What are the downsides of implementing insurtech solutions?

Insurtech solutions are transforming the insurance industry by leveraging technology, data, and innovation to improve customer experience, efficiency, and profitability. However, implementing insurtech solutions also comes with some downsides that insurers should be aware of and address. In this article, we will explore some of the potential challenges and risks of adopting insurtech solutions in the insurance sector.

1 Regulatory compliance

Insurtech solutions often involve new or emerging technologies, such as artificial intelligence, blockchain, or cloud computing, that may not be fully regulated or standardized by the authorities. This can create uncertainty and complexity for insurers who need to comply with different rules and requirements across different jurisdictions and markets. Insurers also need to ensure that their insurtech solutions are ethical, transparent, and fair, and that they protect the privacy and security of their customers' data.

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Ezekiel Macharia

Managing Director @ Kenbright | Actuary
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Working with regulators to develop Regulatory Sandboxes for InsureTechs is very important. This enables them to experiment without the fear of non-compliance. In Kenya, we have a very active and positive regulator and this has enabled experimentation of new technologies. For example, our company, Kenbright, was able to launch an insurance aggregator which has enabled consumers to compare and buy insurance online. The regulator’s support was critical

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Mufumba Paul

Host:The Insurance 4Cus Podcast on YouTube | Insurance Underwriter|Centent Creator |Insurance Researcher | Writer| CEO-Austech Dynamite Company. BBA-INSURANCE |PROCUREMENT LOGISTICS, SUPPLY CHAIN| PGD-FINANCE
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In my opinion, Implementing Insurtech solutions in Uganda may face challenges such as limited internet access in rural areas, low levels of financial literacy among some segments of the population, regulatory hurdles, and resistance to digitalization in traditional insurance practices. Additionally, there may be concerns regarding data privacy and security, as well as the need for significant investment in infrastructure and technology literacy programs to ensure widespread adoption and effectiveness of these solutions.

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2 Integration and interoperability

Insurtech solutions may not be easily integrated or interoperable with the existing systems and processes of insurers, especially if they are legacy or outdated. This can create technical and operational challenges, such as data silos, compatibility issues, or duplication of efforts. Insurers may need to invest in upgrading or replacing their infrastructure, or in developing APIs or connectors, to enable seamless and smooth communication and collaboration between their insurtech solutions and their core functions.

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Ezekiel Macharia

Managing Director @ Kenbright | Actuary
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An InsurTech should be able to distribute and sell an insurer’s product by considering some form of manual process where the insurer has legacy systems. For example, an automated email solution where API are not available may be augmented with a call center to provide last mile services.

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3 Cultural and organizational change

Insurtech solutions may require insurers to adopt a different mindset and culture, one that is more agile, innovative, and customer-centric. This can be difficult for some insurers who are used to a more traditional, conservative, and risk-averse approach. Insurers may need to change their organizational structure, processes, and incentives, to foster a more collaborative and experimental environment, and to empower their employees to embrace and leverage insurtech solutions.

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Ezekiel Macharia

Managing Director @ Kenbright | Actuary
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Insurers who have a dedicated digital team are considered as better partners for insurTechs because they are more agile and tend to understand the challenges inherent in digital sales.

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4 Skills and talent gap

Insurtech solutions may demand new or specialized skills and talent, such as data science, software engineering, or digital marketing, that insurers may not have in-house or in sufficient quantity. This can create a skills and talent gap, which can limit the potential and performance of insurtech solutions. Insurers may need to invest in training or reskilling their existing workforce, or in hiring or partnering with external experts or providers, to fill this gap and to ensure that they have the right capabilities and competencies to implement and manage insurtech solutions.

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Ezekiel Macharia

Managing Director @ Kenbright | Actuary
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Building capacity in house is better than outsourcing in the long run. Over time, clients will demanding more and more convenience which, most of the time, requires integration with multiple third parties. This can create complexity and delays in implementation for a newly outsourced team.

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5 Customer expectations and satisfaction

Insurtech solutions may raise the expectations and satisfaction of customers, who may demand more convenience, personalization, and value from their insurance products and services. This can create opportunities for insurers to enhance their customer loyalty and retention, but also challenges for insurers to meet or exceed these expectations and satisfaction. Insurers may need to monitor and measure their customer feedback and behavior, and to continuously improve and innovate their insurtech solutions, to ensure that they deliver on their promises and differentiate themselves from their competitors.

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Dennis Kiplang'at

PMP®|PMI- ACP®|BSP |FLMI| ACS| ARA | ASQ®- Six Sigma Black Belt
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The expectations from clients and even partner insurers is that Insuretechs bring more to the table in terms of driving efficiency and convenience ergo the bar is set quite high on NPS/NES/CSI/ Customer satisfaction metrics. Enhancements like 360 customer view and process automation enable this augmented experience.

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6 Cybersecurity and fraud risks

Insurtech solutions may increase the exposure and vulnerability of insurers to cybersecurity and fraud risks, as they rely more on digital platforms, channels, and data. This can create serious threats and damages for insurers, such as data breaches, identity theft, ransomware attacks, or fraudulent claims. Insurers may need to invest in enhancing their cybersecurity and fraud prevention and detection systems and policies, and to educate and inform their customers and employees about the best practices and precautions to protect themselves and their data.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the downsides of implementing insurtech solutions?

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1 Regulatory compliance

2 Integration and interoperability

3 Cultural and organizational change

4 Skills and talent gap

5 Customer expectations and satisfaction

6 Cybersecurity and fraud risks

7 Here’s what else to consider

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