- Early-stage ventures are moving beyond the online/UI experience and are focused on the core industry economics -- i.e. driving down the 56 cents of every premium dollar that is indemnity (loss costs), the further 12 cents needed to assess, value and pay those losses, and the circa 26 to 30 cents required to develop, distribute, select and price product.
- There is an increased presence of early-stage-focused VCs that have insurance chops, meaning that high-quality startups focused on more complex industry issues have smart capital for funding (there wasn't much of that last year at this time).
- An extraordinary boom in insurtech investment capital means that too many businesses with little chance for success are getting funding. (How many new millennial-focused renters insurance ventures does the market actually need?)
- Despite the overwhelming level of capital focused on the space, valuations are generally rational. Yet, there are far too many high-profile investments that seem to make little sense, both in terms of funding levels and valuations. (I can personally attest to being recruited for two roles running pre-revenue startups that received term sheets from investors with pre-money valuations between $30 million and $40 million...exciting for the founder, but irrational in the cold light of day.)
- Insurance (viewed by some/many as old school and boring) is showing signs that it can lead in the commercializations of new technologies (IoT, blockchain, telematics, etc.). This can only be positive for attracting "A" talent to our industry.
- Lemonade has demonstrated that all of us in the industry can learn something from them. The most recent example is the zero-deductible product (and a no-rate-change protection for as many as two claims), which received unprecedented attention. While this is not new and is already offered by some, the lesson in this case is that being a marketing machine may be worth something (or Dan Ariely, the behavioral economist working with Lemonade, should be hired by us all).
- The intractable trend in new risk-taking capital (pensions fund, hedge funds, SWFs, etc.) is leading to "infrastructure light" risk takers -- we now have some smart insurance entrepreneurs jumping in with solutions that enable this structural change.
- Well-established insurance vertical solution tech companies are now providing attractive exits for insurtech early-stage companies.
- Emergence of insurance-specific hot technologies in areas such as chatbots, machine learning and advanced analytics, etc. seems to be leading (in terms of trial by the insurance industry incumbents) the more established, industry-agnostic solutions -- watch this space!
- The industry is all in on insurtech! Witness the presence of public company CEOs' commentary on the topic, the abundance of CVCs, the number of corporate intra-ventures, etc. Also compare and contrast year-over-year presence at this conference.
Top 10 Changes Driven
Since the inaugural InsureTech Connect last fall, the amount of smart capital focused on more complex industry issues has soared.