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Big Tech Insurance: The Impact on Healthcare and P&C Insurance

By July 31, 2020February 27th, 2024No Comments

Healthcare is on everyone’s minds in 2020. The call for better health insurance has converged with several other insurance industry trends.

Big Tech companies have begun to offer healthcare coverage, but we may see this disruption grow into other insurance markets soon. Just this month, Walmart has become the latest retailer to enter the health insurance industry, recruiting Medicare insurance agents to organize the initiative, and Amazon has expanded to sell auto insurance in India.

Currently, Big Tech firms are playing around the insurance industry margins, investing in promising InsurTech startups and developing (or publicly spitballing) ancillary products and services. Total capital invested in InsurTech firms reached $3.18 billion in 2018, nearly doubling the $1.65 billion invested in 2017, and then topped over $4.4 billion in 2019.

What effect does Big Tech Insurance currently have and could these players take hold in other insurance industry markets?

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What is Big Tech Insurance?

Big Tech Insurance is an insurance industry niche where technology companies create insurance offerings, combining the power of intelligent software, mass wealths of Big Data, and major financial backing from Silicon Valley investments.

Venture capitalists, insurance companies, private equity firms and financial services firms, for the most part, are funding Big Tech Insurance. Buyers report the following motivations.

  • To enhance the distribution process and extend customer reach.
  • Lowering the cost of claims administration and policy distribution.
  • Access to new, niche markets.
  • Access to data or automation capabilities that can be used to reduce costs and improve decision-making.

While this niche at first opened up for healthcare insurance, one 2018 study found one in five consumers would use Amazon or Google for home insurance. The model behind Big Tech Insurance applies to many areas of the insurance industry, especially when it comes to home and auto, where Internet of Things (IoT) devices can easily collect data.

While Big Tech companies aren’t direct competitors today, many in the insurance industry are notably concerned about the state of affairs changing.

One this is certain, however: Heightened competition is coming, whether from conventional tech firms or innovative insurance industry players. If data is truly “the new oil” powering the 21st century economy, then firms such as Google and Amazon have a powerful competitive advantage in any new market they enter, given the extraordinary amount of data they’ve collected.

4 Challenges with Big Tech Insurance

However, there are also reasons to believe Big Tech’s current strategy of making strategic investments and staying on the fringes of the market may persist for some time.

Namely, there are substantial impediments, both structural and market-driven, that make the insurance industry a challenge for outside competitive forces.

1. Regulatory Issues. Because of health insurance’s direct link to human well-being (both in terms of health and finances), insurance products are always going to face substantial regulation.

2. Lower Margins. Many insurance carriers operate on margins in the two to three-percent range. These aren’t numbers that will necessarily excite high-growth technology firms.

3. Lack of Expertise. The advantages larger tech firms possess with data analysis, AI and Machine Learning, would be mitigated to some degree by a lack of industry experience and expertise.

4. Customer Trust. Consumers have incentives to change carriers periodically, yet many policyholders do not bother to comparison shop when it’s time for renewal.

In order to meet these competitive challenges, it’s imperative that insurance companies act now, because the pace of innovation within the industry is exploding — as witnessed by recent growth in the InsurTech market.

There is no denying that large tech firms have significant advantages they can bring to bear into sectors such as insurance and banking. Insurance firms can’t compete with Google or Amazon in terms of having access to large data sets.

Large tech firms also have access to powerful advantages in terms of human capital and disruptive technologies. Silicon Valley has been beating Wall Street in the war for elite young workers, and insurance companies don’t have access to the same kind of sophisticated AI and machine learning tools deployed by tech sector titans.

WaterStreet: Facilitating Better Customer Experiences

WaterStreet Company is a true “one-stop-shop” for carriers, MGAs and others, to get the system capabilities and back office processes services that they need to be successful — without the burden of vetting and managing multiple vendors.

Our emphasis on the customer experience is a core competitive differentiator. Our approach is to partner with our clients and draw upon our collective industry expertise to help them through every step of product launch or expansion to ensure its growth and success. We want to be there for our clients every step of the way by providing robust cloud insurance software.

In today’s customer-centric world, what passes for customer service usually results in poor quality interactions that leave much to be desired with customers.

Our software has the ability to enable digital engagement and omni-channel communication allowing carriers to offer more communication options for their policyholders to engage with them the way that they want to. Additionally, Business Process Outsourcing (BPO) service offerings help free up valuable resources of the carrier to work on higher value tasks such as engaging customers throughout policy and claims processes, when they need the carrier the most.

Whether that pressure comes from Big Tech; small, nimble and innovative startups within the insurance industry or established companies focused on getting digitalization right, it’s vitally important that your enterprise stays perched at the vanguard of digital transformation — and WaterStreet can help you meet that challenge.

Reach out to WaterStreet Company today to request a consultation and demo of our solutions.

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