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Perspectives: Competitors or catalysts? Evaluating insurtech’s role in the insurance industry

Phil Edmundson

The insurance industry has been an obvious target for digital transformation, with antiquated information technology stacks that still engage paper, phone and fax processes. That feels like a relic to those exposed to industries that are multiple decades into a digital transformation. Seeing this opportunity, some early insurtechs followed the model of Uber and Facebook — “move fast and break things” — but over time, that hasn’t been the primary story. 

In the past decade, insurtechs have disrupted the long-standing status quo of traditional insurance incumbents dominating the industry’s market share. The most successful insurtechs are removing the operational friction that has marked the industry for decades by using intuitive technology to solve complex business challenges with solutions that manage to keep the policyholder at the forefront. 

Insurtechs are at times misinterpreted as competitors trying to steal market share from legacy commercial insurers and brokerages. This overlooks how insurtechs are providing a catalyst for the insurance industry, seeking to fill in gaps in the overall value chain. The technology introduced by the companies, and the efficiencies they create, ultimately realign the benefit to each insurance stakeholder and enhance the industry at large.

Innovating the user experience

Insurtechs are evolving the traditional policyholder and broker processes by leveraging technologies and solutions previously reserved for the Big Tech giants, like artificial intelligence, custom applications and native digital platforms. 

The insurtechs that deploy AI have an advantage in developing technology due to their expertise in collecting and applying actionable data that traditional organizations often lack. Incumbent insurers instead must rely on their own historical claims data and are unable to take advantage of newer data sets that come by way of social media, government or other data produced with proprietary software, placing them at a disadvantage. 

Many insurtechs also deploy digital platforms and applications built on innovation in user experience, or UX. Digital experiences within the insurance sector are only effective when the designs reflect the needs of brokers, policyholders and other stakeholders, which is difficult to measure without sophisticated product management techniques. Early attempts at digitizing insurance processes were mired in poor UX design, with portals developed under the misguided assumption that any digital experience was superior to old-school practices. Insurtechs that fully take advantage of modern product management practices borrowed from leading technology companies can analyze the digital habits of brokers and policyholders to develop tailored solutions that are highly effective in aiding their regular tasks, rather than replacing one cumbersome process with another.

Balancing digital efficiencies and the human element 

Many insurtechs serve as marketplaces for consumers to more transparently compare quotes and understand how insurers determine rates. They create efficiencies through tailored experiences, cutting costs and creating savings.

While digitization enables these efficiencies, it is not the same as automating humans out of the underwriting process. In fact, the success of these technologies depends on striking the right balance to allow for human judgment. For instance, a human underwriter equipped with improved data insights can make a better policy decision than today’s AI would alone, or than it would with only traditional historical actuarial tables. 

Insurtech provides the tools to make the overall experiences for humans easier and more gratifying. Prioritizing the human element within these technological advancements should be at the core of the innovations taking place within these traditional entities. Not only does it showcase how tech-powered enhancements are essential, but it also is a great representation of how the people within the organization are the true decision-makers. 

Maximizing stakeholder benefits

Each area of insurtech innovation opens up a new opportunity to expand and create value for stakeholders: reinsurers, insurers, brokers, underwriters and policyholders.

Insurtech has made insurance more widely accessible than ever, creating a tech-powered consumer marketplace. Facilitated by the access of the web, brokers and providers can open themselves up to entirely new markets, while also taking advantage of the efficiencies and the larger prospective customer pool that comes with the territory. With these advancements, brokers can be positioned as the resource that teaches customers and business leaders how to use these new technologies effectively with minimal risk.

Underwriters are often considered to be insurtech’s primary casualty as automation takes hold — but that is not the full picture. Data-driven underwriting requires the human touch to achieve more accurate, effective coverage. Instead of replacing underwriters, insurtechs help them do their job more effectively and efficiently, with AI working in sync to improve their capabilities. In fact, great data insights can and do also improve the work experience of underwriters.

Commercial policyholders have benefited from insurtechs by taking full advantage of data-powered risk evaluation capabilities they have brought to the table. The industry has been built on the foundation of the judgment calls determined by actuarial science; the introduction of dynamic data to weigh against risk, however, makes for much more accurate, transparent coverage for policyholders.

For reinsurers and other owners of risk capital, it is imperative now more than ever to maximize the tools and expertise that insurtech has brought to the forefront. The same technologies that enable the gathering of data and improved underwriting can provide a view into aggregate risk. If properly packaged and displayed — using the kinds of UX practices discussed earlier in the context of policyholders and brokers — new forms of data can help risk capital to be “smarter” as well.

Finally, in a classic expression of the “innovator’s dilemma,” traditional insurers historically were not structured to make investments in new technology, making them the most likely to be on the losing end of the trend. While insurtechs have the ability to devote the majority of their resources to digital platforms, big data, machine learning and other new technologies, traditional insurers must choose which resources can be allocated across their standard lines of business and go-to-market strategies. Traditional insurers, however, still have the ability to learn from insurtechs. By incrementally leaning into the many technological advancements in the insurance sphere, incumbents can take advantage of the innovation that insurtechs have become the catalyst for, and over time begin to experience the type of advancements that will push the entire industry forward for the better.

Phil Edmundson is founder and CEO of Boston-based Corvus Insurance Holdings Inc. He can be reached at