It is undoubted that the advancement of technology has affected the InsureTech startups in a significant manner. From the automation of the insurance systems to the need to replace some of the human labor with machines, it is evident that the InsureTech startups have had different effects and reactions to the increase in the level of technology (Hanley, 2017). According to the CB Insights, the traditional insurance industry is doomed, and its downturn has been exacerbated by the investment of $ 1.7 billion by the insurers, reinsurers, and venture capitalists beginning in 2016 (Hanley, 2017). Most of the InsureTech startups in 2018 are targeting the independent agency value chain, which has mostly based the insurance activities in the United States of America and the rest of the world (Hanley, 2017). The independent agency value chain is concerned with the marketing, sales, casualty insurance, and the underwriting of property insurance. The increase in the level of technology has been estimated to deprive the traditional agents of their work while favoring those that are conversant with technological approaches to insurance. The InsureTech chief executive officers have more decisions to make in ensuring that their startup businesses have the required technology to contribute positively to the process of insurance in the United States of America (Hanley, 2017). The survival of the independent agents is limited in the InsureTech world due to their low conversance with the technological advancement in the insurance sector. However, the independent agents can secure their future by ensuring that they are in line with the current technological trends in the InsureTech sector. One way of doing so is by attaining the required education to handle the InsureTech devices and processes (Hanley, 2017). Then, the agents can be in the limelight by ensuring that they stay connected to the social media platforms. Through that way, the independent agent will survive in a world full of InsureTech startups (Hanley, 2017).
One of the most significant inventions that technological advancement in the insurance industry has brought about is the use of big data (Wamba et al., 2015). Increasingly, the world of insurance has handled more data than it used to, and the processes are getting much more detailed than they have conventionally been. The situation has led to an increase in the use of big data and their analytics to handle the volume of computable data at their disposal (Wamba et al., 2015). The use of big data has been attributed to the increase in the value addition for the processes that optimize the current practices. However, the handling of the voluminous data has not always been easy for the various organizations, as they have had to bear with various risks such as the loss of data and the intermittent danger of cybercrime that has affected the other industries in the United States of America such as healthcare (Wamba et al., 2015). Nonetheless, the situation has been improved by having proper management of the massive amounts of data. That has been a way in which the big data has been handled adequately. The management has come in time to salvage the situation where the various areas of risks in the insurance industry face their unique pitfalls (Wamba et al., 2015). A need has arisen to evaluate how the challenges in the setups can be alleviated by the use of the specific big data applications that have been invented to counteract the effects of risk on the insurance industry. The big data analytics have addressed market risks by focusing on the various areas that are considered the crucial focal points for the big data risk management: foreign exchange, interest rates, and equity and commodity prices in the market (Wamba et al., 2015). Looking at the change in the interest rates as the first parameter in the market risks, insurance companies that deal in loans such as banks have had to deal with the risks such as the default on the loans and the lowering of the interest rates by the American government thus incurring losses (Wamba et al., 2015). The changes in the foreign exchange rates have had a significant effect on the companies that conduct their businesses in the multiple currencies that are available in different countries across the globe.
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Usage-Based Insurance and Telematics (UBI) is an innovation by the auto insurers that calculates the insurance costs incurred by the clients according to the type of vehicle they use against the time they have been using the vehicle, the distance traveled, and the behaviors exhibited by the car (Andri et al., 2018). The UBI differentiates the insurance services from the traditional insurance systems where the insurance companies used to reward safe drivers by giving those low premiums and little or no bonuses. The UBI has three types. The first type is the insurance where coverage is based on the odometer readings of a car. The other one is where coverage is based on mileage, which is computed from the global positioning system (GPS) data (Andri et al., 2018). The last type of the UBI is where the insurance coverage is based on the other type of data that is collected from a vehicle, inclusive of the day and time of the travel and the historical risks associated with the road traveled. UBI has thus reduced the risks that the drivers have faced in having their insurance claims addressed by the insurers. Notwithstanding, there has been a massive competition in the auto industry which has been caused by the rapid changes that are observed in the industry (Andri et al., 2018). Telematics, on the other hand, has indicated that the trends in the auto industry have brought about behavior-based telematics that has disrupted the insurance market a great deal. Telematics has been associated with the development of black box insurance. Black box insurance has been identified as the out-of-sight insurance that records the speed at which the vehicle travels, and the total distance traveled and the time or day that the vehicle is on the road (Andri et al., 2018). The black box insurance is a technological approach to current insurance, which has been targeted at reducing the risks that insurance has traditionally brought. The addition of the feature that monitors the behavior of the driver on the road has been regarded as the final blow to the risks that were previously caused by auto insurance.
The auto insurance space has seen more influence from technological advancement than either the property or health insurance. The main reason for the trend is the increase in the advancement of the motor vehicles with technological touches on both their design and their functionality (Frey & Osborne, 2017). Emergent technologies in the insurance such as the advent of the UBI and the increased use of telematics have been in line with the manufacturing principles and requirements of the car manufacturers across the globe. The UBI has been developed to ensure that the vehicle owners reap more from the insurance agencies, to compensate them for the money they have used in the payment of the insurance premiums in the different scenarios in the world (Frey & Osborne, 2017). The use of telematics has increased the monitoring of the insured cars to ensure that the vehicles have been insured to the best standards that are available in the market. The handling of the big data, as another trend that has characterized the auto insurance more than it has affected both the property and the health insurance (Frey & Osborne, 2017). The risks that the management of big data has solved for the insurance industry has mostly affected auto insurance. Technological advancement has focused on the insurance of the vehicles more than it has focused on the property and the health insurances (Frey & Osborne, 2017). Financing trends in the auto insurance industry have also been more advanced than they have in the property and the health insurance. InsureTech has a promising future with the Introduction of technology.
Artificial intelligence has affected the insurance industry in a variety of ways. Mainly, artificial intelligence transforms the sector by revolutionizing the customer experience (Riikkinen et al., 2018). Excellence in the customer service has had a promising future in the auto insurance industry with the advancement in technology. Technology in the insurance sector begins by educating the insurers on how to maintain the high levels of customer service (Riikkinen et al., 2018). Additionally, the increase in the level of technology promises the insurers the future of neural networks and the techniques in machine learning. In the risk management procedures, artificial intelligence will transform the insurance sector from detect and repair approach to a predict and prevent model. Artificial intelligence has also impacted cybersecurity positively (Riikkinen et al., 2018). The pace of change in the technological arena has contributed to the risk management in the insurance industry. The risk management has been contributed to by the enhancement of decision making for the insurance companies. The response to the market by the contemporary insurers has reduced risk by ensuring that the management of the same has been considered (Riikkinen et al., 2018). Digital innovation has changed the manner in which people have engaged with the different businesses in the world. The enhancement of customer service in the insurance industry has increased the standards that have been associated with insurance (Riikkinen et al., 2018). Therefore, the expectations in the market have also changed in a significant way. Thus, the increase in risk management by having companies embracing technological integration in insurance has fastened the pace at which pressure is affecting the insurers.
References
Andri, P. E. R. L., Bongers, S., Genovese, D., & SORDO, H. N. (2018). U.S. Patent Application No. 15/394,260 .
Frey, C. B., & Osborne, M. A. (2017). The Future of Employment: How Susceptible are Jobs to Computerisation?. Technological Forecasting and Social Change , 114 , 254-280.
Hanley, R. (2017, April 17). How Insurtech disruptors will defeat independent agents. Retrieved from https://www.agencynation.com/how-insurtech-disruptors-will-defeat-independent-agents/
Riikkinen, M., Saarijärvi, H., Sarlin, P., & Lähteenmäki, I. (2018). Using Artificial Intelligence To Create Value in Insurance. International Journal of Bank Marketing .
Wamba, S. F., Akter, S., Edwards, A., Chopin, G., & Gnanzou, D. (2015). How ‘big data’ Can Make Big Iimpact: Findings From a Systematic Review and a Longitudinal Case Study. International Journal of Production Economics , 165 , 234-246.
