Updated September 25, 2023, at 3:45 PM
With the proliferation of fintech innovation, advisors 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 attracting $92 billion in venture capital in 2022.
This transformation, however, isn’t 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.
The Role of APIs in Insurtech
Application programming interfaces (APIs) have played a critical role in this momentum, allowing the deluge of new tools to speak to each other for real-time data-sharing among advisors, clients, and custodians, as well as other third-party providers. That free flow of data also has the potential to redefine the client-advisor relationship as technological innovation has begun to bridge the gap between the insurance and investment worlds.
Just ten years ago, there was little crossover between securities and insurance, as insurance agents, health insurance agents, and Wall Street advisors have traditionally stayed in their separate lanes when it comes to product sales. But that’s started to change. With the right tools and access, financial advisors 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.
Insurtech Offers Better Client Experiences
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.
Advisors can serve as a more comprehensive financial planner, 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 also 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.
Going Forward with Insurtech
Insurtech allows advisors 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.
Ultimately, insurtech positions advisors to become multi-dimensional thinkers, cultivating stronger bonds with clients who have come to expect more choice, transparency, speed, and access—and to have it delivered all in one place.
Keep Reading: 5 Reasons to Use a Wealth Management Fintech Platform
Editor’s Note: A similar version of this article written by Financial Independence Group’s Chief Operating Officer Arron Price has also been published on FintechForAdvisers.com.
