The Technological Disruption of Insurance Industry: A Review

Abstract

The paper focuses on the digital transformation that is greatly affecting the insurance industry and forcing radical change upon corporate culture, products and processes, customer relationship and relations with the sector's various competitors. By responding to three research questions, the paper aims to contribute to the academic discussion and proposes to offer useful cues of reflection to the insurance management, since the dissemination of new technologies needs to move towards continuously updated business models.

Understanding the InsurTech dynamics in the transformation of the insurance sector

“…As a consequence of such innovations, perhaps due to the threat of insurers losing direct access to end customers in the personal insurance market (Stoeckli et al, 2018), there arose the need to enable innovations to provide software solutions for insurers seeking to both enhance their technological capabilities and adapt their business model. Finally, once all stages of the customer journey and value chain were affected by the InsurTech phenomenon (Cappiello, 2020), it was perhaps when the combination of innovations converged into full InsurTech carriers that decided to both develop and distribute insurance products, which potentially represented a significant shift from traditional insurance models. Based on this argument, we can lay out the landscape of the transformation of the insurance sector (see Figure 6), representing the movement of waves of innovation (see Figure 5) by means of the structure of the InsurTech Matrix (see Figure 4), reflecting how InsurTech dynamics has transformed the insurance sector, from the traditional structure leading to a dynamic user‐centric ecosystem.…”

“…In this sense, Eling and Lehmann (2018) have stated in their research, the potential impact of technologies in the value chain of insurance companies, referring to three main areas in their categorization: (a) technology for the data acquisition and analysis, (b) technology for data storage, and (c) technology for communication and sales. In this context, all the players in the insurance sector are called to operate in a context where InsurTech are expanding at a rapid pace (Cappiello, 2020). According to Eling and Lehmann (2018), they suggest three major categories of shift in the insurance sector where new technologies: (1) change the way insurers and customers interact (social networks and digital communication), (2) can be used to automate, standardize and improve the effectiveness and efficiency of business processes (online sales and digital claims settlements), and (3) create opportunities to modify existing products (telematics insurance) and develop new ones (cyber insurance).…”

“…In addition, Pollari (2016) also warns that Insurtechs threaten insurers in different aspects, since they can collect an increasing volume of data, a considerable improvement in product pricing, as well as an increase in the speed of claims management (Puschmann, 2017), applying technological innovation in the areas that compound the value chain. As a result, Insurtech is being able to reshape the structure of the insurance sector (Lee & Shin, 2018; Yan et al, 2018), so the faster the insurance business adapts to technological innovation, the more likely companies are to survive in a sector that is rapidly changing and being driven by technology (Cappiello, 2020).…”

“…More recently, academic literature has also investigated about this trend, focusing on how technology relates to the insurance industry (Cappiello, 2018, 2020) or the impact of technology in the value chain of the insurance sector (Eling & Lehmann, 2018). More specifically, some studies have proposed a framework for evaluating InsurTech innovations providing guidance for their future development through of a series of managerial indicators (Xu & Zweifel, 2020), and even described InsurTech development within the insurance industry, highlighting how insurance companies are adapting to this new context (Neale et al, 2020).…”

The impact of artificial intelligence along the insurance value chain and on the insurability of risks

“…the Internet of Things (IoT), 16 mobile phones, blockchain technology, 17 artificial intelligence and predictive modelling (Cappiello 2020). Digitalisation has already had a considerable impact along the insurance value chain and will continue to do so as new technologies emerge and mature (Eling and Lehmann 2018).…”