Developing the Fintech ecosystem: Insurtech and Regtech are becoming the next big things

22 November 2016

Technology innovations, big data, and growing mobile usage are reshaping the existing financial ecosystem and favor the appearance of a large number of novelty business models. Now we can take advantage of user-friendly, yet technology-based interfaces aimed to help customers bypass the complexities and intricacies of dealing with traditional banking institutions. However, the digital transformation doesn’t stop here: after the reformation of payments, foreign exchange and P2P lending, a new generation of Fintech startups is taking aim at such outdated and inconvenient systems and insurance and regulations.

Insurtech: the evolution of the insurance industry

Insurtech, an amalgamation of “insurance” and “technology”, refers to an emerging market of digital technologies used to transform the current insurance and health industries and offer new ways to get access to insurance products at low costs. According to investment statistics, last year Insurtech companies raised $2.6bn. Plus, the latest surveys show that nearly half of established insurance companies believe that such businesses can steal at least 20% of their customers over the next 5 years.

Insurance policies have a lot of possibilities for innovation. Today’s consumers, especially the Millennial generation, have a high bar of expectation and don’t like to wait: they want to be able to make an online research, get a quote and buy an insurance policy from the comfort of their home or car in less than 15 minutes. Using tremendous amounts of customer data and online-scoring platforms, Insurtech startups can address the changing needs of the customer and significantly improve operational capabilities.

Insurtech start-ups are crowding all spheres of the insurance industry, from creation of applications that help consumers shop for ultra-customized insurance policies to providing alternative digital risk transfer mechanisms. For example, Insure The Box, a UK-based car insurance company, uses little telematics boxes (also known as black boxes) to evaluate your personal driving style and dynamically price premiums according to the received data. If you are a safe driver, you can earn up special bonus miles and get cheaper renewal rates in future.

There are many Insurtech businesses focusing on selling innovative types of insurance, like Metromile that provides pay-per-mile car insurance policies that can save low-mileage drivers lots of money. Simplesurance enables cross-selling of product insurances via online retailers. FinanceFox offers an innovative Android/iPhone app to manage all your insurances online and control their due dates, services and annual costs.

ecosystem

Clover Health Insurance uses technology to create a better health care experience and provide various kinds of cost-efficient health insurance plans including gym memberships and prescriptions and vision coverage. Oscar Health Insurance Co. positions itself as a digital alternative to traditional health insurers and offers simple to understand insurance plans. They include a 24/7 free call from a doctor who can provide professional medical advice and send prescriptions to your local pharmacy.

Regtech: compliance and regulatory obligations made easy

According to Fintech specialists, we are currently witnessing the third wave of the Fintech development. At first, new technological advancements and regulatory changes favored the appearance of a new generation of non-bank providers and boosted investment in the industry. The second wave of the Fintech revolution was connected with the competion between Fintech companies and traditional established players that tried to use their promoted brands and infrastructure to defend their existing market positions.

The next stage of the Fintech industry development is going to be partnerships between businesses and Fintech startups. New players can offer traditional financial institutions their innovative technology to lower operational costs and boost customer satisfaction – biometrics authentication and identity verification solutions, new methods of assessing risks or customer spending patterns, and many others. Regtech is a new Fintech niche that perfectly fits into this conception: it is aimed to help businesses comply with numerous regulations and reporting requirements within the financial industry.

Regtech startups help financial services providers integrate and automate the process of adaptation to the fast changing regulatory necessities and manage their legal risks. They offer numerous legislation, compliance, management, activity monitoring, regulation gap analysis, reporting, case management and other digital tools aimed to massively reduce manual work and resolve issues regarding compliance and reporting obligations.

Regtech

For example, FundRecs provides a reconciliation platform to transform the way how data is managed, processed and leveraged in the Funds industry. Silverfinch is aimed to create connectivity between asset managers and insurers through a fund data utility in a convenient, secure and standardised way. Vizor offers software to monitor the full supervisory lifecycle and comply with financial regulatory requirements. Corlytics allows banks and financial firms to get access to a database of global financial fines and to identify potential regulatory risks and finanical losses.

Digitalization is gradually transforming all spheres of the financial services industry. According to “The Pulse of Fintech,” a quarterly statistics report covering main Fintech trends all over the world, this year investors have been paying particular attention to such new Fintech areas as Insurtech and Regtech. Of course, we are witnessing just the beginning of the transformation process, but it’s only a matter of time when these sectors will implement technology to improve the quality of their services and customers’ experience.

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