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Disruption Vs Innovation in Insurance

3 minutes, 11 seconds read

People concerned with insurance have been using the terms- ‘innovation’ and ‘disruption’ interchangeably, perhaps because both correspond to building something ‘new’. However, there is a fine line between the two. All disruptors are innovators whereas, not all innovators are disruptors. Let’s delve deep into the difference between disruption and innovation in insurance.

Who are the ‘Disruptors’ in Insurance?

Disruptors drastically alter prevalent businesses, services, or products. They tend to be more creative, useful, impactful, inexpensive, time-savvy, and most importantly – scalable. 

As an example, Lemonade took in $57 million in premium revenue from 4,25,000 customers in 2018. This four-year-old startup was able to sell premiums to millennials- 90% of whom were purchasing insurance for the first time.

Reason- instead of an all-encompassing insurance package, Lemonade is keen on distributing micro policies as low as $5, which the customer perceives as useful. They’ve simplified the claim settlement process and within 3 minutes, a customer can get his refund credited to his account. While Lemonade sells its insurance policies through chatbot Maya, chatbot Jim handles claim settlement. Such AI-powered bots can handle multiple customer requests just as human agents and are better in detecting fraud. 

The disruptors are prone to adapt to changing customer preferences, which the traditional insurers are reluctant to because of the fear of losing existing customers. Disruption in insurance can break the barrier of the lower market penetration rate.

What’s Innovation in Insurance? 

Innovation is independent of drastic changes in businesses. It focuses more on bringing positive business development by delivering convenience to the customer and improving operational efficiency.

Innovation is not always about introducing new technology. It is also about harnessing existing technologies to build innovative solutions. For instance, blockchain technology has been there for decades; but the insurance industry has recently utilized it for algorithmic trading, smart contracts, policy distribution, and claim settlements.

For example, AXA Fizzy provides paperless flight insurance based on blockchain technology. Every user interaction is recorded and executed in the ledgers- from buying a policy to claim settlement without any human intervention. 

Other examples of innovation in insurance include Robo-advice, NLP (Natural Language Processing) to understand customer queries, insurance for IoT devices, AI-powered underwriting, automating insurance workflows, and Machine Learning technologies.

Also, read – Innovative insurance products of 2109

However, according to McKinsey’s report on Digital insurance in 2018, most of the P&C, health, and life insurance innovations revolve around marketing and less towards product development and claims. This gives an idea of the scope of innovation in insurance.

Where insurtechs are focusing

What’s Next in Insurance: Disruption or Innovation?

The traditional insurance business is known to be resilient to technological advancements and innovations in terms of consumer-centric products. To stay relevant and competitive, insurers should shift focus from digitization to strategic disruption according to the changing market dynamics.

In fact, Insurers are willing to fund insurance startups to gain a first-mover advantage in terms of technology and innovations. These investments illustrate a clear goal of improving customer experiences and supporting their existing operations at the startups’ risk. 

For instance, “Axa provided seed funding for five European start-ups under a fund set up in France in 2013, before launching Axa Strategic Ventures in 2015. The €200 million ($223.47 million) venture capital fund has the mandate to invest in innovations in insurance..”. (OECD (2017), Technology and innovation in the insurance sector)

Innovation from Insurtechs has the potential to contribute to the insurance value chain; however, managing disruption is still quite a challenge. Disruption alters the business and behaviours in such a short span that most of the outcomes remain unanticipated. While innovation takes time to catch the stream, disruption can make or kill a business. The best is to blend incumbents’ years of experience with innovation from startups to bring an accountable disruption.

We’ve been solving critical front & back-office insurtech challenges through innovative technological solutions. Drop us a ‘hi’ at hello@mantralabsglobal.com to know more.


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Retention playbook for Insurance firms in the backdrop of financial crises

4 minutes read

Belonging to one of the oldest industries in the world, Insurance companies have weathered multiple calamities over the years and have proven themselves to be resilient entities that can truly stand the test of time. Today, however, the industry faces some of its toughest trials yet. Technology has fundamentally changed what it means to be an insurer and the cumulative effects of the pandemic coupled with a weak global economic output have impacted the industry in ways both good and bad.

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Source: Deloitte Services LP Economic Analysis

For instance, the U.S market recorded a sharp dip in GDP in the wake of the pandemic and it was expected that the economy would bounce back bringing with it a resurgent demand for all products (including insurance) across the board. It must be noted that the outlook toward insurance products changed as a result of the pandemic. Life insurance products were no longer an afterthought, although profitability in this segment declined over the years. Property-and-Casualty (P&C) insurance, especially motor insurance, continued to be a strong driver, while health insurance proved to be the fastest-growing segment with robust demand from different geographies

Simultaneously, the insurance industry finds itself on the cusp of an industry-wide shift as technology is starting to play a greater role in core operations. In particular, technologies such as AI, AR, and VR are being deployed extensively to retain customers amidst this technological and economic upheaval.

Double down on digital

For insurance firms, IT budgets were almost exclusively dedicated to maintaining legacy systems, but with the rise of InsurTech, it is imperative that firms start dedicating more of their budgets towards developing advanced capabilities such as predictive analytics, AI-driven offerings, etc. Insurance has long been an industry that makes extensive use of complex statistical and mathematical models to guide pricing and product development strategies. By incorporating the latest technological advances with the rich data they have accumulated over the years, insurance firms are poised to emerge stronger and more competitive than ever.

Using AI to curate a bespoke customer experience

Insurance has always been a low-margin affair and success in the business is primarily a function of selling the right products to the right people and reducing churn as much as possible. This is particularly important as customer retention is normally conceived as an afterthought in most industries, as evidenced in the following chart.

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        Source: econconusltancy.com

AI-powered tools (even with narrow capabilities) can do wonders for the insurance industry at large. When architected in the right manner, they can be used to automate a bulk of the standardized and automated processes that insurance companies have. AI can be used to automate and accelerate claims, assess homeowner policies via drones, and facilitate richer customer experiences through sophisticated chatbots. Such advances have a domino effect of increasing CSAT scores, boosting retention rates, reducing CACs, and ultimately improving profitability by as much as 95%.

Crafting immersive products through AR/VR

Customer retention is largely a function of how good a product is, and how effective it is in solving the customers’ pain points. In the face of increasing commodification, insurance companies that go the extra mile to make the buying process more immersive and engaging can gain a definite edge over competitors.

Globally, companies are flocking to implement AR/VR into their customer engagement strategies as it allows them to better several aspects of the customer journey in one fell swoop. Relationship building, product visualization, and highly personalized products are some of the benefits that AR/VR confers to its wielders.  

By honoring the customer sentiments of today and applying a slick AR/VR-powered veneer over its existing product layer, insurance companies can cater to a younger audience (Gen Z) by educating them about insurance products and tailoring digital delivery experiences. This could pay off in the long run by building a large customer base that could be retained and served for a much longer period.

The way forward

The Insurance industry is undergoing a shift of tectonic proportions as an older generation makes way for a new and younger one that has little to no perceptions about the industry. By investing in next-generation technologies such as AR/VR, firms can build new products to capture this new market and catapult themselves to leadership positions simply by way of keeping up with the times.

We have already seen how AR is a potential game-changer for the insurance industry. It is only a matter of time before it becomes commonplace.


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