Every insurance and reinsurance related event lately has had at least one panel on a particular topic that almost no-one had heard of a couple of years ago: insurtech.

What is insurtech?

Just as the name suggests, it is the combination of insurance and technology. Or, perhaps more accurately, the rise and use of a wide range of technologies within the insurance industry, from underwriting and claims to administrative functions. What has always been an extremely paper-intensive industry is now gradually dragging itself into the digital age.

This digital transformation is part of a new industrial revolution, sometimes referred to as 4th industrial revolution or “4iR”, though it is anything but industrial. The transformation involves many things from the rise of automation and artificial intelligence (AI) within everyday work processes to the use of blockchain technology and smart contracts, simplifying claims management and underwriting processes.

An example: Lemonade

Lemonade Insurance Company is a poster child of the insurtech movement. Its CEO and co-founder Daniel Schreiber once stated: “The insurance brands we know today came of an age in the era of the horse-drawn carriage, but insurance is best when powered by AI and behavioral economics, which is why we believe that companies built from scratch, on a digital substrate and with a social mission, will enjoy a structural advantage for decades to come.”

What does Lemonade do? Using a mix of artificial intelligence, algorithms and chatbots, it allows its customers to download and use apps to purchase policies and make claims automatically, rather than liaising with human beings. Its most famous claim to fame was its ability to pay a claim (for a stolen coat) in three seconds. At its core, Lemonade is digital peer-to-peer insurance, similar to a mutual insurance company, except replacing brokers with AI. Its current, primary limitation is that it really can only handle small, simple claims; more complex claims are passed on to humans.

Prepare for disruption

Despite Lemonade’s limitations, it is a good example of the potential for technology to disrupt a traditional industry. A bastion of paperwork and old-style practices, the insurance world is slow to move, but there are many new technologies which are becoming relevant and beginning to make inroads: blockchain, AI and machine learning, big data, robotics, healthtech and medical wearables, and the ‘internet of things’.

No part of the industry is immune – insurtech comprises established insurance vehicles looking to re-invent themselves by embracing new technologies, new insurers setting up to write insurance in innovative ways, or simply new ventures that are offering specialized tech products to insurers and other market participants.

Chris Garrod

Director, Insurance and Technology


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