(Finance) – New technologies are revolutionizing the insurance market: in the distribution of services, artificial intelligence, the circulation of APIs, big data and cloud platforms offer advantages in economic and efficiency terms for startups that want to scale a market booming.
Globally, the sector is already worth it 1.8 trillion dollarsbut has a 60% growth potential within a few years: the market also runs in Italy given that by 2030 it could touch 30 billion euros.
Integrated insurance (or embedded insurance) will allow one better customization of the policy on customer needs and greater speed also in the settlement of claims: 68% of Gen Z are interested in purchasing these integrated digital insurance policies.
“The insurance sector is experiencing a period of great evolution and is destined to change radically in a few years: in order to exploit its full potential, companies are equipping themselves with technological solutions, opening up opportunities for new players”, he declares Luigi Alicante, Insurance Senior Account of Mia-Platforma 100% Italian tech company specializing in the construction of cloud-native digital applications and platforms.
The era of “all you can ensure” has inexorably begun. No longer just home, car and life insurance: now insurance also covers bicycles, pets, consumer electronics, musical instruments and much more. It is the new era of the insurance sector in which it is possible to protect everything that has sentimental value. In recent years the the concept of risk has taken on a new meaning: the pandemic, the global economic situation and widespread uncertainty about the future have pushed the insurance sector to find new ways to reach the end customer and give life to the embedded insurance market.
In practice, with a single click, the consumer will be able to buy insurance coverage as an integrated product in the purchase of another good or service. All this is made possible by the digital transformation that has allowed the streamlining of many procedures within the insurance services sector: artificial intelligence, the circulation of APIs, big data and cloud platforms have brought economic and efficiency advantages to all players who want to scale the embedded insurance market which is currently worth 1,800 billion dollars globally with a potential to grow by 60% in a few years according to what reported by the Open & Embedded Insurance Observatory Report 2022.
Within this market, the most requested services are “bancassurance” services, i.e. the integration between banking and insurance activities, which cover 70% of the market, followed by personal protection products with 19%. affinity insurance with 9% and closes the travel sector with less than 1%.
The market also has excellent growth potential in Italy: the Italian Insurtech Association has estimated that the embedded insurance market will be worth up to 20% of the value of the total insurance sector over the next 10 years.
In detail it is a turnover that could be worth almost 30 billion euros by 2030, taking into consideration that for KPMG the Italian insurance market, with reference only to companies with registered offices in Italy, is worth 144 billion euros at the end of 2021.
How has the insurance market changed with digital and green?
The insurance market – he explains Louis Alicante – presents great opportunities for digital evolution, which will be driven by some trends that are already strongly changing the market. On the one hand, the entry of the main digital Over The Top (OTT) vendors into the market (such as, for example, Amazon which has opened a home insurance comparison portal in the UK market), which are forcing companies to accelerate the sale of policies on the digital channel and from an Embedded perspective. On the other hand, for traditional insurance companies, digital opens up scenarios of product innovation and distribution that are already emerging both in the Italian and international markets.
To accelerate customer adoption of digital products, insurance companies need to modernize their IT architectures to simplify the shopping experience of its customers, and make its services increasingly accessible and easy to use.
As far as the green is concerned – Alicante continues – the National Association of Insurance Companies (ANIA) states in the report entitled “The green turning point of transport and mobility. Challenges and opportunities for the insurance market” that insurers play an important role in incorporating i sustainability principles in their corporate policies and in ensuring a more sustainable transformation of community, economy and society.
For example, Insurtech players are emerging who provide insurance services only on goods that meet the criteria of the circular economy, such as cars or rental houses, excluding all linear and non-reusable or recyclable products, which therefore have a short life cycle .
Or the growing impact that climate change is having on the world is favoring the distribution of parametric policies, which pay compensation not on the damage suffered but on the phenomenon that has occurred. For example, in the event of bad weather, the policyholder can receive a refund regardless of the damage suffered, but for the simple fact that the bad weather episode occurred.
What are the new challenges of the Italian insurance market?
Insurance companies are facing several challenges. On the one hand, they must respond to the needs of increasingly demanding and digital customers, who wish to have all the data relating to the services purchased available in a single point, which can be accessed anywhere and at any time. On the other hand, they are facing the entry of new digital native competitors (such as Amazon or Tesla) into the market, forcing them to revisit and innovate their business model.
In the future, it will be increasingly important to accelerate innovation in the methods of selling and distributing products and services, and to encourage integration with partners, including those outside the insurance market.
Collaboration with a view to ecosystem allows you to activate new sales channels in bundles with players such as banks, retail chains, innovative insurtechs, to name a few, and to create innovative insurance products and services that meet the needs of all customer segments.
To allow a coherent and stable evolution, it will be essential for companies to simplify and streamline internal processes and optimize the underlying internal IT systems, in order to be able to compete with the new digital native players.
How will the mobility of the future change the business of the insurance sector?
Alicante cites the study “Move to the future: mobility in 2031” carried out by EY and IIA – Italian Insurtech Association, according to which new mobility trends (such as, for example, interconnected smart cities, self-driving vehicles and pocket micro-mobility) they will strongly influence the offer of insurance companies, which are already developing new types of policies, linked to behavioral analysis and driving data or calculated on the basis of km travelled. Looking ahead, insurance products dedicated to multimodal mobility will be increasingly widespread, i.e. linked to the person regardless of the means of transport used and extended to more vehicles – bikes, electric scooters, scooters, cars – both private and shared – and integrated solutions all purchase bundle.
What opportunities will arise for the new technological players?
To face the challenges of an ever-changing market, insurance companies are putting innovation and digitization at the heart of their development strategies, explains Alicante.
The technology that enables the modernization of IT systems are the APIs (Application Program Interfaces), technological tools that simplify the interoperability of data and the integration between insurance companies and new business partners, even outside the insurance sector, creating greater opportunities to generate new business models, also thanks to the scalability and evolvability of the system.
However, APIs must be managed, processes adapted to these new technologies, and people trained in this process of change. Technological players can play an important role in this area, supporting companies to adopt an API Portal, a catalog where all the APIs that are used by internal application teams are recorded and described in detail, and accompanying people in this evolution.
Then there is another broader theme: in many companies, the concept of silos in IT is still widespread. This prevents us from offering an experience omnichannel, and to provide maximum visibility and availability of its data to its customers. Technology vendors can help companies decouple data from underlying systems, and expose it in real-time to applications and services aimed at end users, or their business partners.