General

From revolutionizing payments, investments, and even contracts, blockchain has had many impacts on our lives. But its potential doesn’t stop there. In reinsurance, blockchain is quietly reshaping how insurers and reinsurers work together, offering improvements in efficiency, transparency, and trust.

This technology, known for powering cryptocurrencies like Bitcoin, can now be leveraged in the reinsurance space for everything from risk underwriting to financial settlements.

In 2022, Allianz and Swiss Re, executed the world’s first legally binding reinsurance contract using a distributed ledger technology (DLT) platform.

Let’s break down the key applications and how blockchain is driving change in this critical industry.

 1. Underwriting

Reinsurance relies heavily on accurate data sharing to assess risks effectively. Traditionally, this process involves multiple parties exchanging data through slow and sometimes outdated methods.

By using blockchain, reinsurers can:

• Access tamper-proof data to evaluate risks more accurately.
• Reduce delays caused by manual or siloed information systems.
• Ensure better coordination between insurers and reinsurers.

Lemonade, a leading insurtech company, showcases the potential of blockchain-powered smart contracts in insurance underwriting. Working with partners like Avalanche, Chainlink, and Etherics, Lemonade launched a blockchain-based crop protection insurance program to help farmers in rural Africa.

Lemonade’s program uses parametric insurance, which triggers smart contract functions when specific weather conditions, like drought, are detected. This blockchain-hosted system ensures affordable premiums, instant payouts, and a transparent claims process, helping farmers survive difficult seasons without financial ruin.

 2. Policy and premium management

The adoption of blockchain in insurance and reinsurance could reduce reconciliation errors by up to 30%, cutting down administrative costs significantly.

Tracking reinsurance contracts and premium payments can be complex. Policies often involve intricate layers of agreements, and any inconsistencies can lead to disputes or payment delays. Blockchain simplifies this by offering a transparent and automated system for contract management.

Here’s how it helps:

• Smart contracts can enforce terms automatically, ensuring premium payments and coverage conditions are met without the need for constant manual checks.

All parties involved—insurers, reinsurers, and even regulators—can have access to a shared view of the policy’s status, ensuring everyone is on the same page.

 3. Claims handling

Handling claims in reinsurance involves multiple reviews, verifications, and settlements. This process can be lengthy, often bogged down by inconsistent records and manual workflows. Blockchain eliminates many of these hurdles by creating a shared ledger where all claims information is stored and validated in real time.

Blockchain-powered claims processing could speed up claims settlement times by as much as 40%, enhancing the customer experience and operational efficiency for insurers. (This is exemplified in the next section)

Key benefits include:

• Faster claims processing through automated checks and approvals.
• Reduced disputes, as the blockchain provides an immutable record of claims data.
• Greater accuracy in reinsurance claims settlements, as blockchain eliminates the risk of duplicate or fraudulent claims

4. Financial settlement

When it comes to settling payments between insurers and reinsurers, blockchain can make a big difference. Financial settlements often involve multiple transactions, currencies, and reconciliations, which can be time-consuming and prone to errors. Blockchain, with its ability to record and verify transactions instantly, makes this process seamless.

Benefits include:

• Instant and secure settlements using blockchain-based tokens or cryptocurrencies.
• Automated reconciliation of accounts, reducing administrative overhead.
• A transparent trail of transactions, making audits more straightforward and less costly.

Lemonade holds the record for the fastest insurance settlement, processing a payout in just 2 seconds. By combining artificial intelligence, blockchain, and other advanced technologies, Lemonade is not only transforming traditional insurance but also paving the way for faster settlements in the reinsurance space.

Why blockchain matters for reinsurance

The reinsurance industry is built on trust and collaboration. Insurers and reinsurers need to work together efficiently to manage risks and protect policyholders. Blockchain offers a practical solution by addressing key pain points like data transparency, manual inefficiencies, and trust issues.

As more players in the industry explore its potential, blockchain could very well become a foundational tool, not just a passing trend. Whether you’re an insurer, a reinsurer, or a tech enthusiast, this is a development worth watching.

In an industry where every second counts and every decision has a real financial impact, predictive underwriting is turning traditional insurance practices on their head.

Gone are the days of lengthy application reviews and back-and-forth underwriting assessments. With artificial intelligence (AI) and data analytics, insurers are harnessing predictive modeling to make quicker, more accurate decisions.

So, what does predictive underwriting bring to the table, and why is everyone talking about it?

What is predictive underwriting, really?

Predictive underwriting is all about using AI and big data to predict an applicant’s risk with precision. Rather than just looking at the basics like age or job title, predictive models pull insights from a ton of data, from medical records to exercise patterns. Think about it like this: if you’re the kind of person who’s always closing the Apple Watch rings, your health insurance might reflect that commitment to fitness.

So, in a nutshell, predictive underwriting aims to give insurers a bird’s-eye view of risk—faster and more accurately than ever before.

How does predictive underwriting work?

Here’s a snapshot of how the predictive underwriting process unfolds:

1. Data collection: The system pulls from various data sources, including electronic health records, lifestyle data, and even wearable devices. For example, if you have a smartwatch tracking your steps, that data could theoretically feed into your health insurance risk profile.
2. Data analysis: Predictive algorithms analyze this data, identifying risk factors that may not be visible in traditional underwriting processes. Factors like exercise patterns, diet, or even sleep quality could now come into play.
3. Risk assessment: The AI models categorize the applicant’s risk profile, often in real time. This allows insurers to instantly see whether an applicant falls into a low-risk or high-risk category.
4. Automated decision-making: With insights generated from predictive analytics, insurers can make underwriting decisions quickly—sometimes in a matter of minutes.

By automating much of the underwriting process, insurers are able to cut down on processing time and, in many cases, reduce costs associated with manual risk assessment.

Why predictive underwriting matters to you

For policyholders, predictive underwriting has the potential to make insurance policies more affordable and accessible. By using a data-driven approach, insurers can offer personalized pricing that reflects each applicant’s unique lifestyle and health profile. If you’re someone who prioritizes health and wellness, you could potentially see lower premiums as a result.

For insurers, predictive underwriting improves efficiency and accuracy. By reducing the margin for human error and leveraging data-driven insights, insurers are better equipped to assess risk, which ultimately benefits their bottom line.

Real-life examples

An example of predictive underwriting in action comes from Lemonade, a US-based insurtech company. Known for its innovative approach, Lemonade uses AI and predictive modeling to assess applications quickly. Their underwriting process is streamlined, often providing users with a quote within seconds. By tapping into predictive analytics, Lemonade can offer policies that fit each applicant’s risk profile more accurately—keeping costs manageable for low-risk customers.

Haven Life, backed by MassMutual, leverages predictive analytics and electronic health records to streamline life insurance applications. By assessing prescription histories and medical claims, Haven Life often provides coverage without a medical exam, delivering personalized policies quickly and affordably.

The future of predictive underwriting in insurance

The sky’s the limit for predictive underwriting.

With continuous advancements in AI and data science, insurers are poised to get even better at assessing risk with accuracy. Future developments may allow predictive models to consider even more dynamic data sources, like real-time health metrics or environmental factors.

For now, predictive underwriting represents a big step forward in insurance efficiency, accuracy, and customer experience. As insurers continue to fine-tune these models, policyholders can look forward to quicker decisions, personalized pricing, and a more streamlined application process.

Homeowners across the U.S. have been hit with steep insurance rate hikes, leaving many wondering, “What’s causing this?”. The answer isn’t as straightforward as it might seem.

Insurance rates aren’t something you can easily adjust. While insurers are pressured to keep premiums affordable to stay competitive, lowering prices can make it harder for them to cover insured losses. On top of that, insurance is deeply woven into the fabric of the economy—from individual homeowners to industries and corporations. This means the state often has a hand in influencing these rates. But any changes from insurance regulators usually come after lengthy discussions and back-and-forth decisions, leaving insurers and consumers in a tough spot.

If you’ve noticed your premiums climbing in the past few years, you’re not alone. The combination of rising construction costs, extreme weather events, and even legal system abuse is pushing insurance rates higher. Let’s take a closer look at the factors driving these price increases and what they mean for homeowners.

Why are homeowners’ insurance rates going up?

There are a few big reasons behind the rise in property insurance rates.

One of the major factors is the increase in natural catastrophes. Hurricanes, tornadoes, wildfires, floods—you name it, and they’ve all been ramping up in frequency and severity.

 Just this year, over 12 hurricanes have struck, causing at least 370 fatalities and over $180 billion in damage. The strongest, Hurricane Milton (Category 3), hit Florida on October 9, knocking out power for over 3 million homes and businesses

Inflation

Natural disasters might be the headliners, but they’re not the only reason your homeowners insurance bill is climbing.

Another major factor is the rising cost of rebuilding homes after a disaster. Since 2020, construction costs have surged by nearly 28%, with labor costs alone up by 12%. This matters because the amount of insurance you need is closely tied to how much it would cost to rebuild your home. When these costs increase, so do your premiums.

On top of that, inflation following the COVID-19 pandemic has driven up the price of essential construction materials like lumber, steel, and cement, pushing replacement costs even higher.

Legal system abuse: Adding to the problem

But there’s an unexpected culprit contributing to higher insurance premiums: legal system abuse.

Triple-I CEO Sean Kevelighan calls this phenomenon “billboard attorneys” pushing Americans toward litigation as a first step. This legal system abuse drives up costs for everyone because insurance companies have to pay out more for claims that go to court.

Third-party litigation funding, in particular, has turned into a multibillion-dollar industry, where outside investors—sometimes even foreign governments—finance lawsuits for profit. This hidden “dark money” not only raises premiums but also creates national security concerns.

Some states are hit harder than others

Not all states are seeing the same rate increases.

If you live in a high-risk area for natural disasters, you’re probably noticing a bigger bump. States in the Southeast and Southwest are seeing substantial increases due to the rising number of climate disasters, with some areas even becoming “uninsurable” due to the high risk of hurricanes or wildfires.

A Bankrate analysis found that the average homeowners’ insurance premium in 2024 was around $2,285 per year—up 23% from January 2023.

In less-risky areas, rates are significantly lower. For instance, the average cost of homeowners insurance in Vermont is $806, in Delaware $966, and in Alaska $995. This is a wide contrast to premiums in higher-risk states like Nebraska at $5,655 per year, Florida at $5,527, and Oklahoma at $4,835

What can homeowners do to lower their insurance costs?

With all these rising costs, you’re probably wondering how you can lower your premiums. Fortunately, there are some steps you can take to soften the blow.

First, shop around. Most major insurers offer competitive rates and provide bundling options if you combine your home and auto insurance. Bundling can sometimes save you as much as 25%. Plus, many companies offer replacement cost coverage, which can be a real lifesaver if your home suffers significant damage.

You can also raise your deductible. By increasing your deductible from $500 to $1,000, you could save up to 25% on your monthly premiums depending on the carrier. Just make sure you’ve got enough in your emergency fund to cover that deductible if something does happen.

Finally, check your credit. In most states, insurance companies factor your credit score into your premiums. Improving your credit by making on-time payments and reducing your debt can help lower your insurance costs over time.

Looking forward

The good news is that while homeowners’ insurance premiums are rising, there are ways to mitigate the costs. As the Federal Reserve lowers interest rates to cool inflation, we could see some moderation in home insurance growth as well. But in the meantime, it’s smart to review your policy, shop around for better rates, and take steps to reduce your insurance expenses where you can.

In the end, homeowners’ insurance is essential—especially in a time when natural disasters are becoming more common. However, staying proactive about your policy can help keep those rising premiums from getting the best of you.

We’ve all heard about climate change and its sweeping global effects—from stronger hurricanes to unpredictable weather patterns and rising sea levels. But what we often overlook is the significant role climate change plays when it comes to risk and insurance.

More extreme weather events mean higher risks, whether it’s flooding, wildfires, or storm damage. In fact, insured losses from natural disasters reached $60 billion in just the first half of 2024.

Unlike other types of claims, which occur individually or sporadically, natural disaster claims often impact large numbers of people simultaneously, thus requiring quick settlements on a massive scale.

As the world shifts toward low-carbon economies, the insurance industry is rolling out eco-friendly policies to meet both climate and consumer demands. This is where green insurance comes in. But what exactly is green insurance, and why should it matter to you?

What is green insurance?

Green insurance refers to a type of coverage that not only protects policyholders from traditional risks like damage to property or injury but also encourages eco-friendly practices. Think of it as the insurance industry’s way of addressing the environmental impact of our choices while still doing its core job—managing risk.

And here’s a trend worth noting: 80% of insurance companies in the US now consider climate-related risks when setting premiums, according to the National Association of Insurance Commissioners (NAIC). This means that more insurers are looking at ways to reward eco-friendly behaviors in their policies.

In essence, green insurance offers the same protection as standard policies, but with added benefits that promote an eco-friendly lifestyle. These benefits are what we call green practices and can take many forms.

For instance, some insurers now offer Pay-as-You-Drive (PAYD) or Usage-Based Insurance (UBI) programs. These programs operate on the principle that reduced driving lowers accident risks and decreases environmental impact. To support this, a sensor is installed in the vehicle to monitor the miles driven. As drivers log fewer miles, they become eligible for insurance discounts.

Common green insurance products

Let’s dive into how green insurance applies to some of the most common types of policies:

• Auto insurance

Insurers are offering special discounts, or coverage benefits for policyholders who drive hybrid or electric vehicles. Not only is this a win for the planet, but it’s also easy on your wallet.

The global market for Electric & Hybrid cars is projected to expand at a growth rate of 15.6% by 2030. Some insurers even go a step further by paying for carbon offsets, meaning they’ll invest in environmental projects to counterbalance your vehicle’s emissions.

• Homeowners insurance

Homes that incorporate energy-efficient materials, solar panels, or sustainable building techniques are benefiting from lower insurance premiums. In the event of damage, green insurance may also cover the cost of rebuilding using environmentally friendly materials.

Homeowners who generate their own power through geothermal, solar, or wind energy can now find policies that cover additional costs during power outages, like temporarily buying electricity from another source.

• Business insurance

For businesses, adopting green practices—like utilizing renewable energy or meeting LEED (Leadership in Energy and Environmental Design) standards—can result in substantial cost savings.

These efforts not only help reduce their environmental impact but also make them eligible for specialized coverage options under green insurance policies.

Bottom line

Green insurance offers a range of benefits, from saving you money—like 20% off premiums for driving an electric vehicle—to reducing your carbon footprint. By opting for policies that promote eco-friendly practices, you’re taking an active role in combating climate change, where cutting emissions is crucial.

Green insurance often includes benefits like covering energy-efficient upgrades for homes or businesses and ensuring that rebuilding after damage is done sustainably. It also features programs like Usage-Based Insurance (UBI) and Environmental Liability Insurance (ELI), which cover the costs of restoring polluted areas and protecting biodiversity.

And with climate change on the rise, green insurance gives you added peace of mind as we face more frequent and intense natural disasters

Imagine flipping a coin. If it lands on heads, you win $100. If it lands on tails, you lose $100. Would you take this bet? Most people wouldn’t, even though the expected value of the bet is zero.

But what if we changed it a little? Now, if it lands on tails, you still lose $100, but if it lands on heads, you win $200. More people take this bet. This is because of a concept called loss aversion. People tend to feel the pain of a loss more acutely than the pleasure of a gain of the same size. In fact, people typically need the win to be 1.5 to 2 times the value of the loss to act on the bet. Loss aversion is just one concept in behavioral economics, and many more exist.

Behavioral economics is changing the insurance industry, taking the guesswork out of creating new products and interacting with customers. By understanding how people make decisions and why, Insurtech companies are developing products that are more relevant, engaging, and personalized to customers’ needs. With this in mind, let’s explore the key concepts of behavioral economics and how they are being applied in the Insurtech space to create innovative solutions.

What is behavioral economics?

Behavioral economics challenges the traditional assumption that people always make rational decisions. It recognizes that emotions, biases, and social influences often play a significant role in our choices. By understanding these psychological factors, behavioral economics offers insights into how people perceive risk, make decisions, and respond to incentives. This knowledge is invaluable for developing insurance products that better align with customers’ needs and preferences.

The key concepts of behavioral economics

Behavioral economics is grounded in several key concepts that provide a framework for understanding human decision-making. These are:

• Loss aversion: We touched on this above. People tend to weigh losses more heavily than gains. This can lead to risk-averse behavior, even when the expected outcomes are favorable.
• Anchoring bias: Our decisions are often influenced by an initial reference point or “anchor,” even if it’s irrelevant. For example, if you’re buying a car and the salesperson initially suggests a price of $30,000, this will influence your perception of a “fair” price, even if you know the figure is inflated. You might negotiate down from $30,000, but the original figure will still subconsciously anchor your thinking.
• Framing effects: How information is presented can significantly impact our choices. For example, people may be more likely to choose a product labeled “95% fat-free” than one labeled “5% fat.”
• Status quo bias: People often prefer to maintain the status quo rather than make changes, even if the change could be beneficial.
• Overconfidence bias: We tend to overestimate our abilities and knowledge, leading to suboptimal decisions.
• Social proof: People are more likely to make decisions that are consistent with the behavior of others.
• Scarcity: When resources are perceived as limited, they become more valuable, even if their intrinsic worth hasn’t changed. For example, the fear of missing out can drive consumers to purchase limited edition products at a premium price, even if they don’t need them.

How behavioral economics influences the Insurtech industry

Insurance companies can use behavioral data to offer more accurate and evidence-based products. But more than that, we can use behavioral economic concepts to enhance customers’ decision-making processes and provide genuine value. Here’s how insurers can apply behavioral economics thoughtfully.

Risk assessment and pricing

Overconfidence bias can lead drivers to think they are safer than average, even when that might not be true. This also applies to home insurance, where people might say, leave a door unlocked or a window open because they believe they live in a safe neighborhood.

Data can help insurers counter this bias by providing objective feedback on driving behavior or area statistics. For example, telematics data can track factors such as speed, braking, acceleration, and night driving, allowing insurers to identify risky behavior. Insurers can use this data to educate customers about their driving habits and encourage safer practices. Additionally, insurers can use telematics data to create more accurate risk profiles and offer personalized premiums based on actual driving behavior, rather than relying solely on demographic information.

Lastly, behavioral economics finds that immediate rewards are more compelling than future ones. Insurtech firms often offer immediate discounts or tangible rewards for behaviors that reduce risks, like installing safety devices in homes or cars.

Customized marketing and product offers

Insurers can use framing effects positively by highlighting how insurance protects against potential losses rather than focusing on the cost of insurance itself. Loss aversion also plays a role here. For instance, framing a home insurance policy in terms of peace of mind and financial security in case of natural disasters can help homeowners appreciate the value of insurance during uncertain times, leading to more informed and confident decision-making. We can also use relevant data to remind customers of the losses (cost and destruction) associated with natural disasters.

Studies also reveal that too many choices or overly complex options can lead people to make poor decisions or avoid making a decision altogether. Insurtech companies, therefore, simplify their offerings and use clear, jargon-free language to make their products more accessible. This is particularly important with highly personalized policies. Insurers need to find a way to use data to clearly present a few options to customers, rather than letting data result in offering 100 tailored packages that will turn customers away.

Customer engagement and social proof

Social proof, the tendency of people to conform to the behavior of others, can be leveraged to increase customer engagement. Insurers can highlight the success stories of customers who have benefited from their products or services. This can create a sense of social proof, encouraging other customers to consider similar products or services.

Final thoughts

Behavioral economics is about real people and real decisions. By understanding how people make decisions, insurers can create more personalized, relevant, and engaging products. From risk assessment and pricing to customer engagement and product design, behavioral economics provides a framework for developing innovative solutions that meet the evolving needs of today’s consumers. As the insurance industry continues to evolve, the application of behavioral economics will become increasingly important for driving growth and success.

Social media platforms like Facebook, Instagram, and TikTok provide a treasure trove of data that insurers are using to assess and manage risk. By analyzing the online behaviors of both potential and existing customers, insurers can adjust premiums, detect fraud, and engage with clients in more personalized ways.

Let’s dive into how this works.

 1) Assessing risk profiles through online behavior

When you think about insurance, risk is at the heart of every policy. Traditionally, insurers gathered data through health records, driving histories, and questionnaires. But with the rise of social media, this can be enhanced.

Now, insurers can gain valuable insights into customer habits, hobbies, and even health conditions by simply analyzing social media profiles. For instance, someone frequently posting about extreme sports like bungee jumping or skydiving would likely be flagged as a higher-risk individual for life insurance.

Pilotbird, a leading analytics firm, assists insurers by analyzing social media activity to evaluate customer risk profiles. This data, which includes lifestyle choices like smoking or participation in high-risk activities, therefore allows insurers to adjust premiums more accurately.

 2) Tailoring policies through customer segmentation

Social media also helps insurers categorize their customers into specific groups, in which they (insurers) can serve tailored offerings.

Insurers can analyze social media data to identify trends in customer interests—such as whether they prioritize green products, family-focused services, or niche coverage options. This segmentation helps insurers design products that resonate with their customers, making it easier to offer personalized insurance bundles or targeted discounts.

 3) Enhancing engagement and building trust

Trust and engagement with customers can be significantly enhanced through social media. Unlike traditional forms of marketing, platforms like Twitter, Facebook, and even TikTok offer businesses the opportunity for two-way interaction with their customer.

Doing so, insurers can address questions, concerns, and feedback in real time thereby creating a more personalized and transparent experience for the customer, who feels more connected to the company.

Take this Instagram reel by Progressive Insurance. The post has garnered over 5.6 million views and has been reshared more than 600 times. This provides the insurance giant with valuable free publicity, helping to keep its services at the front of the minds of its prospects. It also helps to humanize the brand and foster loyalty, which in turn, reduces churn and boosts customer retention.

 4) A new way to combat fraud

Social media also serves as a useful tool in fraud detection. Insurers can use online data to identify red flags, such as when a claimant’s online activity doesn’t match the circumstances described in their insurance claim.

In a well-known case from 2016, Zachary Barton who had claimed disability payments from the Department of Veterans Affairs was discovered posting gym workout videos on his Facebook page. This led to him being sued by the Department of Justice for committing a federal crime.

Ethical considerations

In the U.S., the use of social media data in insurance raises significant ethical concerns, particularly around privacy and data protection. As we have seen, social media provides a wealth of information. However, insurers must tread carefully to avoid overstepping legal and ethical boundaries.

A prominent issue is the lack of transparency. Consumers may not be fully aware that their online activity can influence their insurance rates, which could feel invasive. In 2019, the state of New York fined Anthem an additional $39.5 million for its 2014 privacy violations, which compromised the personal information of its 78.8 million customers nationwide.

Conclusion

The integration of social media data into the insurance industry is transforming how risk is assessed, policies are tailored, and customer engagement is fostered. While it offers new opportunities for personalization and fraud prevention, insurers must navigate the fine line between innovation and ethical data usage.

Aside from that, online behavior doesn’t always reflect real-world actions or intentions, and basing decisions on potentially misleading information could result in unfair pricing practices. For example, someone posting about adventurous hobbies might be flagged as a high-risk customer, even if their lifestyle is much more risk-averse than their online persona suggests.

Transparency, data accuracy, and respect for consumer privacy will always remain essential. As U.S. insurers turn to and rely on these new data sources, compliance with regulations such as the California Consumer Privacy Act (CCPA) and clear communication with customers will be crucial to avoiding fines, mistrust, and potential reputational damage.

As of today, over 3.46 million patents have been filed. Over the years, technology has transformed the way we live, work, and connect. While these innovations are often made for the greater good, for some industries like insurance, they can be a double-edged sword.

Technologies like AI and blockchain have streamlined processes and boosted efficiency, but they also come with a host of new risks that insurers can’t afford to ignore.

Let’s explore some of these emerging risks and examine recent cases that highlight just how serious they can become.

One major risk is cybersecurity, with incidents growing by the day. As insurers increasingly rely on digital platforms and store vast amounts of data, they become prime targets for hackers. Last year alone, there were 317.59 million ransomware attempts reported worldwide.

Bigger, bolder attacks

Take the MOVEit data breach, for example. This 2023 cyberattack affected over 600 organizations and resulted in the exposure of millions of personal files and records. When companies are hit with such attacks, the claims for cyber insurance skyrocket.

Insurers are now rethinking how they assess cyber risks, as the financial fallout from these breaches can run into billions.

Another growing concern is Artificial Intelligence (AI). AI is now being used to automate various tasks, from claims processing to customer service. This automation often results in greater customer satisfaction due to faster settlements, less hassle, and overall better service.

Unfortunately, AI isn’t always fair. When AI systems rely on flawed data, they can make biased decisions like offering lower payouts to certain groups or rejecting claims unjustly.

For example, a 2019 study revealed that a hospital’s algorithm designed to identify high-risk patients flagged fewer Black patients. This happened because the data reflected lower healthcare spending on Black patients, leading the algorithm to incorrectly assume they were healthier than equally ill white patients.

Liability from autonomous vehicles: Who’s to blame?

Autonomous cars sound like a dream come true, but from an insurance standpoint, they’re a nightmare. When a self-driving car crashes, who’s responsible? The driver? The car manufacturer? The software developer? These are tough questions that insurers are still grappling with.

A high-profile accident involving a Tesla Model X was settled in court earlier this year. The incident occurred in 2018 in California when Walter Huang activated the Autopilot feature before the crash. In a court filing to keep the settlement amount private, Tesla stated that it agreed to settle the case to “end years of litigation.”

When tech goes down

We’ve all experienced it—a website crashes or an app stops working. For insurers, these kinds of tech failures can lead to serious business interruptions and operational failures.

Back in July, a faulty update by CrowdStrike caused millions of Windows PCs to crash and disrupted operations. Airports, hospitals, emergency services, and many other critical sectors were affected.

Although an updated patch was sent out within a few hours, it required manual fixes for the computers, one by one. Loss estimates from the crises are believed to have reached upwards of $1.4 billion.

Wrapping it up

The tech boom brings exciting opportunities, but it also opens the door to new risks that insurers have to navigate carefully.

Whether it’s managing cybersecurity threats, ensuring AI fairness, or dealing with the uncertainties of autonomous vehicles, the industry is facing challenges that are evolving just as fast as the technology itself.

Insurers need to stay ahead of these risks by continuously updating their models, strengthening cybersecurity measures, and keeping an eye on emerging trends.

After all, staying informed is the best way to ensure that both they—and their customers—are protected in this brave new world of tech.

If you’ve ever heard of embedded insurance, you might already know it’s when insurance coverage is automatically included in products or services.

Think about buying a plane ticket and getting travel insurance bundled in. It’s simple, convenient, and saves you from having to go through the process of shopping for insurance separately.

But Insurance-as-a-Service (IaaS) takes this concept and runs with it.

Instead of just including a pre-made insurance policy with a product, IaaS allows companies to offer customized insurance solutions as a full service. Businesses don’t just tack on insurance—they can integrate the whole insurance process into their platform, from buying coverage to managing claims.

Let’s dive into how IaaS works, the different models out there, and what makes it desirable for both businesses and customers.

What is Insurance-as-a-Service (IaaS)?

So, embedded insurance is one way to think about how IaaS works.

However, Insurance-as-a-Service is much broader as it allows businesses to offer a whole range of insurance services in a flexible and cost-effective way. This allows them to launch a new insurance program or expand on an existing one.

Rather than just tacking on a policy here and there, IaaS offers companies the ability to integrate entire insurance services into their own platforms or products. It’s like turning insurance into a plug-and-play feature for any business.

For example, instead of companies like Specialized and VanMoof just selling you a bike and offering insurance as an afterthought, with IaaS, those same companies could actually offer you insurance options, manage your claims, and keep track of your coverage—all through their own platform.

It’s insurance that’s built into the experience, rather than an add-on.

IaaS models in action

Now, how does this work in practice? There are several different Insurance-as-a-Service models, each with its own take on the concept.

 1. White-label insurance:

Here, businesses offer insurance products under their own brand name, even though the actual insurance is provided by a third-party carrier. This is popular in industries like travel and retail.

Example: Shopify offers its merchants the option to add shipping insurance to their products, but the coverage itself is provided by insurance partners.

 2. API-driven insurance:

With this model, companies use insurance providers’ APIs to connect directly to their systems. This allows them to offer custom policies to their customers in real time.

Example: Trōv, a big player in on-demand insurance, allows users to switch coverage on and off for specific items through their app.

 3. Full-stack insurance providers:

These are companies that own the entire insurance process, from offering the policies to handling the claims.

NEXT Insurance is a great example here. They don’t just sell you a policy—they also process your claims directly, cutting out the middleman.

Benefits of IaaS

There are plenty of reasons why Insurance-as-a-Service is a win-win for both businesses and customers:

• Convenience for consumers: IaaS makes insurance easy to access and less of a headache. You don’t need to jump through hoops or spend time shopping around. The insurance is already there when you need it.
• Seamless integration: For businesses, insurance can be a smooth part of their existing offerings. It adds value without feeling intrusive or overly complicated.
• Customization: With IaaS, companies can tailor insurance to fit their customers’ needs perfectly. This leads to a much better customer experience because the insurance feels relevant to the product or service.
• Increased trust: When companies offer insurance through their own platform, it builds a sense of trust and loyalty. Customers are more likely to stick around when they feel like they’re getting a complete service.

Closing thoughts

What’s also worth mentioning is the technological integration that connects these businesses and their insurance partners. This is where Insurance APIs come into play. Insurance APIs, true to their name, enable communication between the business processes and infrastructures of both insurance companies and their partners.

Insurance-as-a-Service takes the concept of embedded insurance and makes it smarter, more flexible, and ultimately more useful. With companies like Shopify, Trōv, and others leading the way, it’s clear that IaaS is here to stay, offering a win-win for businesses and consumers alike.

So, the next time you’re shopping for something big, you might find that the insurance is not just an add-on—it’s part of the whole package. Other times, it could be insurance, just masquerading as something else entirely.

Sometimes technology progresses slowly, and other times it leaps forward. Telematics, and the technologies that support it, are one of those leaps. Fueled by advancements in 5G, IoT connectivity, and more, telematics now enables accurate Usage-Based Insurance (UBI) on a scale we haven’t seen before. This pricing model allows consumers to pay for insurance based on their actual habits, be that energy consumption, driving, or other activities.

In the automotive sector, telematics devices track driving habits to reward safe driving. This data can be transmitted in real time, providing insurers with a more accurate picture of a driver’s risk profile. In the utilities sector, telematics allows accurate monitoring of energy consumption, identifies potential faults, and optimizes network performance. Smart meters, equipped with telematics capabilities, can provide real-time data on energy usage, allowing utilities to offer time-of-use pricing and demand response programs.

In other words, UBI is transforming the insurance industry. This shift from traditional risk-based pricing is reshaping the relationship between insurers and policyholders. This shift continues as more trends emerge. But what are these trends? Let’s get into it.

Surging 5G connectivity

The 5G boom in the United States has been nothing short of explosive. Just two years ago, there were nearly 162 million 5G-enabled devices in the country – almost double the amount from the year before. These devices now make up almost a third of all wireless connections. And the growth shows no signs of slowing down. By 2028, experts predict that 5G will dominate the wireless landscape, accounting for a whopping 91% of all connections.

5G is a game-changer for telematics. In the automotive sector, it’s powering real-time diagnostics, software updates, and connected car services. For consumers, this means safer, smarter driving. For insurers, it offers more accurate risk assessment and innovative products.

Beyond cars, 5G is transforming smart homes. Homeowners can now monitor energy usage, automate devices, and detect issues like leaks instantly. This means improved efficiency, reduced costs, and better relationships with insurers. Specifically, consumers won’t need to argue about insurance claims based on inaccurate usage data, as they can see the real-time impact of their behaviors (like turning the air conditioner on or washing clothes in higher heat).

As 5G becomes more widespread, we’ll see even more innovative telematics applications across industries. And perhaps more interestingly, we could see UBI become the dominant form of insurance in the coming years.

Crash detection & crash diagnostics

More models of cell phones, including the latest Apple and Pixel devices now include crash detection. Similarly, most new cars now feature automatic crash detection and can alert emergency responders. These features are mandatory in all new cars sold across Europe, but they are also important to US consumers. A whopping 51% of Americans say it is extremely or very important that their next car has a system where it will car emergency services when airbags deploy.

Crash diagnostics, powered by advanced sensors and 5G connectivity, are providing unprecedented insights into accidents. These systems can accurately record the speed, direction, and even force of impact, offering a more comprehensive understanding of the incident than traditional witness accounts or police reports.

This technological advancement is significantly impacting the insurance industry. By providing objective evidence, telematics can help insurers:

• Resolve disputes more efficiently: Telematics data can clarify conflicting accounts, reducing the time and cost associated with investigations.
• Offer more accurate pricing: By analyzing driving habits and accident risk, insurers can develop more personalized and equitable pricing models.
• Develop innovative products: Telematics-enabled features like accident prevention alerts and remote assistance can enhance customer satisfaction and loyalty.

Crucially, these telematics allow for faster claims processing with less human intervention. The last thing most consumers want to worry about after a crash is filling out forms. With a more advanced UBI policy, this data can be sent automatically.

Multimodal profiling

Multimodal profiling, though still in its early stages, has the potential to revolutionize UBI models. Current programs primarily focus on driving behavior, but the future of UBI lies in providing comprehensive coverage for all modes of mobility.

Imagine a UBI program that understands when you drive, cycle, or use an e-scooter. This “pay how you move” approach would offer continuous mobility coverage tailored to your individual needs. While mobile telematics will continue to monitor driving behavior, a single poorly scored car trip shouldn’t overshadow a customer’s overall mobility patterns.

By incorporating “green rewards” for less car usage, insurers can incentivize sustainable transportation choices, benefiting both customers and the environment. This holistic approach to mobility profiling would create a more equitable and sustainable UBI landscape, where customers are rewarded for their diverse transportation habits.

A smartphone-driven revolution

Future UBI products will undoubtedly leverage the capabilities of smartphones to an even greater extent, offering an app-based experience and insights beyond the car. The vast amounts of data collected by modern connected vehicles will also be harnessed to provide even more personalized and accurate UBI solutions.

For example, smartphone apps can track driving behavior, monitor vehicle health, and even detect potential risks like distracted driving. The options are plentiful here – monitoring when drivers are making/receiving calls, sudden braking, and whether they are driving recklessly in geofenced areas like schools and hospitals. These insights can be used to reward safe drivers with lower premiums and provide personalized recommendations for improving driving habits. Additionally, data from connected cars can offer a deeper understanding of driving conditions, allowing insurers to accurately assess risk and adjust premiums accordingly.

While the increased level of oversight may raise privacy concerns for some consumers, the potential benefits of UBI are significant. By accurately measuring driving behavior and risk, insurers can offer more equitable and affordable premiums. For safe drivers, UBI can result in substantial savings.

As technology continues to advance, we can expect even more innovative UBI solutions that seamlessly integrate with our daily lives. The future of UBI is bright, promising a more personalized, efficient, and rewarding driving experience for all.

Final thoughts

UBI is rapidly evolving, driven by advancements in telematics and 5G technology. As telematics capabilities expand, UBI will become even more personalized and accurate, offering consumers the opportunity to pay for insurance based on their actual usage. From driving habits to energy consumption, UBI is transforming the insurance landscape, providing a more equitable and rewarding experience for policyholders.

The way insurance is sold has come a long way. What started as a largely face-to-face business, where customers relied on agents for advice, has transformed into a mix of digital platforms, AI-powered tools, and seamless integrations.

Back in the day, the most common way to buy insurance was through an agent or broker. If you wanted to insure your home or car, you’d likely meet with an agent who would walk you through the process, explaining the fine print and offering recommendations. It was all about relationships—agents were trusted advisors. The value here was the personal touch, and for many people, especially older generations, that trust was everything.

But, as much as this model worked, it had its limitations. Agents could only reach so many clients, and everything was very hands-on. There were lots of forms, phone calls, and back-and-forths to finalize a policy. Things worked, but they moved slowly. Insurers also had to pay hefty commissions to the agents and brokers who sold their products, which contributed to the overall cost of insurance.

Even today, agents and brokers still have a role, especially for more complex insurance needs. Many people still prefer the guidance of an expert when navigating complicated coverage, like life or health insurance.

What if you could buy insurance while doing your banking?

That’s exactly what Bancassurance aimed to do. Starting in the late 20th century, banks partnered with insurance companies to sell insurance products right alongside checking accounts and mortgages. The idea was that if you trust your bank with your money, why not trust them with your insurance too?

This model took off, especially in Europe and Asia, but also in the U.S. with big players like American Express and City Bank offering insurance products. For consumers, it made sense—buying insurance through a bank was convenient because everything could be handled in one place. And for insurers, it was a chance to tap into a massive customer base without needing to build out their own salesforce.

However, bancassurance doesn’t always offer the personalized advice people get from an agent, so while it’s great for simple policies, it might not be the go-to for more complicated insurance needs.

The rise of tech-based solutions

Insurtech—a term that blends insurance with technology came to prominence in the early 2010s. Companies like Lemonade, Root Insurance, and Trov have shaken up the industry by offering innovative, tech-driven solutions. Lemonade, for example, uses artificial intelligence (AI) to provide renters and homeowners insurance with a super-smooth, app-based experience. Root Insurance uses telematics via the Root app tracking your driving behavior through an app, to offer personalized auto insurance rates based on how safely you drive.

The big draw here is that everything is faster and easier. You can get quotes instantly, file claims in minutes, and manage your policies all through your smartphone. It’s insurance designed for the digital age, a huge attraction for tech-savvy customers who want everything at their fingertips.

What makes insurtech particularly interesting is how it’s tapping into areas that traditional insurers might have overlooked. For instance, Trov offers on-demand insurance for individual items like electronics or sports equipment, letting you turn coverage on and off whenever you need it. This is a far cry from the traditional model of long-term policies with complicated terms.

Embedded insurance

Imagine booking a flight, and before you complete your purchase, you’re offered travel insurance at checkout—no extra effort required. That’s the beauty of embedded insurance. It’s when insurance is seamlessly included in other products or services you’re already using.

In the U.S., platforms like Expedia and Airbnb often offer travel and rental insurance right within their booking systems. Similarly, when you buy a smartphone, you might be offered extended warranty insurance at checkout—think of services like AppleCare.

This approach makes buying insurance super convenient. You don’t have to go out of your way to research policies or talk to an agent. The product is there when you need it, exactly at the point of sale.

What’s next?

So, where do we go from here? The truth is, there isn’t a single “best” distribution channel anymore. Customers today want flexibility, and that means a hybrid model where they can choose how they buy insurance, whether it’s from an agent, online, through an app, or even as an add-on to something else they’re purchasing.

Insurers are investing in omnichannel strategies, allowing customers to interact with them across multiple touchpoints. Niall Kavanagh claims that this will improve sales and retention. For example, a customer might start by researching policies on an app, talking to an agent for advice, and then finalizing the purchase online—all with the same company.

Technology will keep driving innovation, and we’ll likely see even more personalized and integrated insurance products in the future. Whether it’s AI helping to predict risks more accurately, blockchain ensuring greater transparency in policies, or more partnerships between insurers and digital platforms, the future of insurance distribution is all about convenience, personalization, and choice.

In the end, no matter how insurance is sold, one thing remains the same: people want peace of mind that they’re covered when they need it most. And with the way distribution channels are evolving, getting that peace of mind is only getting easier.