Insurtech is the latestbuzzword making the rounds within the C-suite of the insuranceindustry.

Unlike banking, insurance has never been known for its romanticpursuit of technology. Never has technology created so much buzz inthe insurance industry as it has with this latest term.

Insurtech, a moniker adapted from FinTech, its more famouscousin, is not merely an apparent combination of the wordsinsurance and technology. Rather, it aptly symbolizes thedisruption that technology is creating in the insurancebusiness.

While fintech is disrupting banking industry processes byenabling newer ways of doing business, insurtech goes one stepfurther in the insurance industry by disrupting its very businessmodel and products.

Let's examine the “famous five” disruptive technologies ofinsurtech.

No. 5: Artificial intelligence

AI-driven cognitive robotic automation has tremendous potentialto elevate the traditional, intricately-human, process-dependentinsurance industry. Be it quote (and illustration), KYC, or claimsprocessing, insurance processes have traditionally been tardy,complicated, and documentation-heavy.

To add to these woes, human errors make the processesinefficient and expensive, leading to money leakage.

AI can take process automation to the next level therebyreducing operating costs. Another area where AI is going to make asignificant impact is “service” and “engagement” through on-demandrobo-advisors or chatbots.

With payment of premiums and claims being the most likely andinfrequent customer touch points, insurance has much to do in termsof customer engagement.

AI can help tremendously in these areas.

No. 4: API and microservices

This is another area of technology that can help insurers uptheir game.

Core platforms and technology ecosystems are still heavilyleaning towards older or legacy technology, and associated sunkcosts. Insurers should aggressively use APIs (roughly, a set ofclearly defined methods of communication between various softwarecomponents) and microservices to decouple modular processes — thatis, help modules interact with other modules simply, without theirbeing dependent on each other — and expose them, such as providingthe user with an interface to access them, so customers, agents andother partners use only the required services as and when they needthem.

Exposing processes such as financial need analysis or changingof premium payment frequency can only help sell more and servicebetter by putting power in the hands of customers.

No. 3: Blockchain

Distributed databases are the new kid on the block. Aftercreating waves in banking and financial services, the blockchainsystem holds significant promise for the insurance industry.

Several blockchain features including immutability, or the ideaof making data that's entered be unchangeable, disintermediation,or the ability to omit a middleman, and smart contracts relate somuch to insurance and its needs, that it is only a matter ofinnovative thinking and time before blockchain finds usage andmajor adoption in the insurance industry.

Insurance, essentially being a contract, has significantopportunity to adopt blockchain reincarnating into smart contracts.Placement, negotiation and binding of risk in a commercialinsurance broker market place, or automating claims settlement forsimple claims, or sharing customer KYC data on blockchain, andmanaging reinsurance treaties are just some of the possible usecases.

No. 2: The Internet of Things (IoT)

This technology is perhaps the biggest potential to impact theinsurance industry. An increasing number of devices, used invarious quarters of human lives, are getting connected to theInternet and the data collected from inbuilt sensors are becomingavailable for consumption.

While being “in touch” with our devices is a new way of life, ithas its own ramifications for business, particularly insurance.

IoT is impacting the very core of the insurance business whichis risk assessment and product. Be it a connected car or the Fitbitband worn on the person, they are telling a story about the “risk”covered, which helps insurers better understand risk, allowing forincreased granularity in pricing and embodyinga paradigm shift fromrisk classification to risk personalization.

The sensor data may also be analyzed to expose failure symptoms,thereby bringing ability to preempt claims and reduce losscosts.

No. 1: Data and analyticals

Data-driven insights (also known as actuarial science) have beenthe cornerstone of Insurance. Hence, underlying the abovetechnologies, big data and machine learning are the keys to unlockthe full potential of insurance at its best in the currentcentury.

Be it sensor data from IoT, or the process data or customerinteraction data generated from cognitive automation.

Considering we live in an age when we are continually generatingdata, in both structured and unstructured fashion, across business,devices (IoT), customer interactions (contact center, social media,chatbots, et al) the insurance industry is being exposed to avariety of potentially useful data.

Soon big data will not remain a choice but a key component ofbusiness operations. Machine learning is a willing partner to bringautomation in the use of such volcanic eruption of data.

The takeaway

InsurTech gives the industry an unprecedented opportunity toexplore new dimensions of the business and morph itself from theage old traditional set of processes and products to somethingbefitting of this age. This should make for exciting timesahead!

Subhobroto Ghosh is vice president of InsuranceSolutions at VirtusaPolaris. He can be reached by sending email [email protected].