Financial technology, or 'fintech' as it is more commonly referred to, is taking the financial industry around the world by storm. Over the past ten years, there has been a significant increase in the use of technology in the financial sector, spanning from mobile banking, small business lending, and financial advice. However, despite the financial innovation and technological progress made so far, a large part of the financial industry is still relatively unaffected.
The insurance sector is one of the areas where the growth of fintech is still lagging behind. This is not to say that progress has not been made. In fact, despite the heavily-regulated nature of the insurance industry, and the considerable expenses involved in infiltrating the market, we are slowly starting to see an ever-increasing presence of fintech in the realm of insurance.
As predicted, the more traditional classes of insurance, such as health, life, property, vehicle and marine insurance have been the first to take the leap into using technology as a method to underwrite risks. Some start-up companies around the world are already providing insurance products at the push of a button. Eventually, most insurance policies will be delivered on mobile phones and other devices.
Technology can also provide valuable information when it comes to underwriting risks. Smart watches and fitness trackers can provide insurers with accurate data for making health assessments so that insurers may no longer need to rely on the declarations made by the insured before purchasing a life or health policy. The reliance on the element of 'utmost good faith' on the part of the insured could eventually become obsolete, and could be replaced by hard-facts obtained through the use of smart technology. Similarly, tracking devices on automobiles or mobile phones can be used to assess an insured person's driving habits and to adjust premium costs accordingly.
Technology has also brought new types of risks to the fore, such as cyber crime and hacking. One of the latest challenges faced by insurers is the rise in popularity of remotely piloted aircraft (or drones). Insurers all over the world are still trying to work out how to deal with the rise in demand of third party insurance cover for these types of aircraft.
Going forward, the necessity for developments and innovation will continue to increase and the insurance industry will eventually have no choice but to accommodate the prospect of using technology in order to satisfy the demand and aptitudes of the general consumer.
Ultimately, once regulatory hurdles have been overcome, technology will provide endless possibilities to the insurance industry and to the consumer. The foreseeable advantages include: a better understanding of client aptitudes through personalised underwriting, increased cost-efficiency and client satisfaction through the use of alternative communications, increased and improved client-insurer interaction, ease of access to insurance policies, and the ability to align insurance products with demographics and in-app data.
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