Technological innovations have taken multiple industries by storm over the last few decades. However, insurance has often been pegged as a slightly more traditional industry.
Enter insurtech, which is driving the new technologies increasingly underpinning insurance solutions.
Traditionally, insurers created categories of risk profiles based on variables such as your age, where you live and previous incidentals. The customer’s insurance premium would then be an industry average based on similar individuals in the same broad category.
But the use of emerging technologies is improving risk profiling, pricing and general efficiency in the insurance industry.
Peter Scheffel, chief technology officer of software development group BBD, uses Friendsurance as an example of a disruptor in the insurance industry.
Initially a German insurtech company that has expanded into Australia, Friendsurance created a peer-to-peer insurance model which connects groups of customers to create their own risk pool to settle small claims. “If their connections remain claims-free during the year, they can retrieve as much as 40% of their premiums,” Scheffel explains.
Through insurtech, South African insurers have a more accurate representation of their clients, ensuring ultra-customised policies according to observed behaviour.
Some examples of innovative technology being introduced throughout the different sectors in the insurance industry include:
* Car insurance – Multiple vehicle insurers are incorporating apps which use GPS and smartphone sensor technology to track driving. These apps can track when the customer is speeding, taking corners too hard or even just slamming on the brakes too aggressively. But responsible drivers will be rewarded.
* Property insurance – Smart home security systems allow insurers and homeowners to monitor their homes through an app. Using a smartphone or tablet, properties can be armed or disarmed, and even be monitored for floods or fires through sensors. Insurers can therefore manage risks, resulting in fewer claims.
* Medical insurance – Insurers are encouraging healthier lifestyles through the use of wearable biometric sensors, such as Fitbit or Garmin fitness trackers. If a customer is hurriedly walking up and down the stairs at work, the chances are they are trying to meet their daily step target. Using these trackers, insurers can monitor movement, heart rate and even sleep patterns.
Innovations and emerging technologies are truly transforming the insurance industry, Scheffel adds. In fact, he thinks the biggest challenge lies in separating the limited fads from the everlasting game changers.