Ultimate Guide to Insurance as a Service in 2024

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 insurtech companies. For example, an IBM study shows that 81% of large insurance companies have either invested in or are working with insurtech companies.

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.

So, “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 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 expected 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.

1. Full-stack digitization

Full-stack digitization 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.

2. 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.

3. Core service digitization

Some Insurtech companies 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 customers.
• Ensure customer engagement with fast claim processing.
• Gain a greater strategic movement area in pricing thanks to effective fraud detection.

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.

Top 7 insurance as a service providers

The following insurance platforms offer cloud computing solutions to insurers to help them digitiliza their (see Table 1):

• Underwriting
• Risk assessment
• Claims processing
• Customer service
• Document management and so on.

Thus, these digital insurance platforms can help insurers manage a fast digital transformation process. While we were picking best insurance as a service providers we have used our lists of:

• Insurance suites.
• Insurance claims management.
• Insurance underwriting.

We only choose online insurance providers with ratings of at least 4. (between 0-5). While we were sorting the insurance platforms we used alphabetic orders since they provide different services for insurers e.g underwriting and claims processing.

Table 1: Top 7 insurance as a service platforms.

Further readings

By reading our selection of five articles, you can learn more about the latest developments in the insurance sector.

• Top 3 Technologies That Enhance Business Insurance Pricing: McKinsey shows that business insurance is an attractive area for insurers. According to research, the best price is the top priority of business insurance customers. In this article, we present the most important technologies that help insurers lower premiums to gain a greater market share.
• How is AI Changing the Health Insurance Practices?: Health insurance is an area that generates more than $1 trillion annually. In this article, we discuss how AI/ML models improve health insurance practices by more effectively detecting fraud, lowering premium prices, and increasing customer satisfaction.
• Impact of the Low/No-Code Platforms on the Insurance Sector: As with insurance as a service, low/no-code platforms help insurance companies easily adopt technology. In this article, we present the pros and cons of using low/no-code platforms that eliminate the need for employees with code skills to perform digital transformation.
• Insurtech Guide: What it is, Trends, Technologies & Challenges: This article is our main introduction to the insurtech landscape and the latest trends in the insurance sector.
• 6 Ways IoT will Change the Insurance Sector: Smart devices have the potential to completely change the insurance sector as we know it. They monitor the environment we live in 24/7 and will thus reduce the percentage of physical losses. However, the advent of the IoT could bring more cyber risks, and soon cybersecurity insurance could be the most important insurance practice.

You can also check our list of top insurance suites.

We can find the best insurtechs that provide insurance as a service model to improve your insurance practices: