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InsurTech 101: the insurance definitions you need to know

Risk carriers, underwriting, embedded insurance…let’s face it: it’s hard enough to keep up with traditional insurance terms, much less the constant influx of new words in the fast-paced digital era.
Industry
General
Words by
Time to read
5 minutes
Last updated
August 1, 2022
In a nutshell

So we’ve compiled a list of some helpful insurance definitions to get you up to speed with all the InsurTech industry jargon (we tried to make it more fun than reading the terms and conditions).

Check out all the latest InsurTech insights on our blog → 

1. Embedded insurance

❌ NOT: I embedded insurance in my bike by glueing my policy to the wheel. It doesn’t move anymore. 

✅ BUT: Insurance that is seamlessly integrated into a company or product’s user journey – think, a customer being able to add bike insurance to their online cart at checkout.

2. Insurance-as-a-service

❌ NOT: Insurance served on a platter at a fancy company event

✅ BUT: A 100% digital insurance offering that covers end-to-end requirements for simpler onboarding, claims management and customer support – created to make the insurance industry more efficient. 

Read more about how insurance-as-a-service is disrupting the industry →

3. InsurTech

❌ NOT: My new computer comes with free InsurTech so I can buy a new one the moment I break it.

✅ BUT: A company that develops and deploys technology to disrupt the insurance industry

4. Freedom of Services (FOS)

✅ DEFINITION: A European directive that helps establish a single insurance market across all European member states

If an insurance company or intermediary is approved in one EU country, then under the FOS, it is licensed to operate in all other EU countries without needing a physical office there. 

5. Pan-European

❌ NOT: A place to buy EU-themed pots and pans

✅ BUT: Even with the FOS (see above), European insurance companies and intermediaries still have to manage local regulations in each country. 

Pan-European insurance coverage overcomes local complexities and applies to multiple countries across Europe, giving high-growth companies the benefit of scale. 

6. Open API

❌ NOT: Adorable Puppy Insurance is a new type of coverage for your adorable puppy.

✅ BUT: An Application Programming Interface is a set of code that allows different software to communicate with one another.

Making an API ‘open’ means that it’s publicly available to other developers who can integrate it with their own software and customise it according to their needs. 

Example: Cowboy uses Qover’s open API to add insurance directly to its website and in-app user flow.

7. Insurance Distribution Directive (IDD)

✅ DEFINITION: A European directive that determines how insurance products are designed and distributed across the EU

The IDD’s goal is that everyone in the European insurance market follows the same rules to ensure adequate consumer protection. Of course, each country has its own interpretation of how to achieve this, which translates into a patchwork of local regulations. 

8. Insurance premium

✅ DEFINITION: How much an individual or business pays for their insurance policy, which covers the insured risks and is used by insurance companies to pay out claims

Embedded insurance can lower insurance premiums for end customers – not only does it cost less for companies to distribute it, but it also provides access to real-time data in order to better assess risk and adjust premiums accordingly. 

9. Risk carrier

❌ NOT: Carrying a lion on your bike while wearing a snake around your neck

✅ BUT: The insurance company financially responsible for the coverage in an insurance policy; the risk carrier charges the premium and pays any associated claims.

Example: Chubb, Wakam, NN 

10. Claims loss ratio

✅ DEFINITION: The amount of money an insurance company loses when paying out claims compared to the amount it collects in premiums

Example: If an insurance company pays 60€ in claims (including the cost of handling those claims) for every 100€ in collected technical premiums, its loss ratio is 60%. 

11. One-stop-shop

❌ NOT: Going to Amazon.com to buy food, clothes, a blender and fruit to blend

✅ BUT: A company that makes their customers’ lives easier by offering multiple services in one place

Example: InsurTechs can act as one-stop-shops for insurance by providing infrastructure for the entire value chain.

12. Underwriting

❌ NOT: Taking notes while hiding under a table

✅ BUT: The process of evaluating the risks of insuring a person or business and setting the coverage, exclusions and price accordingly

13. Omnichannel

❌ NOT: Qover +, a new streaming service offering sports, news, opinion, drama and comedy all on one platform

✅ BUT: A distribution approach that meets customers where they shop – ensuring a seamless experience whether they’re online or in store

Read more about how to engage customers through an omnichannel strategy → 

14. Depreciation

❌ NOT: The effect of painting your house lime green or a deteriorating relationship

✅ BUT: When the value of something decreases over time due to wear and tear

Example: If your bike gets stolen three years after you buy it, it’s likely not worth as much – so some bike insurance companies won’t give you as much money back. Pro tip: Find an insurance company with low depreciation.

15. Terms & conditions

❌ NOT: That thing you never read

✅ BUT: Legal framework that binds the insurer and the insured once the insurance has been purchased. It goes into the details of an insurance policy including what is and isn’t covered, coverage dates, how to cancel your contract as well as any special conditions or restrictions.

See, that was fun, wasn’t it? Hopefully you learned some new insurance definitions and are on your way to becoming an InsurTech pro!

Keep an eye out for future instalments, and if you need further explanation, our experts are here to help.