InsurTech, digital insurance offer for new demands. What is it and why will it be crucial in 2023?

14 April 2022

Updated 06 July 2022

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InsurTech has emerged as not just the future but the present of the insurance industry. Understanding the extent to which this area is impacting the insurance industry's products and services is complicated and easy at the same time. While we might consider this term to be recent, the digital insurance offering has already been established for a few years now.

Due to its youth, it may still be difficult to speak of a consolidated InsurTech ecosystem, unlike what is already happening with its sibling, FinTech, but we can safely say that it is already a reality that not only other businesses have taken advantage of.

There is a group of native InsurTech business models and service propositions that are reinventing the insurance offering as we know it to create a new way of understanding this mature and storied industry.

What is InsurTech and what does it mean?

Also known as InsureTech, InsurTech is the industry dedicated to offering digital solutions related to the insurance sector, its products and services. The words "Insurance" and "Technology" make up a term that has been gaining more and more followers in recent years.

We can safely say that the vast majority of professionals are familiar with the term FinTech, but, on the contrary, there are many who are still wondering what InsurTech is. As with the former, its focus is on the use of technology and digital solutions for the development of a new proposition.

This new InsurTech proposal can be carried out by both traditional insurance companies and new startups in the sector that base their strategy on the use and application of technology to make their business model possible.

The development of digital onboarding solutions, online product and service contracting, as well as remote trust services, have laid the groundwork for making InsurTech possible.

The insurance industry has seen a significant reduction in the number of customers under the age of 35 over the last decade. The so-called millennials show half the interest of their predecessor generation in taking out products and services, while the next segment of users (Generation Z) shows a quarter of the interest of their predecessors.

Aware of the demands, needs and expectations of the new consumer profile, the insurance sector has found in InsurTech the answer to them. The proposal of this way of understanding insurance fits in with the new generations and thanks to its agile component is capable of transforming itself and offering a broader and more segmented proposal.

The conglomerate of InsurTech-related businesses was already worth an aggregate value of more than 23 billion in Europe alone in 2021 according to a study by Mundi Ventures. This, accounted for about 25% of the value of FinTech.

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InsurTech ecosystem: how does it work?

The functioning of InsurTech is only possible thanks to a large network of different companies, each one focused on certain aspects that make it possible to offer its solutions.

While many of the components that serve the financial sector to power FinTech are the same as those that serve InsurTech, there has been a proliferation of specialist businesses that focus on the specific use cases of the insurance sector and have repurposed them for digitized transposition.

In this way, and broadly speaking, we can say that the following sub-areas are part of what we understand today about how the InsurTech ecosystem works:

Traditional insurers digitized

These InsureTech players are emerging as those with the largest shares of investment in technology, relying on innovative startups to transform their usual systems and adapt them to the dynamics of native InsurTech.

Digital native insurers

These types of businesses are born out of a digital approach to the insurance industry. Without the technology that makes it possible for insurers to operate online and new tools to establish digital customer journeys, these companies would not exist.

These InsurTechs bring a new, more versatile and flexible approach to life, home, vehicle or home insurance. Among others, those dedicated to the following sub-areas stand out:

  • eHealth.
  • Flexible life
  • Usage-based car and motorcycle
  • Commercial and business insurance with participative financing
  • Smart home

Additional insurance on FinTech products

Just as the traditional banking and financial sector offers insurance products and services, FinTech takes the opportunity to offer a wide range associated with its own services.

Wallet cards, trading platforms or even e-commerce, when selling technology products, offer insurance with InsurTech models within the core of their business. In many cases, they also act as partners of native InsurTechs.

Distributors and comparators

Perhaps this is one of the most representative categories of InsurTech and FinTech, as certain players gained great visibility a few years ago, even in television media, achieving significant notoriety and unifying under the same digital platform all the insurance offerings, both traditional and digital-native in comparators and distributors.

InsurTech providers and technology for the area

These companies do not usually provide insurance services and products per se, but they enable the operation of those that do thanks to their digital developments. InsurTech providers of the following technologies stand out:

Customer service platforms, service buyers or insurance marketplaces need the solutions of RegTech providers in order to operate.

All these players framed within the value chain and offering tools for the customer experience as technology providers are not the visible face of the sector, but they are responsible for driving the "manufacturers" so that they can increase their growth, expand and operate with guarantees and security.

Plug and Play solutions for the InsureTech area

One of the challenges for companies in the InsureTech sector is to ensure smooth and agile market deployments in crucial processes such as customer onboarding, document and data management or fraud prevention.

The best technology providers are those that integrate their solutions into insurance companies within days and without impacting the business. Ensure scalability and the fact that the platform is not forced to commit to costly developments by being able to integrate agile and versatile solutions adapted to insurance use cases.

In recent years some of these InsurTech providers have created plug and play digital platforms that are ready to deploy.

InsurTech trends for 2023 and innovative companies

As we have been anticipating, one of the key points to keep in mind is the cross-supply of products between FinTech and InsurTech. Firms and companies in the industry are either integrating new products and services or forging alliances with similar companies to create a broader distribution network.

The trends that InsurTech companies will show will come from the hand of flexibility. To adapt to new consumer demands, we will see a great deal of product innovation focused on flexible insurance that can be modified at any time.

Changing these rates dynamically or, for example, innovative insurance policies such as those in which you pay only for the days you use a vehicle or second home will require agile and powerful e-signature solutions capable of creating a seamless and personalized user experience.

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