Being in the midst of a technology boom over the last decade, every industry feels the impact as new developments lay claim on their sector. Financial services combined with insurance always created a complicated landscape. While there’s a wealth of opportunity, there’s also a host of factors needed to consider. In the past, many ‘solutions’ to an expedited and customer-centric approach to insurance weren’t necessarily viable. As a result, many startups hesitated before venturing into the sector… until now.
The New Normal
Mobile devices and electronics are ingrained in our lives. Attention spans are at an all-time low, and users expect a simplified experience. Given the nuanced nature of the insurance industry, these are two factors the industry typically lacked in the past. But these new trends make adapting the only option for Insurance. As Britt Armour explains, “As customers are expecting more from digital experiences offered by companies such as Google, Amazon, Facebook, and Apple, they are expecting the same level of customer experience from their financial service providers as well. FinTech is disrupting the traditional financial services industry, providing innovative solutions for convenience, accessibility, and tailored products.” Held to this standard, insurance previously lacked simplified user-friendly experiences, the very problem that fintech sets out to resolve.
What is Fintech?
Let’s start with the basics. FinTech stands for finance technology because these companies and services leverage technology to solve problems previously only handled through financial institutions. In the past, large fees and expensive payments accompanied insurance and advising, creating major problems for lower income brackets that wanted to save for retirement or emergencies, but couldn’t afford to meet with a professional. As Lenny Sanicola described in Huffington Post, “Since fees are one of the biggest enemies of one’s retirement savings, there are FinTech startups trying to solve for this and many other problems related to 401(k) savings, attempting to make life easier for individuals managing their retirement savings.“ Since automation and robo-advisors cost less on an operational basis after covering the overhead, there’s a chance to scale back prices on insurance services.
What Does It All Mean?
Fintech specifically related to the insurance field might also be referred to as instech or insurtech. These industry-specific startups and systems still span a variety of areas. Perhaps it’s best to reference the Wall Street Journal when explaining Fintech’s broad applications. Financial technology applications can often be seen as solutions just looking for the right problems. It’s not an overly complicated concept, but rather systems intended to streamline archaic and qoutdated practices. Given the broad opportunities and applications of fintech, it continues to evolve into multiple sectors. This environment also presents exciting opportunities for increased customer engagement and retention rates.
As these startups challenge our typical business models with a myriad of new solutions, like any new technology, there are also challenges. Many naysayers highlight the security risks in particular. Yet even this, blockchain now could potentially solve. Part of this transition is going to be trial and error, but in the end, I am confident we will land on a better solution. This era of disruption should be encouraging and exciting. After all, there is always room for growth.