In the past 10 to 15 years, insurance technology, or insurtech, has been taking the world by storm. In fact, in 2016, VC investment in insurtech exceeded $1 billion
The rise of insurtech is largely due to the ever-increasing use of mobile devices and the need for quick, simple and safe insurance solutions that mobile users can use regularly.
However, even though the insurtech industry has been progressing very swiftly, not every major insurtech startup is a roaring success. Here is a look at some of the lessons from insurtech's successes and failures.
- Everquote – Everquote is an insurtech company that helps people compare quotes for auto insurance premiums. The company was founded in 2010, and generated over $100 million in revenue in 2015.
- Coverfox – Coverfox is a Mumbai-based insurance brokerage that enables people to easily buy insurance online. This company was founded in 2013. In 2015, it received $12 million in Series B funding. Its website currently averages 280k hits per month.
- The Zebra – The Zebra is also an auto insurance comparison platform, like Everquote. This company was founded in 2012 in Texas. The Zebra has received over $23 million in investing, including an investment from Mark Cuban.
These three companies all fill significant needs in the insurance market. Everquote and The Zebra both allow customers to shop for the lowest auto insurance rates, and CoverFox allows people to find insurance coverage incredibly quickly for a broad range of risks.
See also: 5 Insurtech Trends for the Rest of 2017
Also, all of these companies were founded in the last seven years, during the period when the insurtech market really started to heat up. So, the success of these companies is the result of a combination of good timing, the usefulness of service, and also, being appealing to vast numbers of people.
The Less Fortunate
Most insurtech companies do not enjoy the level of success obtained by Everquote, CoverFox, and The Zebra. In fact, like most startups, the majority in the insurtech field fail. Buy why? And what lessons can we learn?
Here are some of the top reasons for failure cited by insurtech founders whose companies failed.
See also: 10 Trends at Heart of Insurtech Revolution
- Timing – 5 insurtech founders said that one of the biggest reasons why their businesses failed was because of bad timing. This means either being too early or too late to market, and not meeting a consumer need that is current and strong.
- Not Getting Funding Early Enough – Delaying funding was another reason cited as a key reason why insurtech companies failed. This makes logical sense, as funding brings company resources and stability to a whole new level. It also earns insurtech startups some degree of prestige that's hard to obtain without it.
- Lack of Specialists on Staff – Often, startups do not realize the importance of having experts on staff who can take care of the complicated technical aspects of the business. Startups may be founded on a great idea, but that doesn’t mean that the people founding them have all of the required skills to make the company successful. Because of this, it’s no surprise that lack of specialists on staff was cited as another key reason why Insurtech companies fail.
The insurtech industry is projected to grow steadily in the next few years. In fact, a single hedge VC firm, Aviva Ventures
, plans to invest $100 million by itself in insurtech by 2020. That is just one firm!
However, despite the strong predicted growth of the market, this does not mean that every insurtech startup will succeed. In fact, many will likely fail.
The companies who can emulate this industry's successes and avoid the causes of failure mentioned above may have a better chance of achieving success.