Fintech platform revenues derived from supporting the insurance industry will reach almost $235 billion globally by 2021, up 34% year-on-year from an estimated $175 billion this year.
This is according to a new report from Juniper Research, which notes growth would be driven by a combination of factors including: machine learning investments enabling insurance providers to personalise products, insurers deploying mobile apps to improve their customer experience and investments in blockchain technologies to underpin smart contracts.
On the other hand, research firm Technavio says growth of Internet-based business ecosystems, rationalisation of transaction processes and increased need for customer satisfaction is contributing to the growth of global insurance technology (insurtech) market. Several venture capital firms are investing in insurtech start-ups. It notes the insurtech firms are leveraging the power of software to promote different insurance products and other portfolio management tasks.
These start-ups are set up with a goal of disrupting less technologically savvy corporations, explains Technavio, adding the use of big data and powerful analytics tools have led to investment opportunities and strategies.
The insurtech market is an increasing phenomenon that has revamped the insurance industry to connect with a wider customer base consisting of high net worth individuals, the upper middle-income group, and the lower middle-income group, says ReportsnReports. The insurtech platforms have the potential to help insurance companies to improve their relevancy to the customers to rebuild their trust, it adds.
Juniper says the rapid transformation of the insurance market value chain will force traditional providers to improve their offerings and customer service to fend off the threat posed by fintech suppliers, particularly in the car insurance sector.
However, Timetric believes the vast majority of insurance start-ups are looking to partner with current insurers, as opposed to challenging them. The banking sector has been transformed and disrupted greatly by fintech, but insurtech remains a long way behind and a very different proposition, despite recent progress, it adds.
Funding to insurtech start-ups surpassed $1 billion halfway through 2016, highlighting the progress made, says Timetric. However, substantial improvements remain essential in basic areas such as mobile Web sites and apps, while more innovative areas such as blockchain and the Internet of things have the capacity to revolutionise the industry, says Timeric. Juniper predicts blockchain will accelerate insurers' ability to personalise products with smart contracts or smart policies adapting automatically to customers' changing circumstances.
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