Safe to say, it’s been a rocky year for the InsurTech industry.
According to CB Insights, global InsurTech funding for Q1’22 was down 58%. With funding drying up and some InsurTechs closing their doors, we’re entering a period where we’ll start to see who the real contenders are.
Now when it comes to predicting who those companies will be, your guess is as good as mine. That said, companies like Lemonade, Oscar Health, Wefox, Branch, and Next Insurance all come to mind. What is it that these companies are doing that has helped them reach unicorn status? They’re all focused on the customer experience and are reinventing how insurance is purchased. The way they’re able to do that is through better data. These companies know their customers better than anyone else, allowing them to offer a personalized user experience in addition to lower premiums.
Balancing Risk vs. Experience
The holy grail of digital insurance distribution is finding the perfect balance between a seamless customer experience with one that doesn’t increase your risk exposure. We’ve written extensively about how to find this balance, but it really comes down to figuring out how to apply friction when necessary and avoid it when possible.
Most, if not all, of the InsurTech players folks have heard of have experienced massive underwriting losses these past few years. While natural disasters, COVID, inflation, and other factors have played a part, another variable is their strategy to trade growth in exchange for riskier policies. That approach will need to change in 2023 as investors have shifted focus to profitability over the grow-at-all-costs approach that was pervasive these past few years.
So how can carriers find a perfect balance between personalized user experiences and enough “safeguards” to avoid writing bad business? One of the new ways to do this is through behavioral data. Carriers have realized that looking at the way their applicants behave during the application process can be extremely telling of what that applicant is trying to accomplish. When carriers have this insight in real-time, it enables them to dynamically change the experience for a user based on their final intent.
For example – if you’re able to detect that an applicant is at higher risk than they appear to be by looking at the way they interact with certain fields on an application, you can dynamically change the experience for that user by asking them additional qualifying questions or running additional data checks. This helps to prevent carriers from opening the floodgates and writing tons of bad business, while also letting the genuine users through and ensuring they can bind a policy. The InsurTechs who are likely here to stay are working to master the balance between user experience and risk/fraud protection, and they’re using behavioral data to help them.
Major InsurTech Industry Themes for 2023
The InsurTech industry, and the industry at large, are constantly thinking about ways to improve and adapt to the changing landscape of the industry. In 2023, some of the major themes that carriers will likely be focused on include the increasing role of technology in the industry, the need for greater customer service and personalized experiences, and the ongoing challenge of managing and pricing risk.
Increasing Role of Technology in the InsurTech Industry
The use of technology in the insurance industry has been on the rise in recent years, and this trend is expected to continue in 2023. Insurance carriers are using technology to improve the customer experience, streamline operations, and better manage risk.
For example, many carriers are using artificial intelligence and machine learning to automate routine tasks and make more accurate underwriting decisions. In addition, the use of telematics and other connected devices is allowing carriers to offer more personalized and dynamic insurance products.
Personalizing the User Experience
Another key theme that the InsurTech industry will be focused on in 2023 is the need for greater customer service and personalized experiences. In today’s increasingly competitive and digitized insurance market, customers expect a high level of service and personalized attention.
Insurance carriers that can provide these services will be better positioned to retain and attract customers. This means that insurance carriers will need to invest in training and development for their employees, as well as in technology that can help them deliver personalized experiences to their customers.
Managing and Pricing Risk
A third major theme that the InsurTech industry will be thinking about in 2023 is the ongoing challenge of managing and pricing risk. Managing risk is a core function of the insurance industry, and it is becoming increasingly complex in a world where new risks are constantly emerging. Insurance carriers will need to continue to develop new and innovative ways of identifying, assessing, and managing risk in order to remain competitive and profitable. This may involve using advanced analytics and data-driven approaches to better understand and price risk, as well as developing new products and services to address emerging risks.
In conclusion, the insurance industry is facing a number of challenges and opportunities in 2023. Insurance carriers will need to focus on the increasing role of technology in the industry, the need for greater customer service and personalized experiences, and the ongoing challenge of managing and pricing risk in order to remain competitive and successful. By staying on top of these trends and investing in the right strategies and technologies, insurance carriers can position themselves for success in the coming year.