I’ll always remember the first question I got on my first book tour. This was in 1993, after I’d published “Big Blues: The Unmaking of IBM,” drawing on my seven years of covering the company for the Wall Street Journal and chronicling how the most admired and most profitable company in the world had lost its way. I started the tour with a radio host for morning drive time who asked, in that highly caffeinated way, “Okay, Paul, what the HELL happened?”
That’s the question that has been rattling around about insurtech this year, as the big publicly traded companies have seen valuations crash and as funding has become iffy. So, to try to get a handle on what’s going on, I chatted recently with Chris Cheatham, now at Bold Penguin, whom I’ve known for years and who has lived most of the insurtech experience over the past decade.
His take is basically that the first wave of insurtech is done. It lasted from about 2011 to 2021, and “it was pretty good. We got some stuff accomplished.” He thinks a second wave will last from roughly 2022 to 2032 and is way more optimistic about where insurtech goes now. “I think you’re going to see a hockey stick-like improvement in terms of efficiency driven into the insurance industry,” he said. “I think the AI stuff is really going to take hold.”
He says underwriting will get way faster. (Don’t get him started on a submission he reviewed recently for a cyber policy that was so long he couldn’t view the email string in Gmail and had to download it via a data service.) He thinks MGAs will drive all sorts of innovation, that the messiness in today’s approach to lead generation will get cleaned up… and much more. But don’t use the word “disruption” around him. He’s allergic to the word “disruption.”
Excerpts from our intriguing interview follow.
First, some background on Chris. He founded a startup called RiskGenius, which helped carriers and brokers analyze and compare policies and coverage language. That small-startup experience became a big-insurtech experience when Bold Penguin bought his company two years ago and he became a senior executive there. (His current title is "product evangelist.") He then went through an insurtech-incumbent merger, when American Family bought Bold Penguin last year. So, he pretty much covers the waterfront.
Now, his observations:
On Disruption in the First Round of Insurtech
“There was no disruption. The biggest disruption was just allowing other parties to enter the process, the APIs [application programming interfaces] that let banks and other non-insurance partners pass leads into companies.”
On Speeding Up Underwriting
“Let's imagine all the friction being removed for an underwriter. They receive a submission, which goes through an extraction tool. The data then is hit against a third-party database to confirm it, flag issues in real time and present it all to the underwriter immediately.
“I think underwriting will speed up a lot. You won’t have these giant email threads, where people are just trying to figure out what's in the submission documents. I will never forget the time somebody forwarded me a cyber submission packet that was basically just an email thread that was so long. I couldn't even access it in Gmail. It was the most confusing thing I've ever seen, just because people had been going back and forth via email for so long.”
On Real-Time Quoting
“It can’t be that far away – 10 years maybe – that you’ll type in the [commercial] risk you’re trying to insure, and you’ll get quotes in real time.”
Currently, he says, the Bold Penguin platform will prompt you with options as you type in that you’re trying to find insurance for, say, a roofer. “Let's say I get three options. If I click on one, immediately I see the carriers that will give me a quote. I can then dig in, maybe specifying a roofer for manufacturing buildings or with solar panels on the roof. The eligibility of carriers updates in real time. What we'll get to is seeing the price in real time. Today, you still would have to have an underwriter review everything after a quote is offered, but eventually we’re going to get to quoting and binding in real time.”
On the Future of Brokers
“There will definitely be people that try to remove that broker. But we're really far off from a florist, say, understanding which insurance to buy for the business. Until you solve that problem, you're going to need agents. And to solve that problem you’re going to have to unwind hundreds of years of case law and hundreds of years of insurance clauses, then figure out how to explain those in real time to people so they know what they need. It’s really tricky.”
On the Future of MGAs
“There's just more capital looking for alternative insurance distribution models, so somebody who sets up an MGA can find somebody to back them more easily than in the past. APIs make it simpler, too. It’s just so much easier to connect a technology platform, like surety bond distribution platform, to some carrier that has their digital appetite figured out. You can go as niche as you want because it’s easier to spin up these MGAs. I just saw someone offer a Metaverse insurance product, right?”
On Lead Generation
“In both personal and commercial lines, lead generation is this really weird, murky place. Everyone complains about bad leads. Everyone seems to be recycling a lot of leads. And Apple just complicated the issue by increasing security and privacy on phones. I don’t know what the solution is, but I think there will be a fundamental shift on lead generation.”
On Advice for the New Round of Insurtechs
“I would completely stay away from the word ‘disruption’ when you're talking to insurance people. Building a new customer experience is not disrupting insurance, and I cringe when I hear people making claims of disruption. Don't tell people that, because they don't want to hear it. If you’re really going to disrupt some part of the industry, just go do it.”