Insurtech, a combination of the words ‘insurance’ and ‘technology’ and a subset of fintech, is proving to be as much of a ‘disruptive technology’ as fintech was to banking. Insurtech emerged around 2010 and today the global market is surging. Indeed, according to some estimates it will grow 41% annually between 2019 and 2023. By using new data streams, such as those derived from Internet-enabled devices, a raft of new insurtech startups are succeeding in areas hitherto unexplored by large insurance firms.

The use of ‘deep learning’ trained artificial intelligence (AI) is key to the various possibilities including dispensing with traditional brokers andusing apps more creatively to radically alter the way in which car insurance works. The new wave of startups includes Tractable, Dinghy, Untangler and BusinessComparison. Over the past 12-18 months, tech investors SoftBank Group Corp. and Andreessen Horowitz have also poured capital into insurtech. Earlier this year they were joined by Health IQ, which raised $55 million from Andreessen Horowitz and other investors. However, it was the announcement this September by Prudential Financial Inc. of its agreement to buy online insurance startup Assurance IQ Inc for $2.35 billion that has truly shaken up the sector. Andrew Sullivan, who heads Prudential’s retirement and group insurance businesses, said that Assurance will add “a new earning stream to Prudential that is not sensitive to equity markets, interest rates and credit.”

Yet despite the general mood of optimism there are still some areas of concern about insurtech, namely around data security. The ability to keep data secure is notoriously difficult and partnerships between the various operators providing insurance are likely to render data flows increasingly susceptible to manipulation. This is likely to be a problem for some time to come as many of the insurtech start-ups are small and require the help of traditional insurers to handle underwriting and also manage catastrophic risk.