Insurtech is fundamentally reshaping the insurance industry, introducing advanced data analytics to provide more accurate risk assessments, personalised policies, quicker claims processing, and targeted marketing.

The result is a level of competitive advantage that is key to meeting the growing expectations of tech-savvy customers.

“This shift away from historical data and manual processes is enhancing customer experiences, improving risk assessment, and optimising pricing,” says Charlotte Koep, chief operating officer of Root insurtech platform. “Traditional insurers are discovering what embracing insurtech can tell them about their business and how they can derive value from comprehensive and up-to-date data sources.”

Garbage in, garbage out

Many businesses continue to underestimate the importance of clean and accurate data. Incorrect or poor-quality input will produce faulty output.

“Garbage in, garbage out,” says Koep. “Siloed, inaccurate and incomplete data can be a massive obstacle that requires expensive clean-up efforts before it can be used effectively.

“Insurtech platforms consolidate information and add context, which helps with the data scrubbing process. The data becomes richer and more comprehensive. For example, in addition to knowing your customer’s name and address, geolocation tools allow you to plot customer addresses on a map, providing hyper-localised insights.”

Context is king

Context is often the missing link in insurance data. Traditional systems struggle to provide the background needed for accurate decision-making. Insurtech platforms deliver contextual information that can be a game-changer for the industry.

“A good insurtech platform lets you analyse demographics like age, sex, income level, race, employment, location, home ownership, and level of education,” she says. “From there, you can identify different customer segments and offer them tailored insurance products that meet their specific needs. For instance, understanding the changing life stages of your customers can help you adjust your product offerings to match their age-related needs.”

Visibility changes everything

The most powerful impact of insurtech is the new-found visibility into traditional insurance businesses, Koep says. What was once a black box turns into a room flooded with light. It’s not that the data wasn’t there before; it simply wasn’t visible or easily accessible.

“Added visibility into your customers’ behaviours and preferences informs your marketing strategies. In turn, this helps you determine when, where, and how to sell insurance policies. You can also determine where your customers come from and assess what types of policies are sold through different channels, such as direct response marketing, online, or direct mail marketing.

“For example, this lets you compare customers acquired through marketing on Facebook versus those acquired through X (Twitter), for retention rates and claim frequency, which are key business decision points in any insurance business.”

Koep says the ability to make data-driven decisions leads to improved customer retention through policies and services that are tailored to meet customer needs more effectively.

“It’s a shift from merely selling policies to selling the right policies to the right people. It’s also more profitable,” she concludes.