As at the previous two years of InsureTech Connect, purported industry game changer Lemonade once again made a big splash at the 2018 conference in Las Vegas this month, by announcing the dawn of ‘Act 2’. As explained by CEO Daniel Schreider in his keynote speech, up to this point we have seen ‘Act 1’, in the company’s offering of improved customer experiences with a “delightful” app and headline-grabbing 3 second claim payout. But he says this is just of 10% of the Lemonade iceberg, floating above the surface. Beneath lurks deep transformation with highly predictive data sets that are simply unavailable to companies which haven’t built upon digital substrates.
However, despite the ongoing buzz around Lemonade, the overarching sentiment at InsureTech Connect 2018 seemed to go against the grain of table-flipping disruption, and reflect a shift in perspective toward collaboration between insurtechs and incumbents. We observed that many of the returning companies continuing to gain traction were those who had successfully partnered with existing insurance companies to improve aspects of their business processes.
While Montoux’s focus in attending InsureTech Connect this year was primarily networking opportunities with the vast array of carriers, insurtechs and VCs at the conference, we did manage to squeeze in attending a few sessions. One panel discussion we took interest in was facilitated by Deloitte’s Thalia Smith, and titled So You Want to be an Insurtech? The panel brought together a regulator, venture capitalist, actuary and an insurance platform CEO, so today we’re taking a look at some of the perspectives they shared.
Milliman Principal and Consulting Actuary Sheri Scott spoke about how in her experience, most insurtech founders don’t have backgrounds in the insurance industry, and often don’t initially appreciate the strict regulatory environment in the United States. Supporting themes from our recent blog post on hiring actuaries, Sheri advised insurtechs to bring on a team member who has a thorough understanding of these regulations, and ideally already has existing relationships with the regulators themselves.
Connecticut Insurance Commissioner Katie Wade said regulators are actively reaching out to insurtechs and trying to encourage them to enter conversations early to ensure compliance factors into their early business decision making. Katie said as regulators the challenge is understanding insurtech models in order to be able to approve them - however often it’s this crucial information that’s their “secret sauce”. Ultimately their concern is that the consumer understands what they are buying, and how it works.
The venture capitalist
Fika Ventures partner TX Zhuo has observed that in 2018 a lot of VC funding is going towards later stage insurtech companies in their B and C rounds. He said the new wave of insurtechs are looking beyond distribution to tech solutions for risk underwriting and leveraging data to improve back end operations, which means they take a lot longer to show revenue, and VCs are needing to invest early before valuations “shoot up”.
The insurance platform
Boost Insurance founder and CEO Alex Maffeo said carriers need to be open minded, and that even once insurtechs find one who is receptive to partnering it can be a real challenge to obtain things like the data needed for actuarial analysis. Alex spoke about the disconnect between insurtechs and large insurance companies, and the challenge this can present when the two attempt to partner. By nature, large insurance companies are cautious and deliberate in their decision making, which means progress and change happens very quickly. On the other hand, insurtech startups must move quickly to ensure they don’t run out of money, which can be perceived by insurers as “annoying, unreasonable or reckless”. Alex said Boost Insurance provides a much needed buffer between these two parties, by providing carriers with an aggregated view of insurtech trends.