The rise of insurtech

Just 10 years ago, there was little crossover between securities and insurance, as insurance agents, health insurance agents and Wall Street advisers traditionally stayed in separate lanes. But that has started to change.

With the proliferation of fintech innovation, advisers have hundreds of thousands of digital tools and services at their disposal to automate tasks, build financial plans, track performance, analyze markets, predict behaviors and improve communication. It’s an explosion of new capabilities, with fintech investment increasing by 84%, from $12.7 billion in 2020 to $23.4 billion in 2021, according to Deloitte.

This transformation, however, is not limited to traditional investments. Insurtech is also driving growth by disrupting the traditional insurance industry model with new ways to reach customers and improve operations. Of the total investment, Deloitte reports that insurance, along with banking and capital markets, and investment management, saw dramatic fintech growth, amounting to 87% of the total funding.

Application programming interfaces have played a critical role in this momentum, allowing the deluge of new tools to speak to each other to facilitate real-time data sharing among advisers, clients and custodians, as well as other third-party providers. That free flow of data also has the potential to redefine the client-adviser relationship as technological innovation has begun to bridge the gap between the insurance and investment worlds.

Just 10 years ago, there was little crossover between securities and insurance, as insurance agents, health insurance agents and Wall Street advisers traditionally stayed in their separate lanes when it came to product sales. But that has started to change with insurtech. With the right tools and access, financial advisers can become experts in insurance, diversifying portfolios with products that don’t carry the risk of equities.

With carrier systems in compliance with investment platforms, eliminating distribution hassles and simplifying transactions, investment professionals can more easily incorporate insurance products into their offerings. Hybrid distribution models, for example, mean wealth managers can view, analyze and manage investments alongside fixed and registered insurance products through one centralized platform.

Beyond broadening and diversifying their repertoire, the integration can significantly improve the customer experience by offering a more complete view of a client’s financial picture.

Advisers can serve as more comprehensive financial planners, incorporating insurance into portfolios as another asset class that’s part of the family budget, pooled together with securities products. They can manage life insurance and annuities right alongside mutual fund investments and estate plans, or coordinate Medicare coverage with life insurance policies — all without the lag times currently experienced in the insurance industry. They can more easily explain complex life insurance products and demonstrate the many shades of annuities, for instance, all within the context of a client’s risk profile.

Insurtech allows advisers to adopt insurance as an asset, fundamentally reshaping their industry by saving time, reducing errors, mitigating risk and simplifying delivery. It helps build scale and boost productivity for advisory practices, while opening new doors to integration across the industry.

Arron Price is chief operating officer of Financial Independence Group.