THE INSURANCE DEVELOPMENT IN THE CONDITIONS OF DIGITAL

TECHNOLOGIES EVOLUTION

Insurances have transitioned to a new level of development at the current stage.Their

competitiveness depends on the level of integration of digital technologies in insurance processes,

activities and products. Fintech products have an impressive impact on insurance. Platforms using

Big Data technologies, artificial intelligence (AI), etc. allow insurers to create new, more profitable

products.

In the field of technologies consumerism creates prerequisites for both insured and insurers

to use mobile devices and services in creating the connection between them. Thus, servicing

customers and solving insurance cases becomes much faster and more efficient for both parties. The

mobile devices have made possible the interaction of the insurer with the client on the principle "at

any time, anywhere”.

Insurance companies are adapting to the new challenges of digitalization through using

digital technologies to offer to their customers unique products and services, taking into account

their customers' consumption preferences. Among the most widespread platforms for digitizing

customer connection are P2P platforms. At the same time, while collecting data on each client these

platforms allow insurers to adopt an individual pricing policy towards each and every client. We

can consider that a first degree discrimination is applied (discrimination based on personal

characteristics). Such a strategy can be applied in the case of personal insurance.

It is important to highlight that in the international practice we could define Lemonade (insurer) as

an active promoter of digital technologies and Friendsurance - as an independent broker.

It is essential to mention that not all the challenges conditioned by the development of

digital technologies are accepted by all insurers. It is highly likely that a certain percentage of

insurers will become potential victims of disruptions in the digital era as it is often the case in
different fields. Technological changes are supported by InsurTech investments, which in 2017

reached 2.21 billion USD worldwide (Fig. 1.)

By using a cellular phone, european costumers have the opportunity to:

• notify the insurance company or broker, that the insured case occured;

• ask for help or assistance in the event of occurence of the insured case;

• GPS localization of the place where the insured case took place;

• contact the insurer's call center by phone;

• Take and send pictures of damaged goods and so on. product damage;

• performing the evaluation with the help of the video application from the client's smartphone to

the operator's smartphone that is in the office, in order to make a decision regarding the distance

assessment of the damage;

• challenge insurer's decision regarding the compensation;

InsurTech continues to be an important opportunity in the FinTech investment space. The

value of transactions in this area have increased from 0.35 to 2.21 billion. USD in 2017. About 60

percent of InsurTech investments were allocated to broaden the value chain of insurance; 30% were

directed to exclude intermediaries. Such investments were made when large insurance companies

became major investors in InsurTech companies. In 2017, approximately 83 percent of the total

number of

InsurTech

transactions were

performed by an

insurer or

reinsurer.

Fig. 1.10 Trends

of InsurTech
investments worldwide in the period 2012-2017.
Source: developed by the author based on
source 109

Last but not least, the development of computing technologies, mathematical models and

software applications has allowed the spread of stochastic models, at the expense of deterministic

models. All these elements of economic, technical and financial nature have cumulatively generated

a real improvement of the system of evaluation of the solvency of the insurance companies, offering

the possibility of comparisons between the results of the participating companies in different

markets and creating the prerequisites of a unitary system of supervision.

In some countries, such as Australia, Singapore, the United Kingdom, with the development

of Insurtechs, regulatory barriers to entry into the insurance market are evident. Also, there is a

reorientation of the successful Insurtech projects from the financing of the risky projects at the early

stage (seed and venture capital) to the financing of perspective research (advanced funding).

According to studies conducted by KPMG (source) most clients of insurance companies

want to have access to some functions of the insurance programs of the companies. It is unclear

how insurers react to these customer expectations, but it is clear that those who come up with digital

solutions to these challenges will be more competitive. The most requested is the system of direct

liquidation of the damage, system implemented in some European countries, such as Poland.

We must mention that for a wide integration of digital technologies in insurance, in addition to the

technical possibilities, in some countries, it is necessary to revise the regulatory framework. At the

same time, efficient innovations in the field of insurance are copied by the competitors within 6

months of implementation.

These and other aspects of digitalization in the insurance sector have boosted the sales of

products and services. At the basis of the development of sales of insurance products online is the

Directive of the European Parliament and of the Council of Europe 2016/97 of 20 January 2016 on

insurance distribution (recast) - Insurance Distribution Directive. From the moment of entry into
force, on 23.02.2016, all EU Member States had to bring the normative acts in line with the

provisions of this Directive by the end of February 2018.