Gain insight into the developments underway in the insurtech world in Australia. “Insurtech is creating new pathways in an old industry. It’s the most exciting industry in the world today,” says Laura Dabrik, Chief Evangelist at Guidewire Software. “Right now, insurance is on the cusp of large-scale change”.
Insurtech companies in Australia are looking for ways to streamline operations and make communication more efficient using digital technology. Companies using insurtech in Australia are more effective and serve their customers when they need it the most. We explore the future of insurtech in Australia.
What is Insurtech?
Insurtech is the combination of insurance and technology. Its goal is to make current insurance models more efficient. It enables insurers to offer ultra-customized policies, create on-demand insurance for special events and offer insurance policies for a more competitive price.
Technologies involved in developing insurtech include data analysis, artificial intelligence, ant the Internet of Things, or GPS tracking.
Why Australia is attractive for insurtech companies
Australia’s insurtech industry is booming. The number of insurtech companies increased by 53% in 2019. Market observers specialised in the Australian market believe that 71% of new start-ups are now post-revenue or post-profit.
Simon O’Dell, CEO to Insurtech Australia, said: “Australia is fast becoming a global centre for insurance innovation, as demonstrated by in the rapidly increasing size of our insurtech ecosystem.” O’Dell predicts that “Australia has the potential to be a leading player in the global insurtech revolution.”
The number of internationally founded insurtechs made up 30% of the market in 2019. The industry is becoming more financially stable. O’Dell also noticed that “both locally founded startups, and international insurtechs looking to scale internationally now recognise our local market as a springboard to global markets, in particular the U.S.”
Australia provides a good nurturing ground for companies looking to invest in insurtech. “The market is small enough for big companies to be agile, embrace innovation, and make decisions quickly.” says O’Dell.
With a strong financial services industry, Fintech is already popular in Australia, so the country is no stranger to innovation. In the future, Fintech will give an advantage to those insurers who offer flexible term products and digital distribution. Technological improvements using Artificial Intelligence will have an influence on the risk calculation and pricing.
Challenges for insurance companies and start-ups and how to overcome them
Collaborations between insurtech start-ups and dominant insurers have increased by 75%.
While this is good news, many traditional insurers and new start-ups face challenges while cooperating. Many of their challenges originate from the contrary working cultures of insurers and start-ups. Michael Fitzgerald, expert and analyst of Insurance Technology at CB Insights, points out the contrary characteristics in the working culture of insurers and start-ups:
While start-ups have a high tolerance for failure, traditional insurers do not. Insurers like to deliver a product which is polished to perfection; startups are more prone to launch a product which is viable and are quicker to make decisions. That is why Michael Fitzgerald says the relationship between insurers and start-ups is more than just the “traditional supplier-buyer relationship”. Fitzgerald thinks that “both parties will need to make significant adjustments to their preferred ways of working (their cultures) in order to optimize their financial, time, and emotional investments in each other.” If both parties learn to make adjustments, they will benefit from better partnerships; which will have a direct positive impact on returns.
What are the trends for insurtech in Australia in 2020?
Experts predict significant development for insurtech in Australia in 2020.
The potential of the Internet of Things is diverse
The Internet of Things (IoT) is on the rise in 2020. Insurers will have to improve how they deal with their claim management, reinsurance, and analysis of customers and marketplace. IoT is a technology which uses devices which are always online to gather and contribute data to a database. It uses sensors and real-time monitoring technologies to alert insurers when they need to get involved.
In the future, insurers will be able to use the IoT to reduce costs and generate additional revenues; for example by offering demand adjusted pricing, induce automatic maintenance, or enable the recognition of fraud.
IBM and ANZ bank implement blockchain technology
Blockchain is an interoperable, decentralized network, which allows all parties, clients, brokers, insurer and banks to connect in a shared and secure network. It creates a digital ledger and it can be easily reviewed by all parties. It is secure and cannot be altered anonymously. With blockchain technology insurers can save time and administrative costs.
The concept of insurtech and blockchain can be quite confusing. Consider an Australian example: IBM uses blockchain technology to improve payment and reconciliation of insurance policies with ANZ.
The traditional process of communication between insurance institutions and clients would typically be:
The client speaks to the insurance broker.
The broker then communicates with the insurer.
The insurer communicates back to the broker and to the client.
The client contacts the bank, who again communicates with the insurer.
Each of these steps contains a lot of paperwork and consumes time, and can be somewhat inefficient as a result.
In cooperation with IBM, ANZ incorporates blockchain into its system. This enables every party to follow up on transactions in real-time. This streamlines communication and makes the process more efficient. All parties can overview the status of transactions, which makes it more transparent as well.
To achieve this, ANZ built a network, which decreases policy costs, and more importantly, enhances the customer experience. From then on, ANZ could build on its experience with blockchain and implement other technologies, such as AI into its services.
Artificial Intelligence is used in many different forms
Artificial Intelligence (AI) can be used to calculate risk for insurance companies in Australia. AI can also push human capability and productivity, speed up communication with the clients, deliver the right data to employees and clients quickly, and finally reduce operational costs.
Using AI technology, insurance companies are able to calculate premiums for micro groups or high-risk individuals. Furthermore, AI can mimic human decision making, and help insurance brokers or with the distribution of policies.
In the future, AI could also help support call centres, and reduce operational costs. Using AI, insurtech companies are able to use 20% less workforce compared to incumbents.
Customer demands are changing
The needs of clients have changed. Customers demand insurance policies that are better tailored to their specific needs. Customers now expect insurers to respond to their personal lifestyle, values, situation and lifestyle. Moreover, customers want immediate and accessible service, around the clock and around the world.
Insurers need to find ways which enable them to meet exactly those customer demands. They have to become more digital to respond to more and more “digital natives” that become part of the target market. Solutions to this can include developing an application for the insurance company to make themselves more easily accessible on devices. Another could be to develop a social media presence. This helps to get in immediate touch with clients wherever they are and simplifies the documentation and upload via chat.
Expand your insurtech company to Australia with the help of local legal specialists
We are experts when it comes to business in Australia. We can help you enter the growing insurtech industry in Australia
Australia still offers much potential for businesses wanting to engage in the insurtech industry. The Australian government sets clear and complex legal, accounting and other corporate obligations for new entrants. That’s why it’s important to work together with an experienced local legal and accounting specialist to comply with local laws.
Biz Latin Hub specializes in assisting market entry to new foreign businesses We provide a range of legal and financial services to aid in the incorporation and ongoing operations of your company in full compliance with Australian law. Contact us at email@example.com to find out how we can help you start your expansion.