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Feasibility of Traditional Insurance vs.

FinTech
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Contents
Introduction.................................................................................................................................................3
1.1 General overview...............................................................................................................................3
1.2 Rationale............................................................................................................................................3
1.3 Insurance Background.......................................................................................................................4
1.4 Study aim...........................................................................................................................................5
1.5 Research objectives...........................................................................................................................5
Literature Review........................................................................................................................................6
2.1 Effects of technological trends on traditional insurance....................................................................6
2.2 How Fintech is transforming insurance service delivery...................................................................6
2.3 Factors influencing adoption of Fintech in insurances.......................................................................6
2.4 Key readings......................................................................................................................................7
2.5 Research Questions............................................................................................................................7
Research Methodology................................................................................................................................8
3.1 Research philosophy..........................................................................................................................8
3.2 Research method...............................................................................................................................8
3.3 Sampling framework.........................................................................................................................8
3.4 Research reliability, validity, and generalizability.............................................................................9
3.5 Constraints and ethical issues............................................................................................................9
Ethical issues.......................................................................................................................................9
Constraints...........................................................................................................................................9
References.................................................................................................................................................11
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Introduction
1.1 General overview

Innovations in financial sectors are often regarded as a positive driver of change and

development in the financial sector as it leads to various immeasurable efficiencies in the area.

However, some of these changes have been characterized by various uncertainties and doubts,

making traditional methods a likely option in our day-to-day financial lifestyle. Despite the

general awareness of the risks posed by these innovations in future financial investments and

service delivery, technological innovations have continued to grow, and their impacts are

currently felt in almost all financial sectors. Based on Mnohoghitnei et al.'s (2019) research, the

concept has tremendous financial potential, which has already been felt and illustrated during the

Covid-19 pandemic with various outstanding performances and transformations in the way

services and products are delivered to customers. As we advance, it is evident that technological

innovations will be crucial in creating new financial and diverse opportunities to fulfill consumer

needs within the financial sector.

The term Financial Technology, abbreviated as "fintech," refers to various financial innovations

resulting from technological changes. Fintech is well known for creating new business processes,

models, products, or applications that have significantly impacted how financial institutions and

financial markets deliver their services. The narrow sense of Fintech refers to financial markets

and institutions reshaping their traditional ways of providing services or delivering products to

their customers through cloud computing, mobile internet, and big data. In that capacity, Fintech

can broadly be seen as applying various technological innovations in financial servicing.

1.2 Rationale

Although traditional insurances have many loyal customers, mainly due to their well-entrenched

services and system to the masses, there are quickly losing ground after fintech startups started
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offering more customer-centric services and products. Fintech startups have also shown their

capability to use various advanced technologies to give their customers more personalized and

affordable services while also making their services closer and highly efficient. Based on various

statistical data from Lee and Shin (2018) and VanderLinden et al. (2018), insurances have

continued to expand their fintech investments, closing 70% as of 2017 compared to 2013 due to

their attractive and efficient investment objects.

There is limited research on traditional insurance and Fintech, which leaves room to investigate

how insurances respond to society-wide and economic technological changes quickly becoming

integrated into their system. Given that insurance deals with big data and is primarily based on

various historical data during the underwriting process to assess and determine risks of the

policyholders, it is arguably the first venture where Fintech is well suited to provide and deliver

convenience. Like other financial sectors, insurances are no exception and require these

technological changes to bring in new possibilities and methods of service delivery for their big

data.

1.3 Insurance Background

The insurance industry is one of the major subsets of the financial sector and is housed under the

financial system based on Investopedia. However, the insurance sectors are unlikely to receive

research looking closely at their business processes. Despite numerous researches conducted in

the claim and risk processes, most are limited to healthcare, especially in the US (Suryono, Budi

& Purwandari, 2020)). There are very few pieces of research in other parts of the world, solely

due to technological development, which has forced the traditional insurance bigwigs to change

their operations continually and rapidly respond to the growing societal demands where

eCommerce and technological mobility is holding sway. To adapt to the current changes,
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insurers are currently trying to deal with various digital disruptions mainly through engaging

takeovers, partnerships, and internal R&D. However, the most underlying transformation right

now is the increased investment in Fintech, which in this context is referred to as InsurTech.

1.4 Study aim

Based on PwC 2018 report on financial services, there is a particular concern in the insurance

sector on the impact technology plays on their growth and development. The insurance

management is already aware of how the digitization of services has become key in

strengthening financial sectors. However, the insurance landscape is still deeply rooted in

traditional methods. Although the dominance of technology is often overemphasized compared

to traditional methods, its influence and adoption by insurances to reduce complexity and

increase compatibility is a significant focus for this research. Besides other aims, the current

study will lay the framework for traditional insurers to adopt emerging technologies in

supporting their current business processes while also exploring various gains of adopting

technology in the highly competitive market.

1.5 Research objectives

The main objectives of this study will be:

1. To identify how technological trends are affecting the traditional insurance age.

2. To discuss how the adoption of Fintech is changing service delivery for insurances

3. To explore factors disrupting the adoption of Fintech in insurances

4. To discuss possible areas within the insurance sectors where Fintech can be implemented
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Literature Review
2.1 Effects of technological trends on traditional insurance

The current insurance sector is increasingly experiencing various technological shifts. However,

the digital-first business models are products of traditional insurance, which the insurance

companies have continued to test and streamline to fuel their businesses to the next level. The

essential thing to understand is how these technological trends reduce operational costs by

automating services and preventing fraud. Therefore, these changes are almost inevitable as

insurance agents acquire and maintain their businesses. Many technological trends in the

insurance sector have taken over many traditional means. The big data technological trend refers

to the ease of structuring and restructuring voluminous data sets marking a critical step in the

insurance sector.

2.2 How Fintech is transforming insurance service delivery

There are many mobile players currently emerging within the insurance industry. Despite the

industry's firmly rooted traditional and complicated environment, there are more opportunities to

introduce various customer value services with mobile solutions. One key driver of these is the

surfacing of the InsurTech and FinTech startups, placing the insurance industries amid a

systematic change for its business operations. According to Chishti and Barberis (2016), the

urgency of insurance companies to offer services and products using digital methods has

improved the value of a digitized ecosystem in the market.

2.3 Factors influencing adoption of Fintech in insurances

In the current age of rapid digital changes, the influence of both external and external factors

such as active insurance management cannot be undermined. The direction taken by insurance is
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essential in determining its technological adoption, which drives the digitization of the sector.

Either way, regulatory decisions also influence how the sector adopts ICT. Therefore, both

internal and external factors influence the potential of insurances adopting new technologies

within the sector.

2.4 Key readings

Although there is little research done in this area, the few provide us with necessary information

on the insurance landscape. Among these is Shin and Choi's (2019) research examining the

feasibility of the fintech platform as essential for sustainable economic growth within the

financial sector. Either Riemer et al. (2017) and Puschmann (2017) also noted that fintech

startups are continually enjoying investments from their ventures and their traditional financial

institutions aware of the essential role digital technologies are playing in business today. Either,

Ma's (2014) study will be vital in examining the essential role of adopting Fintech in big data for

convenience and ubiquitous access. Other researches that will be key in this study include FANG

et al. (2013), Alt, Beck & Smits (2018), Skees & Enkh-Amgalan (2002), and Hemphill (2019).

2.5 Research Questions

The key research questions for this study will be: 

I. How do technological trends affect the traditional insurance age?

II. How does the adoption of fintech affect service delivery in insurance?

III. What are the factors disrupting fintech adoption in insurances?

IV. What are the possible areas of fintech implementation within the insurance industry?
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Research Methodology
3.1 Research philosophy

The role of technology in our society today is to shift our fundamental research, which focuses

mainly on creating pure knowledge, to one aligned with specific economic needs (Pollari, 2016).

Therefore, such use-inspired research should not be confused with the applied research that is

inherently supported and inspired by technological developments and commercial outcomes.

Therefore, this research is guided by the use-inspired research philosophy, which is an emerging

area of inquiry, particularly in the service industry. Prescribing to this research philosophy

necessitates we identify various real-world challenges presented by traditional insurance and

Fintech before delineating the research agenda for insurance services which calls for extant

literature review to provide pathways for addressing challenges identified.

3.2 Research method

The researcher will adopt a qualitative research method to address various research questions

raised in this study. The primary reason for choosing this method is that top insurance officials

target the data type. They are better positioned to respond and give credible information on the

feasibility of traditional insurance and Fintech based on where they are working. Either, the top

officials are also tasked with managing various processes in their companies, including

technology. Therefore, there are better positions to answer questions regarding any insurance

technology impacts in the financial market.

3.3 Sampling framework

Since the research will be based on a qualitative methodology, selection will be limited to critical

experts in selected insurance firms. According to Fridlund & Hildingh (2000), the number of

respondents in qualitative studies should range from 1 to 30, unlike quantitative research, where

significant numbers can be targeted. However, the final sample size will be based on the expert's
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wealth of experience or information targeted in the research questions. Out of 10 possible

populations targeted during this study, the sample size set is a maximum of 6 respondents. These

six will be chosen based on a popular opinion from top executives at the insurance firm.

3.4 Research reliability, validity, and generalizability

Reliability refers to research instruments measuring and yielding consistent results under similar

conditions. To test the reliability of the instruments used during this study, the questionnaire

items will be submitted through a pilot test to remove any confusing words and improve clarity.

Also, a Chronbach alpha statistical instrument will be used to statistically assess the reliability of

the said instruments before submitting them to the respondents.

On the other hand, validity refers to the degree of statistical instruments measuring what the

researcher intends to measure. In this study, two types of validity will be ensured: content

validity and face validity.

3.5 Constraints and ethical issues

Ethical issues

Ethical lapses can occur during the research process. The key ethical issue during this study is

self-interest which may come at the researcher's expense. Having worked in the insurance sector,

personal interests might arise, leading to capitalization or inflation of respondent opinions. As a

result, the research will seek to declare his self-interest before starting the research process.

Constraints

Any research will face constraints before its completion. Essential for this study is meeting the

timelines of the insurance executives. Meeting top officials might be an uphill task for anyone.

As a result, the researcher intends to send an email to book an appointment one month before

actual research is conducted.

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References
Alt, R., Beck, R., & Smits, M. T. (2018). FinTech and the transformation of the financial

industry. Electronic Markets, 28(3), 235-243.

Chishti, S., & Barberis, J. (2016). The Fintech book: The financial technology handbook for

investors, entrepreneurs and visionaries. John Wiley & Sons.

FANG, Y., ZHU, Z. Y., & XU, X. J. (2013). The Necessity and Feasibility Analysis of Our

Catastrophe Insurance Special Legislation [J]. Science Economy Society, 1.

Hemphill, T. A. (2019). The title insurance industry: infusing innovation and

competition. Business Economics, 54(3), 177-181.

Hildingh, C., Fridlund, B., & Segesten, K. (2000). Self‐Help Groups as a Support Strategy in

Nursing: A Case Study. Rehabilitation Nursing, 25(3), 100-104.

Lee, I., & Shin, Y. J. (2018). Fintech: Ecosystem, business models, investment decisions, and

challenges. Business Horizons, 61(1), 35-46.

Ma, X. (2014). On the feasibility of data loss insurance for personal cloud storage. In 6th

{USENIX} Workshop on Hot Topics in Storage and File Systems (HotStorage 14).

Mnohoghitnei, I., Scorer, S., Shingala, K., & Thew, O. (2019). Embracing the promise of

Fintech. Bank of England Quarterly Bulletin, Q1.

Pollari, I. (2016). The rise of Fintech opportunities and challenges. Jessa, (3), 15-21.

Puschmann, T. (2017). Fintech. Business & Information Systems Engineering, 59(1), 69-76.

Riemer, K., Hafermalz, E., Roosen, A., Boussand, N., El Aoufi, H., Mo, D., & Kosheliev, A.

(2017). The Fintech Advantage: Harnessing digital technology, keeping the customer in

focus. University of Sydney, Business School and Capgemini.

Shin, Y. J., & Choi, Y. (2019). Feasibility of the FinTech industry as an innovation platform for

sustainable economic growth in Korea. Sustainability, 11(19), 5351.

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Skees, J. R., & Enkh-Amgalan, A. (2002). Examining the feasibility of livestock insurance in

Mongolia (Vol. 2886). World Bank Publications.

Suryono, R. R., Budi, I., & Purwandari, B. (2020). Challenges and trends of financial technology

(Fintech): a systematic literature review. Information, 11(12), 590.

VanderLinden, S. L., Millie, S. M., Anderson, N., & Chishti, S. (2018). The insurtech book: The

insurance technology handbook for investors, entrepreneurs and fintech visionaries. John

Wiley & Sons.