Abstract
Technology advances at an incredible rate all around the globe. Financial technologies (FinTech) are defined as production of services that combine financial services and technology. A subdimension of FinTech, insurance technologies (InsurTech) is a system built with the purpose of creating solutions for the insurance sector using a technological approach. Making it easier for the insurance companies and the insured to manage their contracts, minimizing the risks involved, and allowing for the development of innovative technologies, InsurTech is simply the technology of insurance business. For the policy owners, these technologies bring with them the benefit of cost-effective policy solutions. This chapter focuses on the possible impact of insurance technologies on the insurance sector. Explored in this study are the estimated transformation of the insurance sector with insurance technologies and the problems likely to occur as a consequence.
TopIntroduction
The common practice in an insurance company used to quote for a casco policy is to base their calculation on the age of the vehicle in question, the information of the insured, no-claim status, etc. which play a role in the price of an insurance policy (Cappiello, 2018). InsurTech analyzes the vehicle and the behavior/driving habits of the insured and offers the right insurance policy accordingly. Minimizing the risks, it contributes to the development of the insurance sector. The purpose of insurance, on the other hand, is to offer complete insurance services to the clients in order to meet their needs and to reduce the risks involved in their operations. Insurance companies need to offer innovative and impeccable services if the sector is to grow and develop. Any innovative entrepreneur who places importance on their business and who knows how to offer the best services to their clients may benefit from the development of the insurance sector and may secure millions or even billions of dollars of growth for their business if they develop a business model based on the InsurTech.
Among the nations with the greatest advancements made in InsurTech are the USA, the UK, Germany, and the Netherlands. Receiving state incentives backed by leading insurance companies, these startups take on very large tasks. Even the reassurance companies are now investing in InsurTech. For example, Trov, an Axa-backed InsurTech company based in the UK, offers insurance policies for personal belongings such as cameras, PCs or mobile phones. “We track the risks in real-time,” said Scott Walchek, CEO of Trov, a company focusing on smartphone insurance. “As soon as you turn on a device, your insurance is enabled and it is disabled as soon as you turn it off. Then, the time elapsed is calculated for billing purposes,” he added (Machler, 2016).
Another example is Lemonade; the company receives unprecedented financial support from US-based investment companies. Able to obtain your quote in an average of 30 seconds, this system guarantees the payment of compensation for damages within 3 minutes. Lemonade builds on AI and digital technologies. Offering its services using a chatbot, Lemonade’s customers just need to text this chatbot to receive the best insurance solution for themselves (Carney, 2017). Chatbots, then, present the customer with insurance options customized based on the information given. After deciding the best option designed for themselves, the clients can sign up to the system using their credit card and mobile signature, and purchase the insurance policy (Schanz, 2015). Another example is Bought by Many, the company aims to operate in a segment none of the insurance companies dare to invest, such as the travel insurance for recovering cancer patients.
InsurTech startups not only adopt a user-friendly approach but also build a close relationship with the insurance customers and offer a service where the client is protected at all ends while preventing damages to the insurance company with risk prevention efforts, warning, and guidance services. Startups aim to define any possible risk using smart devices in segments such as Accident, Health or Hazard Insurance and to minimize or even eliminate those risks.
A Blockchain is a concept with possible ties to InsurTech and it is a topic drawing recent interest in Turkey. Developed with the purpose of bringing the customers and the intermediary together, Blockchain is a database where any transaction is controlled by the users without the need for a corporation to offer security over the transactions, thanks to the Blockchain ledger. This system offers a secure and transparent method for transactions which ensures the efficiency and productivity of all (Shelkovnikov, 2016). Minimizing printed material costs and transaction costs between companies, it also allows for rapid processing. The requests received are filtered by the Blockchain software automatically allowing for the drafting of smart contracts. A promising new technology for fields such as supply chain, product lifecycle, secure data collection, transparent data sharing, the Blockchain technology has drawn the attention of tech companies, entrepreneurs and the governments all around the world.
Key Terms in this Chapter
Broker: Private and independent professional insurance intermediary who acts as the consultant and/or representative of the person who purchases an insurance policy.
Insurance Policy: The written and legal proof of the contract signed between the insurer and the insured. An insurance policy consists of information about the insurer and the insured, definitions of the type and coverage of the insurance, the cost of insurance, the duration of a contract, premium payment information, issue date, and liabilities and responsibilities of the parties.
Insurer: The insurance company which contracts an engagement with the insured undertaking all the responsibilities of the insured with regards to the insurance type.
Smart Home: Building technologies are the reflection of common industrial control systems into our daily life; home automation can be defined as the use of this technology customized according to personal preferences and needs. Smart homes allow the user to remotely control any functions and systems embedded in a home.
Premium: The payment made by the insured on a regular basis in exchange for the assurance provided by the insurer in the face of the risks available.
Fintech: This is a technological development which aims to compete with traditional finance methods. It represents the technology allowing for mobile banking and the use of mobile devices for investment and making financial services readily available for the users.
Autonomous Car: Also known as self-driving cars, these cars use a number of sensors to identify its surroundings and they are able to move autonomously without the need for human interference.
Reassurance: The partial or full transfer of the liabilities of one insurer to another insurer.
Blockchain: It is a recording system made up of blocks which are connected using cryptography, making the system a lot more secure.