(Image source: ITC homepage.)
The annual 2022 InsurTech Connect (ITC) conference took place Sept. 20-22 in Las Vegas at the Mandalay Bay hotel against the backdrop of multiple exciting changes in our market. The event was packed with attendees ranging from startups and founders, to bankers, venture capitalists, vendors, technologists, and many others. The atmosphere was upbeat, with a lot of curiosity about where the insurance technology industry is heading.
Moving into what we could call InsurTech 2.0, the market has reached a reflection point. We understand where we’ve been. We’ve seen a decade of aggregators, direct-to-consumer approaches, and a multitude of trends, learning, and changes in our 1.0 phase. The focus now is on what’s next and what will help us build on what we’ve learned—that was the spirit at ITC all week.
One strong theme repeated among attendees was the strong viability and potential of highly profitable niches, combined with in-depth experience in implementing insurance fundamentals. These niches have been exploited by MGAs and PAs in particular, which by nature are very focused and specialized in a particular line of business. In the past, InsurTech innovators placed a priority on rapidly building market share, using technology to acquire customers and gain a volume edge. The risks from this approach have become clear as many are now struggling to find a path to profitability. The industry is shifting back to an emphasis on underwriting fundamentals and prioritizing measured growth—after all, insurance is a long-tail business where it can take a long time to see results.
The industry has learned that it can’t simply rely on a venture capitalist or technologist point of view. For InsurTechs, success demands a laser focus on insurance fundamentals and profitability from day one to achieve “controlled growth.” Technology and innovation can certainly help and improve our processes and reach, but they don’t change the basics of how the insurance business works.
Our industry is taking a more specialized route focused on who can perform well from an insurance risk standpoint. This is what insurance carriers, investors and customers expect now. They want people they can trust, and who can deliver.
Niches and specialization were also a main point stressed ITC Chairman and Co-Founder Caribou Honig’s keynote speech at the end of the conference this year. He advised attendees “not to try to boil the ocean,” but rather pointed to examples where InsurTech innovators are drilling down into niches and crushing it with superior products and world class service. It’s certainly something I’ve seen with my own startup. Niches are likely a trend that will rise in the market in the coming years. It offers founders a way to specialize and differentiate while meeting a more targeted need.
Looking ahead, the conference demonstrated that there is a lot of opportunity to innovate on the insurance product itself, to find sleepy niches and challenge legacy offerings with fresh solutions that leverage technology. We’ll also likely see new types of coverage, new ways to underwrite, and other reimaginings, with a balance of insurance and technology expertise. In the future, InsurTech startups and top players will need to intimately understand the industries they target, including the products, business models, cycles and other basics. Only by combining rich experience in insurance fundamentals with innovative technologies will they succeed in finding a path to profitability.
The InsurTech category is becoming ever more specialized and segmented. Judging from the large and vibrant crowd at ITC this year, InsurTech is moving beyond its initial phase of trying to “boil the ocean” and is poised to continue to evolve, thrive and succeed.