A decade ago, the rise of insurtech companies was seen as a disruptive force in the insurance industry. These startups set out to reinvent the way insurance companies operated, but they were often met with scepticism from the industry.

The strategy of startups has since changed. No longer seeking to disrupt the industry and obtain market share from traditional insurers, instead they look to collaborate with insurers to help improve upon existing frameworks and keep pace with evolving consumer expectations. The result has been a noticeable shift in attitudes across the industry towards technological innovation.

Insurtech funding saw a sharp uptick in 2024, rising to US$1.27bn in Q2, according to Gallagher Re's Insurtech report published earlier this year. Latest figures show that deal value continues to rise, a large portion of this funding now coming from insurer incumbents recognising the opportunity for strategic investment.

But progress is iterative and the evolution we’ve seen to date isn’t enough. The insurance industry is far from ready to tear up the rule book and revolution is needed to keep pace with customer expectations, against a backdrop of tight margins and a challenging economic landscape.

Problems? What problems?

As technology of all kinds has advanced, so too have consumer demands for a faster, more efficient experience. Across all industries, from healthcare to retail, advances in technology have increased the speed at which consumers can purchase products and services, or communicate with a customer service agent.

The insurance industry has been undeniably slow to increase the processing time for claims, and customers can be left with an unresolved claim for weeks, if not months, on end. Our research shows 43% of customers are waiting over two weeks for their claims to be resolved – significantly longer than most are willing to tolerate.

With one in five customers now expecting claims to be settled within hours, it’s evident that the traditional approaches are failing to meet the demands of the modern consumer. And yet the level of service among insurers has reportedly dropped in recent years, despite rapidly rising premiums.

Recent research by Which? found that UK consumers are growing increasingly frustrated with this poor customer service. Common complaints cited in the report included repeatedly chasing for updates on a claim and requests to submit the same documentation multiple times. Now accustomed to the immediacy of digital services and real-time updates, the slow manual processes traditionally associated with insurance claims have become more unacceptable.

Insurers cannot continue to be on the back foot when it comes to integrating new technology that will help them keep pace with consumer expectations, or they risk damaging customer trust beyond repair.

What the industry requires is a revolution, not just an evolution, in its adoption of new technologies. The continued scepticism related to collaboration with innovative insurtech companies leaves legacy players operating with one hand tied behind their back.

The not-so-long road to meeting customer expectations

Many insurtech companies are already helping traditional insurers to revolutionise by actively addressing these customer pain points with technology that seamlessly integrates with existing systems.

An example of this is in claims, which we know to be a major pain point for customers in the recent report from Which?.

The large volumes of claims received and the vast amounts of unstructured data to collect and analyse mean that even straightforward claims can take weeks to resolve.

This is a primary use case for artificial intelligence (AI), with tools that can triage claims automatically and take the routine process of sorting through claims out of the claims handlers’ workload. This frees them up to focus on more complex cases and spend more time directly supporting customers throughout the process. It can also flag high-risk claims for further investigation, while automatically approving straightforward cases. This reduces the likelihood of erroneous payouts and ensures that legitimate claims are dealt with as swiftly as possible.

These technologies are enabling insurers to move away from the paper-based processes that have long caused a bottleneck in the industry – and much faster than may be assumed. Digital transformation, if done effectively, does not need to be a long and arduous process. Rather, insurtechs can help to seamlessly resolve many of the pain points that have long appeared part of the industry’s very core, if given the opportunity.

How can the industry act faster?

Where reluctance to adopt technology stems from a perceived lack of consumer trust in technologies such as AI, insurers and insurtechs can work in collaboration with one another to address this. While AI may offer speed and efficiency, trust and fair decision-making still take the top spot for 62% of consumers, according to our research. So each must ensure that AI doesn’t operate as a black box, with clear reasoning as to why a decision has been made.

AI is not the ultimate answer yet, but instead needs to be looked at as a tool that can accelerate the outcomes a technology solution can deliver

Better understanding at the C-suite level of what’s on offer from this technology can also help. Widespread hype around tools such as ChatGPT may have inadvertently blurred the industry’s understanding of AI’s specific use cases. But by promoting greater overall awareness of how technology is advancing and the latest cutting-edge solutions, insurers can capitalise on these opportunities far more efficiently. 

Improved definitions of AI’s use cases can really help accelerate the impact of technology as well; insurers and insurtechs need to clearly articulate their problem statements to ensure that AI doesn’t end up a ‘solution in search of a problem’.

In the days following the initial hype of ChatGPT, lots of insurers were looking to generative AI as an answer to a problem they couldn’t articulate, and, on the opposite side, insurtechs were keen to engage with this new interest, even if they weren’t sure how generative AI fit within their product. Improving the articulation of the challenges insurers face and the solutions insurtechs can offer will, over time, make it much easier for the industry to revolutionise.

AI is not the ultimate answer yet, but instead needs to be looked at as a tool that can accelerate the outcomes a technology solution can deliver. As both insurers and insurtechs mature in their understanding of AI, both will see that AI utilisation hinges on a huge amount of auxiliary technological support – for integration, data engineering, model training, feedback and alerting, performance tracking, and user engagement and action. Without thinking through all these aspects of delivering AI, projects can go sideways in terms of costs and outcomes. Insurtechs need to continue to invest in the whole of the product that sits around the AI offering, while insurers can benefit from understanding all these technological aspects – and choose trusted partners for their AI revolution.

Unlocking the full potential of technology

The industry is certainly on the right track. Where traditional insurers and innovative insurtechs are increasingly coming together to help resolve some of insurance’s longest-standing problems, rather than working against each other, it seems we’re far closer than ever before to unlocking the full potential of technology.

But it’s also clear that consumers are growing restless for improvement in the levels of customer service they’re receiving from their insurers. And when technology can address many of these pain points, the industry must get better at leveraging these opportunities faster – embarking on a revolution, rather than continued evolution, of how it responds to new innovation – so that insurers can secure their place in the future of the industry.