Tag Archives: ask kodiak

To Be or Not to Be Insurtech

It is probably a bit presumptuous to liken the insurtech startup movement to Hamlet’s famous “To be or not to be” soliloquy. It is, after all, a well-known and historical Shakespearean reference. However, the similarity is in the questions asked, and such a question has probably been asked prior to many defining moments. And just as Hamlet pondered many questions, there are many questions that revolve around the state of the insurtech movement. At this juncture, some five years into this movement, the one question that has most likely gone by the board is – Is it real?  You can debate whether we are at the beginning of the insurtech cycle or at the end. However, there are several strong points in favor of the fact that it is real.

See also: Convergence in Action in Insurtech  

SMA has been following the insurtech startup trends since 2013. Currently, we track approximately 1,200 insurtechs. It is definitely a fluid number. Some startups go out of business, and others come in to fill the void at a regular pace. In the 2013-2015 timeframe, the insurtech startup landscape was a tsunami of activity – it was difficult to get one’s arms around what was happening. In the latter half of 2017, some strong realities emerged. SMA’s recently released research findings have revealed several major insurtech trends or themes that are specific to insurance and have meaningful implications for the industry. In response to the “is this real” question, three of the 10 themes anchor the insurtech movement firmly in reality.

  • Insurtech has spread to all tiers and lines of business – Originally, most of the activity was in personal lines and health. Now, of the P&C contingent, which SMA data indicates is 39% of all the activity, a little over half is personal lines; 35% is commercial lines; 13% is workers’ comp. Historically, technology providers have targeted particular tiers for their sales efforts. The startup community targets insurance business problems without a specific tier focus. What this means is that insurers of all sizes are able to adopt insurtech-provided technology. SMA partnering data shows that there are insurtechs with customers ranging from top 10 insurers down to single-state insurers. The bottom line: The fact that insurtech is not focused on the top echelon of global players but rather on business problems across the insurance ecosystem lends itself to the “it’s real” theme.
  • Live implementations are increasing – Not surprisingly, in the beginning of the startup movement, most of the activity was around fundraising and proofs of concept. In 2017, and continuing at an accelerating pace in 2018, insurer “go lives” are happening. Some insurtechs have 10, 12 or more insurer logos on their websites. These are not investor listings; they are the names of insurers that are rolling out capabilities in the marketplace. In particular, drone usage, smart home/connected property and connected vehicle initiatives are common and growing. The “it’s real” indicator is that insurers are not going to roll out technology that affects their customers just for the fun of it – customers are not guinea pigs. Insurers are seeing the value in insurtech offerings and are executing.
  • Insurtechs are partnering – While there is nothing wrong with a technology provider staying in their space, a long-standing trend within the insurance industry has been partnering for greater value. This has not escaped the attention of a number of insurtechs. For example, Bold Penguin and Ask Kodiak have partnered, as have Elafris and Hippo and Betterview and Understory. Mature technology providers also see the value of startup partnering; for example, Willis Towers Watson and Roost, Verisk Analytics and Driveway. Majesco partners with a network of insurtechs. The “it’s real” factor is that insurtechs are not simply attempting to see what they can do just for today – but, rather, what they can do for the long haul, to become strategic contributors within the insurers they work with.

While there are still questions about the insurtech movement, one of them should not be – Is it real? Business value is being generated by many startups – and no insurer is going to walk away from that. New channels and service opportunities are emerging that are generating interest and execution. New products are sprouting up at a regular pace. Not every startup and every idea is going to be a winner, but many will be. And some already are. Bottom line? Both Hamlet and Shakespeare would be proud of the insurance industry for seeing the possibilities and not just the questions.

See also: 4 Key Qualities to Leverage Insurtech  

New Era of Commercial Insurance

Despite a generally soft market for traditional P&C products, the fact that so many industries and the businesses within them are being reshaped by technology is creating opportunities (and more challenges). Consider insurers with personal and commercial auto. Pundits are predicting a rapid decline in personal auto premiums and questioning the viability of both personal and commercial auto due to the emergence of autonomous technologies and driverless vehicles, as well as the increasing use of alternative options (ride-sharing, public transportation, etc.).

Finding alternative growth strategies is “top of mind” for CEOs.  Opportunities can be captured from the change within commercial and specialty insurance. New risks, new markets, new customers and the demand for new products and services may fill the gaps for those who are prepared.

Our new research, A New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance at a Time of Market Disruption, highlights how changing trends in demographics, customer behaviors, technology, data and market boundaries are creating a dramatic shift from traditional commercial and specialty products to the new, post-digital age products redefining the market of the future.

See also: Insurtechs Are Pushing for Transparency

Growth Opportunities

New technologies, demographics, behaviors and more will fuel the growth of new businesses and industries over the next 10 years. Commercial and specialty insurance provides a critical role to these businesses and the economy — protecting them from failure by assuming the risks inherent in their transformation.

Industry statistics for the “traditional” commercial marketplace don’t yet reflect the potential growth from these new markets. The Insurance Information Institute expects overall personal and commercial exposures to increase between 4% and 4.5% in 2017 but cautioned that continued soft rates in commercial lines could cause overall P&C premium growth to lag behind economic growth.

But a diverse group of customers will increasingly create narrow segments that will demand niche, personalized products and services. Many do not fit neatly within pre-defined categories of risk and products for insur­ance, creating opportunities for new products and services.

Small and medium businesses are at the forefront of this change and at the center of business creation, business transformation and growth in the economy.

  • By 2020, more than 60% of small businesses in the U.S. will be owned by millennials and Gen Xers — two groups that prefer to do as much as possible digitally. Furthermore, their views, behaviors and expectations are different than those of previous generations and will be influenced by their personal digital experiences.
  • The sharing/gig/on-demand economy is an example of the significant digitally enabled changes in people’s behaviors and expectations that are redefining the nature of work, business models and risk profiles.
  • The rapid emergence of technologies and the explosion of data are combining to create a magnified impact. Technology and data are making it easier and more profitable to reach, underwrite and service commercial and specialty market segments. In particular, insurers can narrow and specialize various segments into new niches. In addition, the combination of technology and data is disrupting other industries, changing existing business models and creating businesses and risks that need new types of insurance.
  • New products can be deployed on demand, and industry boundaries are blurring. Traditional insurance or new forms of insurance may be embedded in the purchase of products and services.

Insurtech is re-shaping this new digital world and disrupting the traditional insurance value chain for commercial and specialty insurance, leading to specialty protection for a new era of business. Consider insurtech startups like Embroker, Next Insurance, Ask Kodiak, CoverWallet, Splice and others. Not being left behind, traditional insurers are creating innovative business models for commercial and specialty insurance, like Berkshire Hathaway with biBERK for direct to small business owners; Hiscox, which offers small business insurance (SBI) products directly from its website; or American Family, which invested in AssureStart, now part of Homesite, a direct writer of SBI.

The Domino Effect

We all likely played with dominoes in our childhood, setting them up in a row and seeing how we could orchestrate a chain reaction. Now, as adults, we are seeing and playing with dominoes at a much higher level. Every business has been or likely will be affected by a domino effect.

What is different in today’s business era, as opposed to even a decade ago, is that disruption in one industry has a much broader ripple effect that disrupts the risk landscape of multiple other industries and creates additional risks. We are compelled to watch the chains created from inside and outside of insurance. Recognizing that this domino effect occurs is critical to developing appropriate new product plans that align to these shifts.

Just consider the following disrupted industries and then think about the disrupters and their casualties: taxis and ridesharing (Lyft, Uber), movie rentals (Blockbuster) and streaming video (NetFlix), traditional retail (Sears and Macy’s) and online retail, enterprise systems (Siebel, Oracle) and cloud platforms (Salesforce and Workday), and book stores (Borders) and Amazon. Consider the continuing impact of Amazon, with the announcement about acquiring Whole Foods and the significant drop in stock prices for traditional grocers. Many analysts noted that this is a game changer with massive innovative opportunities.

The transportation industry is at the front end of a massive domino-toppling event. A report from RethinkX, The Disruption of Transportation and the Collapse of the Internal-Combustion Vehicle and Oil Industries, says that by 2030 (within 10 years of regulatory approval of autonomous vehicles (AVs)), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model called “transportation-as-a-service” (TaaS). The TaaS disruption will have enormous implications across the automotive industry, but also many other industries, including public transportation, oil, auto repair shops and gas stations. The result is that not just one industry could be disrupted … many could be affected by just one domino … autonomous vehicles. Auto insurance is in this chain of disruption.

See also: Leveraging AI in Commercial Insurance  

And commercial insurance, because it is used by all businesses to provide risk protection, is also in the chain of all those businesses affected – a decline in number of businesses, decline in risk products needed and decline in revenue. The domino effect will decimate traditional business, product and revenue models, while creating growth opportunities for those bold enough to begin preparing for it today with different risk products.

Transformation + Creativity = Opportunity

Opportunity in insurance starts with transformation. New technologies will be enablers on the path to innovative ideas. As the new age of insurance unfolds, insurers must recommit to their business transformation journey and avoid falling into an operational trap or resorting to traditional thinking. In this changing insurance market, new competitors don’t play by the rules of the past. Insurers need to be a part of rewriting the rules for the future, because there is less risk when you write the new rules. One of those rules is diversification. Diversification is about building new products, exploring new markets and taking new risks. The cost of ignoring this can be brutal. Insurers that can see the change and opportunity for commercial and specialty lines will set themselves apart from those that do not.

For a greater in-depth look at the implications of commercial insurance shifts, be sure to downloadA New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance at a Time of Market Disruption.

6 Minutes of History From 2016

We knew that 2016 would be big.

To capture the flavor of the pace and magnitude of change, I wrote a series of blogs where I likened the dramatic shifts in insurance technology to what happened during the original Italian Renaissance, when education, money, art and science combined to create quantum leaps forward and redefined trade and the economy, the social scene and technological advancement.

So here we are at the end of 2016, and I think we can make a case that 2016 was not only pivotal and groundbreaking but that it was historic on the scale of a Renaissance. At no time in the history of insurance can we find one year that includes this many game-changing events AND a rapid pace of continuing advancement.

My thinking is that if the 525,000 minutes of 2016 were actually historic, then perhaps they deserve their own six-minute look back. To keep things short, I’ve split the 2016 trends into one-minute discussions.

Insurtech — From independent ideas to industry-wide imperatives

Do you remember where you were when you first heard the term “insurtech”? Its first connotations were regarding those out-in-the-stratosphere ideas from independent tech and insurance startups as an extension of fintech regarding important-but-not-disruptive ideas in insurance. You may have heard the term “insurtech” in 2015, but it certainly went mainstream in 2016 as its own vertical focus separate from fintech.

Conversations around insurtech grew, but, more importantly, the influx of capital that advanced the proliferation of startups and greenfields based on new tech capabilities and business model disruption were unprecedented — bringing insurtech from its fintech roots into a completely mainstream, independent, industry-wide wave of innovation. Many traditional insurers and reinsurers hopped on the insurtech wave and showed interest in capturing their own slices of the creative pie. From accelerators like the Silicon Valley Insurance Accelerator (SVIA), Global Insurance Accelerator (GIA) and Plug and Play to the first InsureTech Connect meeting in Las Vegas in October with more than 1,500 executives in attendance, insurtech became the “hottest” thing in the industry, giving insurers of all sizes and lines of business pause to consider their strategies. Even S&P recognized the impact of insurtech as having “a complementary place in the traditional insurance world, despite remaining uncertainty in the industry about how it will function on a wide scale.”

See also: The Insurance Renaissance, Part 5  

The insurance industry may never have had this much activity, excitement and concern on the promise and potential of insurance disruption and reinvention.  From the launch of Lemonade, Slice, Haven Life and more insurers and MGAs, the shift to a customer-centric rather than product-centric view is creating a customer experience not unlike the Amazon experience. 2017 will continue to see existing insurers and reinsurers looking to stand up a new brand and business model to capture the next generation of customers and position for growth.

Emerging technology engages insurers

What emerging technologies are we seeing as having made an impact in 2016 with real operational impact? There is artificial intelligence (AI) and machine learning. There are new sensors and their ability to capture the unseen aspects of operation and life. Protective technologies in vehicles, property and health are growing. There is live streaming data and video from smart phones and drones. Data’s organizational and visual capabilities are improving with new tools.

We could drone on.

But the reality is that the mobile, connected and ethereal digital world is using real-time data to gain insight and manage, reduce or eliminate risk in the physical world to a greater degree than ever before. There used to be “an app for that.” Now, there’s a sensor for everything on the Internet of Things. The world is fast becoming an omni-channel portal into daily life. The distance from “emerging technology” to mainstream tech usage is measured in months, not years, shattering Moore’s Law.

Emerging technologies span a diverse realm for insurers — if you consider that new technology can be worn on a wrist, flown pilotless through the sky or operate entirely within the digital networks of processors and servers. It’s no wonder that an insurance renaissance is in full swing. The space age has given way to the digital age, where it seems like anything may be possible — it just takes imagination, creativity and thinking outside the traditional box. Digital technologies have penetrated previously untapped data mines, allowing machine failure to be predicted and prevented; human risk to be captured and calculated; and insurer risk to be managed, mitigated and eliminated, creating a new value proposition, new products and new services for customers.

New and innovative businesses launches

Disruption makes use of plug-and-play ideas and technologies. Traditional insurance organizations were tightly wound balls of string, operating everything within that ball. Connections were immovable. Processes attempted to be neat and tidy, but they were always struggling with the “messiness” of adaptation. Today’s insurtech resembles Legos in insurtech’s ability to fulfill conceptual opportunities. Imagine a pile of sensors, another pile of devices and yet another “pile” of data streams. Then ask yourself, “What can your mind dream up today?” In 2016, businesses were busy dreaming up enough disruptions to disturb the sleeping giants of insurance.

Slice made a mobile app that integrates with a hybrid homeowner/commercial product. Lemonade used an AI bot to act as agent on a peer-to-peer insurance platform. Haven Life (launched in 2015 but entered 33 new states in 2016) reconsidered how data streams could improve the life underwriting experience for term life.  And then there were new distribution options with companies like Ask Kodiak, Insurify and PolicyGenius — to name a few — deconstructing and redefining the insurance value chain/business model.

Just like building with Legos, there seem to be no end to the combinations of startup and greenfield businesses that can launch using new business models, technologies and great ideas across all aspects of the insurance value chain to meet new customer needs, expectations and demands. This is one area where 2017 will certainly trump 2016 — we may only be seeing the beginning of the innovation wave — but expanding from venture-capital-backed to existing insurers standing up their own greenfield and startup businesses.

Reinsurers invest in insurtech and startups

With the reinsurance market having excess capital, reinsurers took big moves to be major players in insurtech — from investing in technology companies to new startup insurance and MGA businesses. In addition, many are looking at all the disruption around and within insurance and developing, incubating and testing new insurance products to take to market, either directly or through customers or partners.

Consider reinsurers’ investment in Trov, Lemonade, Root and Slice; Munich Re’s investment and focus on mobility and autonomous vehicles; or XL Group and the establishment of XL Innovate, a specialized venture capital fund pursuing investments in financial technology, new opportunities for insurance underwriting and related analytics, globally. Swiss Re, Hannover Re, Odyssey Re, Maiden Re and others are rapidly making moves as well.  Consistently, these investments are in new operational models, new products or meeting new risks — creating a path to underserved or new markets.

See also: Insurtech: One More Sign of Renaissance  

As noted in a recent article, all this insurtech activity is raising the expectation on the importance of reinsurance capital to support new business models and back technology startups. In the process, insurtech startups are looking to disrupt the risk to capital value-chain in insurance by deconstructing and collapsing the value chain and by cutting out primary carriers or brokers, as well as costs, and placing the risk directly with reinsurers, leveraging unused capital. We expect to see increased activity from reinsurers that will likely begin to look at partnering with existing insurers/customers to collaborate on new products and with emerging technologies or by standing up a new brand or greenfield, continuing the deconstruction of the traditional insurance value chain.

Cloud goes mainstream

In 2016, the case for core system platform in the cloud reached the tipping point — from a nice-to-have to a must-have. Its logic has grown as capabilities have improved and cost pressures have increased. Though cost is a consideration and modern functionality is important, rapid industry change is fueling a renaissance in insurance models. The startup insurer or the greenfield insurance concept needs a system solution built for rapid deployment. New products often need new processes, making cloud capabilities a catalyst for creative product development. Nothing can make an insurer feel more cutting edge than moving from idea to rollout in the short timeframes that cloud solutions provide.

Many insurers are taking advantage of the same pay-as-you-use principles as consumers themselves. They are sharing system solutions with cloud-based technology. They are paying as they grow, with agreements that allow them to pay per policy or pay based on premiums. They are using data-on-demand relationships for everything from medical evidence to geographic data and credit scoring. They use technology partners and consultants in an effort to not waste time, capital, resources and budgets.

Insurers are rapidly moving to a pay-as-they-use world, building pay-as-they-need insurance enterprises. This is especially true for greenfields and startups, where a large part of the economic equation is an elegant, pay-as-you-grow technology framework. They can turn that framework into a safe testing ground for innovative concepts without the fear of tremendous loss, while having the ability grow if the concepts are wildly successful. The window of opportunity is open to insurers that wish to prepare their business models, products, processes and systems to embrace the pay-as-you-go culture

This makes cloud a nearly-universal solution, fitting the needs of both startups and traditional insurers with plans for growth and expansion. In 2016, cloud became a mainstream option — an imperative for insurers needing a competitive edge.

Perspectives on the Pace of Change

The world recently lost John Glenn, a famous American astronaut and long-time U.S. senator. Glenn was born in 1921, only 18 years after the Wright Brothers tested flights at Kitty Hawk. He lived to pilot jets, was the first person to orbit the earth in a spacecraft, then later flew on two Space Shuttle missions at the age of 77. His life is a great example of the growing pace of change — in a world that moved from mechanization to digitization.

See also: A Renaissance, or Just Upheaval?  

Yet as much as changed in Glenn’s lifetime, today’s advancements are eclipsing all of them in pace and disruption. The systems that create knowledge through data and analysis are truly powerful forces that will ignite perpetual improvement and a new world of connected living. Insurance, once concerned with risk management on a large scale, will be focused on learning and understanding risk down to an individual policy-level, with a craving for more knowledge as it becomes available. If 2016 proved to be an insurance renaissance fueled by insurtech, it is very likely that 2017 will provide us with an even greater shift in the midst of an industry rebirth.

How much will change?

We have all of 2017 to find out!

Observations From InsurTech Week

InsurTech Week 2016 hosted by the Global Insurance Accelerator in Des Moines was a great experience. It is quite interesting to see the energy, excitement, new ideas and investment in the insurance industry. Brian Hemesath and his team at the GIA have done a great job of harnessing this activity and being a positive force for change in the industry.

There are two themes I would like to highlight. The first is that the ingenuity and sheer variety of the startups is astounding – and will ultimately be a great thing for the industry. The second theme, and perhaps the more subtle one, is that there is a collegial atmosphere and a common sense of purpose about the role of insurance in society and business.

See also: Insurtech Has Found Right Question to Ask  

Variety and Ingenuity

The 11 insurtech startups participating in this InsurTech Week are a microcosm of the larger movement. A few examples are illustrative.

  • Abaris – an innovative, direct-to-consumer solution for retirement planning, starting with income annuities.
  • Insure A Thing – an idea for a revolutionary new business model for insurance that includes making payments in arrears (post-claim).
  • Denim – a social media ad platform for insurance with a vision to ultimately reimagine marketing and distribution.
  • ViewSpection – a mobile app for DIY property inspections to help to inexpensively provide more information to agents and underwriters.

The other participants also had innovative solutions for various lines of business and addressed key business issues in insurance today. They are: Ask Kodiak, Gain Compliance, Montoux, InsureCrypt, Elagy, CoverScience and Superior Informatics.

Some are in the early stages. Some originated outside North America and may or may not enter the market here. Some may not even be approved by regulators in their current form. But that is true of the broader set of the hundreds of insurtech companies that are active today.

The main point is that there is a great deal of innovation here, and many of these companies will play a role in the evolution of insurance, one way or another.

Collegial Atmosphere

The founders and investors in insurtech companies certainly desire to make money. Insurers that are engaging with these firms hope to gain competitive advantage. But in keeping with the culture of the insurance industry, there is also a great atmosphere of collaboration and even a sense that there is a higher purpose.

I don’t want to sound too dramatic, but there is a sense of altruism here – a sense that there are great opportunities to make the world a better place. Many of the insurtech companies see opportunities to improve safety in homes, in businesses, in factories and on the roads. The potential to significantly reduce accidents and deaths is tangible. Providing new services and capabilities to enhance lifestyles, improving individual well-being and just making it easier for customers to do business with the industry are also common purposes.

There is a spirit of cooperation among insurers, insurtech and other industry players, even in cases where companies are competitors. Not to criticize other industries, but insurance is about a lot more than selling a widget and making a buck.

See also: Calling all insurtech companies – Innovator’s Edge delivers marketing muscle and social connections

A Bright Industry Future

Overall, I believe this is cause for optimism for the insurance industry. It is not easy to transform from today’s business models, processes and systems into a future that embraces all the new ideas coming from insurtech. But many in the industry are now actively involved in building strategies, experimenting with new ideas and technologies, launching ventures and generally being willing to think differently.

While many industries are being disrupted, insurance is more likely to morph into a better version of itself, with incumbent players learning from and partnering with new players.