InsurTech and Beyond, as a FinTech*

June 14, 2021

Global literature categorizes InsurTech as a FinTech. We have embraced this without much question. But I'm sure some of you are confused about it as I am. "Why?" you ask?

Since insurance is defined as a "Financial Service" and FinTech is the primary framework where financial services meet new technologies, insurance technologies, namely InsurTech, are also described as a subcategory of FinTech. 

We know that theoretically, all elements in a subset are also members of that set. In this case, all InsurTech activities must also be a FinTech activity.

If we look at the definitions; 

"FinTech is a new financial industry that uses technology to improve financial activities" - Wikipedia 

Wikipedia expands the definition, stating that financial technologies are used to automate fields of investment, insurance, trade, banking services, and risk management. The description covers insurance, but the examples below are related to payment, investment systems, and banking.

According to, FinTech is defined as "new technologies that aim to improve and automate the processes of providing and using financial services." Here too, InsurTech is listed among the most active areas of FinTech.

In KPMG's Pulse of Fintech report, FinTech is categorized as "Payments, InsurTech, RegTech, WealthTech, BlockChain / CryptoCurrency, and Cybersecurity." In the FinTech 250 map published by CB Insights for 2020, with 35 startups, InsurTech is the most listed category under the 20 subcategories.

In summary, InsurTech is considered an essential part of FinTech, especially in markets where entrepreneurship and technology are making rapid progress. The increasing interest of investors puts InsurTech in the spotlight of the FinTech media.

So, how valid is the cluster-subset relationship between InsurTech and FinTech?

First, let's take a look at why insurance is a financial service. The Financial Services sector refers to companies that manage money. Banks, stock markets, credit institutions are the first ones that come to mind. Insurance also offers a service that promises to compensate the financial losses that individuals and institutions will suffer due to the risks they may encounter. Private pension plans relate to this concept in terms of retirement rather than an unexpected risk. In this sense, insurance is a sector focused on money management. 

But unlike other financial services, insurance is.

"a contract that promises to compensate for the damage suffered in the event that can likely occur in a persons' lives."

Now, this makes things complicated. To clarify the complexity, let's expand a bit by underlining some keywords;

"Persons' lives": Insurance touches all areas of the lives of private and legal persons that involve risk. This means specializing in a place to understand the risk and detect the damage. These fields present a long list in a wide range, such as health, natural disasters, theft, legal liability, maritime, extreme weather, traffic liability, shipping, trade, employer's responsibility, and credit.

 "Likely": Probability creates the requirement of making forecasts to insurance, adapting predictions to financial models, and determining the compensation for the service accordingly. This opens a window for having more data to better prognosis, process, and make sense of big data and price the risk correctly. 

"In case of occurrence": Realization of the risk doesn't just mean defining and paying for the financial loss. It covers acting as an intermediary to eliminate the damage in case of need, establishing contracted service networks, providing first aid in case of damage, making agreements with parties that will cover the expenses of the loss without requiring the insured to pay. Since the payment to be made "in case of occurrence" is not more attractive than the win-win (for all parties) of non-realization, "preventiveness" like measures to reduce the probability of risk and size of the loss come into play. This means opening up to a massive field of technology.

 "Compensation of damage": For compensation, what the damage is, whether it occurred for a reason within the contract, and the framework of the contract terms must be settled. Then the monetary equivalent of the determined loss is paid in the fastest way, or the damaged value is restored to its pre-damage state. To achieve this, expertise in all these fields must be put into use quickly with the support of external experts.

"Promises": Under this concept, the money collected as a premium could be invested in the best and safest way, following the law, especially in long-term insurance areas such as retirement and life. It could be considered that investment processes are managed transparently and dynamically together with the insured, as well as legal disputes. Legal disputes may not only be the disputes arising from the contract terms of the parties in the insurance contract but also the legal processes involving the insured risks. This means that we have stepped into Legaltech territory.

When explained in this way, we see how the scope of insurance and Insurtech exceed the limits of FinTech. The emphasis on "providing financial services" in the FinTech definition does not seem to apply to the entire insurance value chain and insurance types. Areas such as price comparison, policy issuance, collection, or payment of compensation may have similarities with financial technology solutions, but issues such as providing health services, in-network providers like vehicle repair or hospital, preventive solutions seem exclusive to Insurtech.

Of course, not all transactions under the financial services umbrella are related to banking or payment systems. For example, changing the ownership of a property or machine in financial leasing or the sale of a loaned property in banking differ in terms of the technologies they can be associated with and the knowledge required. Or, improving customer experience, mobility, artificial intelligence-supported robotic consulting, and chatbot applications can offer standard solutions for different areas. However, the differences unique to Insurtech make it necessary to look at this area from a slightly different angle.

So, what kind of consequences can Insurtech going beyond the boundaries of FinTech have? The answer can be summarized as "awareness" and "opportunities." Namely;

In channels where FinTech is discussed, only the areas of Insurtech close to financial services may be of interest due to the FinTech focus of the participants.

Environments in which Insurtech is handled remaining within the boundaries of FinTech may confirm that collaborative opportunities with other disciplines are not sufficiently emphasized. Considering that the scope of insurance is less known, especially among technology manufacturers and young people, it may be necessary to use different methods outside the FinTech spectrum to attract technologies and business models from other fields to the Insurtech area.

These are our deductions, but of course, there are different perspectives that readers can bring.

When we look at the situation in Turkey, we see that insurance technologies are already mentioned to a minimal extent in publications and websites, meetings, and conferences related to FinTech. When we look at the FinTech verticals defined by the Turkish Presidency Finance Office, 

P2P Lending, Payments (Digital payments, e-money companies, cross-border payments), Personal finance management, BlockChain and CryptoCurrency, Micro Insurance, Digital Banking, Financial API Economy, Mass Finance, FinTech models focused on Money Markets (Robo Advisor, etc.), RegTech (Models that digitize regulations)

We can see that it remains within the framework of financial transactions and instruments defined as "Insurtech," yet Insurtech is not mentioned. Although insurance is a financial service, it is sometimes seen as very complex and secondary to other financial services. Of course, the fact that the insurance sector in Turkey is far behind the levels of developed countries, unlike the banking sector, affects this.

In Turkey, we are currently focusing on the expansion of Insurtech as a FinTech vertical. After this phase, seeing how more opportunities can be captured in areas beyond this scope is necessary. 

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