time and timing transactions based on the steady flow of information helps financial industry players make money. In the insurance field, the name of the game is saving money. New technology can help insurance companies more accurately price policies to risk and while also cutting down on fraudulent claims that are costly to the industry. Daily Fintech notes that one of the more transformative developments in insurtech is the emergence of telematics. The capability to gather and transmit near-real time information produces even more data points from which an insurer can more precisely make their risk assessments. These bountiful data sources produce a tremendous amount of data from the home for home insurance, and from the car for property and casualty insurance, Daily Fintech explains.
The collection and analysis of data is not limited to the home and the car. Wearable technology first found its place in people’s lives in fitness applications. But these technologies have matured to a point where they can be used for healthcare applications. The ability to monitor people and collect data of a person over a longer period of time yields measurable data that insurance companies can use to assessing health risks for life and health insurance, Daily Fintech says.
The industry’s adoption of new ways to measure and analyze data opens the door to the use of artificial intelligence. Insurance companies can implement AI in claims processing to detect fraudulent claims. The technology works by detecting patterns that humans would fail to see. Credit card companies have benefited from these analytics capabilities for year so it was only a matter of time before insurance companies added these capabilities to their toolbox, Daily Fintech says. Insurance is still a business of around identifying and mitigating risks. But it’s a safe bet that insurtech will bring transformative change to the industry.