Overview of Insurtech: Everything You Need to Know about It

Insurtech refers to the use of technology to revolutionize how traditional insurance operates. With artificial intelligence, blockchains, and other innovations, claims management, underwriting, contract execution, and risk management performed by an insurance provider will be more cost-effective.

We live in a constantly changing world. As we wake up to new information every day, our lives are slowly changing. But there’s one thing that stays constant regardless of time: humans’ desire for stability. People always need back-up plans, and that’s why many of us seek comfort in health insurance.

Since the 1930s, health insurance has been acting as a financial stronghold for people around the world. As new technological advancements have been made on a daily basis, the traditional insurance models are considered slow and mundane due to their complicated operation processes.

Now that convenience has become a top priority for people in this ever-changing world, insurance providers have to find an operational strategy that allows customers to secure health insurance at any time they’d like without having to go through tedious paperwork, hence the emergence of insurtech.

Pacific Prime invites you to join us as we explore how the insurance industry keeps up with technology trends and uses insurtech to enhance their efficiency, improve customers’ experience, and streamline their operation process, as well as the concerns regarding the use of insurtech in this article.

What is Insurtech?

Following the boom of the term “fintech,” the use of technology in the financial sector, insurtech has emerged as a combination of “insurance” and “technology” that disrupts the insurance industry through technologies such as artificial intelligence (AI), blockchain, and Internet of Things (IoT).

Back in 2016, the term “insurtech” was barely registered in Internet searches, but the demand for technology in the insurance industry has contributed to more than three million results of the same search now as new businesses and products use technology to compete with established providers.

Insurtech startups play a significant role in transforming how insurance providers operate and sell their products. Traditional insurance operates by sorting customers into groups according to the providers’ criteria, which can sometimes result in misclassification and overpriced insurance plans.

On the contrary, insurtech startups use real data to create tailored and more precise criteria. It’s normal to see big insurance providers join hands with insurtech companies to improve their services, resulting in more cost-effective insurance plans that solve problems in the following areas.

1. Claims Management

Claims management in insurance refers to the verification process of a request made by an insured individual or businesses when something is damaged or lost under insurance coverage. Normally, claims are reviewed manually before the insurance company decides on the compensation.

With insurtech, technological innovations are used to automate the processes of collecting data and claims, verifying the validity of the claims, as well as paying out different claims. Human errors and fraud can also be prevented with the help of technology during this intricate process.

2. Underwriting

Underwriting is when an insurance provider decides whether it’s possible to provide coverage for an individual or business or not by accessing the risks they pose. This process will determine the client’s monthly premium and coverage for various types of claims.

Modern-day technology is able to automatically gather and compare different sets of data to conduct informed risk assessment, which will greatly help insurance providers decide on policy extension along with the suitable price of a policy for each of their clients.

3. Contract Execution

While finalizing a contractual agreement between an insurance provider and their client is the last step in securing , both parties may feel overwhelmed by the number of terms and policies they have to go through.

From contracts regarding payment conditions to different coverage levels and policy renewals, insurtech can handle them in a blink of an eye using technology. The blockchain technology, for instance, helps provide an unbiased evaluation of the criteria and determine the suitable course of action.

4. Risk Mitigation

Insurtech doesn’t only streamline processes involving claims and contracts but also help providers analyze risks via technologies that provide transparency for processes related to accounting, data reconciliation, or financial reporting. Some technologies can even warn providers of potential fraud.

What Technologies do Insurtech Companies Use?

From AIs and automation to big data and drones, insurtech incorporates a wide range of technological innovations in the forms of software and hardware. While the list goes on as new innovations are being made continuously, we’ve compiled the most notable technologies used in insurance for you below.

1. Artificial Intelligence (AI) and Machine Learning

It’s an understatement to say AI, the ability of a digital computer to simulate human intelligence, has transformed the way of the world. We use virtual assistants to help us with daily activities, healthcare experts use AI to identify disease patterns, and the insurance industry is no exception.

Chatbots like ChatGPT and Claude can generate immediate response, so customers can engage in interactive discussions and get help anywhere and anytime. AI also has the ability to learn from historical data, so it can also help calculate fair and impartial premiums with enough data and risk profiles.

2. Big Data

Big data refers to diverse sets of information that continue to grow at a rapid pace as they’re being collected real-time. Mostly comes from data mining, big data can arrive in different formats and encompass the volume of information, the collecting speed, as well as the variety of the data points.

Insurance providers will be able to gather a vast amount of their customers’ risk profiles and medical histories with the big data collection method, allowing them to better understand their customers’ habits or even use these sets of data as the inputs for AI tools.

3. Blockchains

If you think a blockchain is an improved version of cloud storage, you’re on the right track. Blockchains are a type of shared database protected with a high-level encryption method so that the system is hack-proof, and no one can tamper or forge the data stored on it.

Insurance providers can use blockchain technology to securely store data related to their products or agreements. Data stored on a blockchain can also be conditioned to be released when specific conditions are met, making it available for only validated providers and clients.

4. Internet of Things (IoT)

Any things that are connected to the internet fall into the IoT category. Our mobile phones, computers, smart televisions, business printers, industrial machines, and other similar physical innovations use their built-in sensors to collect data and share such data with other things.

We can see many insurance providers offer their clients a reward system for good handling of vehicles and appropriate driving habits, which can all be gauged by speed-tracking devices that come with their car insurance. By utilizing IoT, insurance companies can base premiums on the smallest details.

Moving Forward with Insurtech and Pacific Prime

While insurtech has greatly contributed to changes in the insurance industry, some established providers are still wary of insurtech startups, and concerns regarding the privacy of insured individuals and the transparency of data collection have been voiced by both insurance companies and customers.

Pacific Prime has been keeping up with technology trends in the insurance industry for more than 20 years. Our team of experts are familiar with a diverse range of services different insurance providers offer, so we’re always prepared to provide you with impartial advice and impeccable services.

Whether you’re looking for insurance plans from companies that use insurtech for yourself, your family, or your business, Pacific Prime can help you mitigate risks and strategize for the most suitable coverage through our obligation-free plan comparison service. We’d love to hear from you soon!

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Natthachamon

Content Writer at Pacific Prime Thailand

Natthachamon Suthana Komalrachun is a Content Writer with a strong passion in creative writing and marketing communications. Working with the team of experienced creators at Pacific Prime, she aims to use the magic of communication to simplify insurance and enchant every reader in our diverse society where insurance and employee benefits act as a life and financial stronghold for everyone—individuals and businesses alike.

After graduating at the top of her class and earning her Bachelor’s Degree in English from Thammasat University, Natthachamon has been practicing her writing skills and making education more easily accessible for Thai children as an Educational Content Creator and English Curriculum Developer for various educational facilities and organizations across the country.

Natthachamon is also a mother of two cats, a board game enthusiast, and a big bookworm who enjoys everything and anything sweet.

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