(Image credit: Mohamed Hassan.)
The InsurTech investment wave has propagated for another year as more investment firms focus on the space and more insurance companies find ways to participate. Announcements of new startups have not slowed, and the industry is seeing more second-round investments and larger funding amounts.
The Silicon Valley model is still largely an outsider’s, but more industry veterans are founding InsurTech startups. Most startups have short-term goals and are quickly trying to validate business models with limited funding, which often means a focus on front ends and customer experience. Yet startups are increasingly iterating on back-end processes as well. Beyond maturity and growth of the marketplace, some notable trends differentiate InsurTech Startups in 2019:
AI Is Everywhere
The spread of (and hype surrounding) AI technologies has led many startups to incorporate AI and machine learning into their messaging. Conversational platforms and chatbots incorporating AI and natural language processing are on the rise, including companies like Hi Marley, RozieAI, and LeO. Machine vision is being used to assess damage: ClaimGenius applies the technology to determine vehicle damage, and Betterview uses it to assess rooftops and properties.
AI is bringing pattern matching to aggregate data from public and semi-public sources, with startups like DataCubes, Terrene Labs, and Planck helping insurers use new forms of data in their underwriting processes. AI’s analytics capabilities are allowing companies like Atidot to tackle book of business analysis and Aureus Analytics to provide customer sentiment analysis. Unstructured data is an additional area of growth, with startups like Friendly, SD Refinery, and Chisel AI helping insurers make sense of documents, forms, and free-form sentence data.
Innovation Has Come for Life and Annuities Products
Providing life insurance without a medical exam has long been a desire of the life insurance industry. Startups like Bestow are using AI and big data to try to make this a reality for term life insurance. Term life is also being offered as part of a larger experience by companies like Fabric, which offers will planning and digital document storage in addition to coverage directly online. More innovation distribution strategies are making inroads as well; Avibra, for example, allows policyholders to accrue coverage through gamification of healthy behaviors. Innovation is still nascent in annuities, but companies like Blueprint are rethinking distribution and simplifying products for online distribution.
Startups Cover All Parts of the Industry
More industry veterans are founding startups, meaning companies are beginning to tackle back-end processes and branch into other lines of business across distribution, analytics, and approaches to new products. Some companies are rethinking and repackaging more complex coverages: Jones is one example, offering pay-as-you-go liability coverage. Others, like Planck and DataCubes, are tackling data and analytics for small commercial underwriting. Companies like JAUNTIN’ and REIN are helping insurers develop niche products.
Concurrently, some established industry vendors are establishing themselves as hubs for InsurTech by helping insurers integrate with InsurTech solutions. These platforms may be especially valuable for integrating with niche startups that tackle a piece of the value chain, but don’t offer a totally end-to-end solution.
Startup Competitors Are Becoming Partners
Many startups entered the market as competitors, especially in personal lines and property/casualty. Yet many of these companies are realizing the value of partnership with insurers. Some MGA and carrier startups, like Trov and Slice, have pivoted and are offering their platforms as tools for incumbent insurers to develop niche products. Metromile is another example (though arguably no longer a startup) and is offering its claims technology to other insurers. These solutions can offer a way to bring technology expertise in-house, but they are also designed for short-term growth, meaning that scale and longevity have yet to be proven.
What can carriers learn from the evolving InsurTech landscape? For starters, startups are unlikely to take business away from established carriers. Should some startups become incumbents, the market will adjust. Even so, it’s important to remember that startups are not legacy players, and speed is the name of the game if insurers choose to move forward with an InsurTech company. And finally, the proliferation of InsurTech also means that carriers have more options than ever when it comes to investment, but adopting new technology for the sake of new technology isn’t true innovation.
Novarica’s recent report, InsurTech for Insurers: 200 Startup Profiles, provides an overview of prominent startups as well as information around trends in the space.