Insurtech


By Alexander Koles/Evolve Capital Partners

InsurTech, an area of the insurance industry that captures new uses of digital technology, has attracted a great deal of interest from startup teams, investors, and incumbents.

Three constants define the insurance industry’s focus on progress and growth: enhancing the customer/distribution experience, accessing new products and capabilities, and improving underwriting and data analytics. Innovative technologies allow insurers and reinsurers to become more customer-centric and cost-efficient while covering risk with new business models.

The insurance business value chain consists broadly of proposition, distribution and operations. Managing General Agents (MGAs) and Third Party Administrators (TPAs) are responsible for distribution and operations. Technological innovation has opened up opportunities in all areas of the value chain, and consequently, the business models of MGAs and TPAs are shifting. These MGAs and TPAs leverage partnerships and acquisitions to scale their business and get access to the distribution systems and customers of legacy insurance companies.

Managing General Agents (MGAs)

MGAs are defined as "an individual or business entity appointed by an insurer to solicit applications from agents for insurance contracts or to negotiate insurance contracts on behalf of an insurer and, if authorized to do so by an insurer, to effectuate and countersign insurance contracts."

Traditional MGAs are affected by the entrance of new companies that use technologies to improve distribution systems. For example, Insureon enables carriers to serve and distribute insurance to small and medium-sized businesses. As a tech-focused distribution business, Insureon streamlines the commercial insurance buying experience.

Third Party Administrators (TPAs)

In the past, standardized insurance products satisfied the needs of the general public. In today’s market of hyper-customization and micro-segmentation, insurance companies are looking for new ways to attract consumers by designing customized market and service products.

Given the economic and operational challenges associated with new product launches, insurance companies need to rely on partners to augment their capabilities. A digital TPA can step in to provide a sophisticated technology platform that supports newer, feature-rich products along with the necessary scale and size needed for these strategic initiatives.

Digital TPAs provide these and other advantages:

? Digital TPAs can hire, train and onboard resources which have expertise in specific domains and are comfortable operating in a digital environment.

? Digital TPAs have the agility and speed to respond to volumes of new applications and service requests, varying their operations staff accordingly.

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