Ultimate Guide to Insurance as a Service in 2022

Ultimate Guide to Insurance as a Service in 2022
The insurance sector is experiencing a rapid shift towards digitalization. According to EY, 80% of customers are eager to use digital and decentralized channels than traditional insurance platforms.
Such an environment is forcing incumbents to collaborate with insurtechs. For example, an IBM study shows that 81% of large insurance companies have either invested in or are working with insurtechs. The “insurance as a service” approach is a part of such collaboration between insurtechs and established insurance companies. Incumbents tend to leverage the cloud-based technology solutions of insurtechs to adopt new insurance environments with a low cost. In this article, we analyze the insurance as a service approach in depth.
What is insurance as a service?
The Something as a Service approach is widespread in many industries. The X as a service approach is always associated with the purchase of services from vendors on a subscription basis to increase a company’s operational efficiency. “As a service” solutions are popular because they are relatively cheap, easy to install and ensure scalability and quick upgrades.
From this perspective, “insurance as a service” means that startups offer other companies the use of selected pre-built elements of the insurance value chain on a subscription basis, essentially running insurance operations for others. Such platforms are cloud-based and can help improve core insurance practices such as: Underwriting, claims processing, fraud detection, customer service as figure 1 illustrates.
Figure 1: Insurance as a service solutions

Why is insurance as a service important now?
Necessity to improve margins
The best price is the most effective criteria for buying business and property insurance. However, as the figure 2 shows, most insurance companies operate with very low or negative economic profit margins. Consequently, insurance companies need to improve their operational processes. The “insurance as a service” approach offers a relatively easy and cost friendly path to digital transformation for insurance companies and helps incumbents to remain competitive.
Figure 2: Economic profit of insurance companies

Pressure to adopt new technologies fast
With deregulation and tech innovation, insurtechs are innovating fast which forces the whole industry to innovate at a faster pace. As the figure 3 indicates, insurer executives plan to increase their technology investments. Insurance as a service helps insurance companies adopt new technologies quickly.
Figure 3: Emerging technologies where insurance executives expect to increase spending the most in 2022

What are the fundamental insurance as a service models?
It is possible to classify insurance as a service into three different categories: Full-stack digitization, digitizing process assistance, and core service digitization.
Full-stack digitization
It is an end-to-end infrastructure for deploying digital insurance practices. In the name of full-stack digitization, insurtechs can develop a platform for an incumbent company or the companies can agree on a licensed white-label backend. Such Insurtechs are examples of B2B2x where they facilitate the digital transformation of old-fashioned insurance companies. Full-stack digitization saves infrastructure costs and helps incumbents conduct technology driven insurance practices from anywhere, anytime.
Digitizing process assistance
Some Insurtechs are working with incumbents to redesign internal processes within a closed digital ecosystem for non-insurance practices. For example, providing effective customer service using NLP-driven chatbots is a common digital solution that offers efficiencies to businesses whether they are insurance companies or not. Automating customer service, company accounting systems, IT requirements, etc. by leveraging the “insurance as a service” model fall into this category.
Core service digitization
Some Insurtechs offer their services in a specific area of insurance, such as underwriting, claims processing, and fraud detection. Using such services can help incumbents compete with innovative insurers that can:
- Conducting an appropriate risk assessment with technology driven underwriting processes. Therefore, they can set a lower premium, which gives them a larger market share, as price is the main criteria of insurance cıstomers.
- Ensure customer engagement with fast claim processing.
- Gain a greater strategic movement area in pricing thanks to effective fraud detection.
Sponsored
Virtual i Technologies helps insurers to assess risk more effectively thanks to their intelligent platform [VRS]™ Virtual Risk Space. By using advanced analytics, the platform makes hidden risks visible and reduces the likelihood of inefficient pricing. [VRS]™ also eases the claims process, with policyholders able to send real-time damage information such as videos, photos, and location with their smartphones to complete the first notice of loss (FNOL).
Virtual i team offers this technology as an insurance as a service implementation, without requiring a slow & costly IT integration project. The figure 4 shows [VRS]™ Virtual Risk Space’s solutions to insurance challenges.
Figure 4: Technology solution of [VRS]™ Virtual Risk Space
![Technology solution of [VRS]™ Virtual Risk Space](https://virtualitechnologies.com/insurbuzz/wp-content/uploads/2022/03/vrs-virual-i.jpg)
Challenges
Data security
Like all X-as-a-Service cloud platforms, insurance-as-a-service platforms are vulnerable to some data security risks because a large amount of sensitive data can be accessed from many devices by many users. Data breaches and losses can cost insurance companies heavily, both in terms of short-term costs (e.g., legal sanctions) and long-term costs (e.g., reputational damage). Therefore, companies considering the use of platforms for insurance as a service should evaluate their cloud partners’ security before using their services with customer data.
For more, please see challenges of cloud insurance applications.
Source: https://research.aimultiple.com/insurance-as-a-service/