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How Sharing Economy Can Fuel Growth

In our last blog of our two-part series on the gig and the sharing economy, we looked closely at how the gig or “on-demand” economy will open up new markets to group and commercial insurers. You can read that blog here.

In today’s blog, we look at the sharing half of the gig and sharing economy. How will a radically shifting market, where borrowing and lending are more prevalent, open doors for commercial and specialty insurers? More importantly, how can insurers fuel the growth of this market by making borrowing and lending more palatable?

Is the Sharing Economy real?

The sharing economy is not only real — it has enormous potential for insurers. RVs make a great example. Recreational vehicle owners use their RVs an average of 28 days per year. With 8.9 million U.S. households owning an RV, that’s nearly 2.9 billion unused RV days per year. RVs are remarkably underutilized, making them a prime market for sharing. RV sharing sites, such as Outdoorsy, help owners to profit from their RV, while helping non-owners to gain access to RV use.

Multiply this idea many times over. ATVs are underused. Boats, chainsaws and generators are underused. Cars, homes, cabins, campsites, hunting property, musical instruments, bicycles, hockey rinks and electronics are all commonly underused. The only thing standing in the way of sharing them all is… insurance to cover a new type of risk.

See also: Opportunities in the Sharing Economy  

While some personal lines insurers are making a case for insuring some of these risks by adapting their personal lines products, it is commercial insurers that may have a leg up when it comes to understanding how to price risk for niche risks or groups and how to offer innovative products to these “small – medium” business owners.

Majesco’s forthcoming consumer research report finds that the consumption of ridesharing and home- and room-sharing services has a strong and growing appeal. The year-on-year growth of these activities was between 5% and 15% depending on the activity, highlighting a growing interest and use across all generations due to the digitally enabled capabilities driving ease of use. (For a further look at sharing economy trends, read Changing Insurance for the Digital Age, a collaboration between Majesco and Global Futures & Foresight.)

Experience is a factor

The sharing economy is related to the experience economy. As millennials enter the middle class, they are owning less “stuff” and putting more emphasis on having greater experiences. The sharing economy is fostering their desire to do more by owning less. With less of their income tied up in ownership and maintenance, they have more to spend on borrowing and renting. They are concerned about risk, but they don’t want a confusing transaction to sit in the way between them and the experience. So, insurers must find ways to build simple insurance experiences into the front end of the overall experience, or hide purchase experiences within the usage itself.

Insurance is the answer to some of the sharing economy’s most pressing issues.

Before “sharing economy” was even a term, sharing was at the heart of insurance. So, it would make sense that insurance would fit well into the sharing economy. Insurance, however, has had a product focus, reflected in the organizational silos based on risks and products, by separating personal versus commercial, rather than a customer focus that shifts between different risks (i.e. personal vs. commercial) based on the behaviors or use.

This is why sharing economy insurance incumbents may find themselves disrupted by Slice, Cover Genius and Metromile and similar entities that are popping up everywhere. Optimistically, however, the sharing economy is igniting an insurance renaissance with traditional insurers like Geico, Admiral, AXA and others asking themselves how they can serve people in the on-demand sharing economy … both personally and as a “business.”

In the sharing economy, it’s all about protection for the shorter timeframes and meeting the uncommon, on-demand need … allowing the customer to fluidly switch back and forth from personal to “commercial” needs. And, it’s all about giving owners and businesses incentives to lend property or assets. Insurance can answer these issues.

Insurance will fuel the sharing economy if insurers can build compelling value propositions

Rental companies are familiar with the risk of lending. They understand what is at stake, and they price insurance into their products or create contracts to handle damage. A new round of entrepreneurs is arising, however, who are using technology to match peer-to-peer lending. Websites such as MyTurn are enabling anyone to launch asset-sharing organizations. These types of companies are unfamiliar with how insurance can offer them protection and how coverage should be handled for a broader segment of products and users. This is an area where insurers can fill a growing gap.

The insurance value proposition in the sharing economy is to make both the lender and the borrower comfortable that the transaction can occur without the threat of loss. All that remains for insurers, then, is to determine where sharing is creating insurance gaps and how they can build, sell and service sharing products.

Data is critical

Consider how data is currently used in underwriting most products. For the most part, insurers pull from traditional data sources for underwriting purposes, and, though they may have reduced underwriting time, it is rarely real-time data. The sharing economy is different. It will require hyper-short underwriting loops based on real-time data because many aspects of sharing happen quickly and in a non-uniform pattern. The whole concept of on-demand insurance assumes the flip of a switch between being uninsured and insured.

On-demand insurance products should have the capability to score based on evidence analyzed from many reliable sources. Sharing economy insurers may want at least some scoring related to social profiles and common pastimes and behaviors. These aren’t easy data points to collect, but the further down the road on-demand insurance progresses, the greater the demand will be for every type of character-based data.

Cloud platforms are necessary

In essence, sharing economy insurance requires on-demand micro duration insurance coverage and blurs the boundaries between personal and commercial insurance.  But insurers face challenges including: creating a micro-duration insurance business model; real-time pricing determination based on micro-segmentation and varied factors; mobile-first user experience; low transaction value but high transaction volume; and low-touch, end-to-end operations.

See also: 4 Mandates for Agents in Sharing Economy  

To support these new coverages requires a next-generation core platform that is a complete architecture redesign with an alchemy of data, analytics, digital and processing components; customer-journey-focused solutions; significant reliance on AI for pricing and underwriting; and a light footprint and auto-scale capabilities for high volume support on cloud.  Furthermore, there has to be a strong “find and bind” integration architecture to tap into an ecosystem of innovative services. As we highlighted in our Cloud Business Platform: The Path to Digital Insurance 2.0 thought leadership report, many of the new insurers providing these innovative products have such core platforms in the cloud to allow them agility, speed and innovation in a continuously changing market.

Agility is (no surprise) highly necessary

For insurers to grab the opportunities as they arise, they will need to understand what new technologies can do to facilitate sharing relationships. They will need to use a next-generation core platform that is scalable and allows for real-time data and agile product development. Cloud platforms will lend themselves to many of the necessary features, but expert data integration and “find and bind” ecosystems will also be vital.

For a better look at growth opportunities within the sharing economy, don’t miss Majesco’s report, A New Age of Insurance: Growth Opportunity for Commercial and Specialty Insurance in a Time of Market Disruption.

Easy Pickings in Southeast Asia

With GDP rates in SE Asia exceeding 6.3% per annum, with premium growth for life, accident and other policies higher than 13% last year in the region and with insurance penetration rates of 5% or less, we seem to be looking at a slow, fat rabbit.

But we don’t seem to be able to shoot it. Why?

See also: Innovation — or Just Innovative Thinking?  

While numerous global and regional insurance carriers have created venture capital funds, insurtech incubators and grand initiatives, the carriers’ fundamental view of the world has not changed. Consider the following: In 2016, there were approximately 75 deals in private tech investment by reinsurers and insurers, up from three deals in 2013. On the face of it, this is encouraging. However, of the total tech deals completed in 2016, more than 72% involved U.S.-based startups and only 12% involved ones in Asia. In other words, the fastest-growing markets of the world received only a fraction of the total tech investments from the insurance industry, which is not exactly transformational.

You can’t shoot even a slow, fat rabbit if you don’t aim at it.

If we assume an average of a $2 million for each of those private deals, this equates to $150 million in total capital commitments. Let’s be generous. If the average deal size was $10 million, the total industry commitment would have been $750 million, or less than .02% of the industry’s $4.5 trillion in annual premium.

Can you imagine a private equity firm like Blackrock investing only two-hundredths of a percentage point of its assets in products and ventures for the future? Neither can I.

In all fairness, it is not easy to disrupt the status quo in insurance.  After all, for well over a century, insurance was a game the house almost always won. Other than catastrophic events (hurricanes, tsunamis, floods, etc. — many of which are co-insured by local and federal governments), insurance has been a safe bet if, of course, you are the house.

In the face of change, many insurers have recently undertaken initiatives to break the mold. MetLife recently created LumenLab in Singapore, where a 7,800-square-foot facility is an incubator for innovative startups from outside the insurance industry. But with MetLife’s earning declining more than 19% from 2015 to 2016, is it enough? Aviva, a British multinational with more than 33 million customers across 16 countries, recently launched an initiative to encourage entrepreneurs to develop disruptive solutions. The mission statement reads: “Our mission is to connect with extraordinary talent, uncover breakthrough innovations and give those breakthrough innovations the opportunity to thrive.”  That’s very passionate, but what is the end game?

See also: Insurers Are Catching the Innovation Wave  

True innovation, transformation and disruption are cultural issues, and must be cultivated and encouraged from the top. Most insurance CEOs do not engage in high-altitude mountain climbing, scuba diving or any other extreme sport, nor do they hang out at the Google campus. Most importantly, they do not spend a lot of time in Bangkok or Shanghai. But they should, because that is where the new markets are forming.

There are, of course, exceptions to the rule. The first is Axa, which has created Axa Ventures, a true, well-funded venture capital subsidiary with a mission to invest in disruptive ventures that can actually get to market. The fund is led by Minh Tran, who has a successful history in venture capital and disruption. The second and less obvious group is Munich Re, based in Germany, which has launched numerous digital and venture initiatives. Germany has become a center for insurtech, and, while Munich Re’s efforts are, in my opinion, still not completely coordinated, it is clearly making a company-wide effort.

If insurance carriers want to lead the pack, they must embrace models similar to the one Axa has created, and they must make a corporate commitment to transformational change — especially in emerging markets. Disruption does not happen overnight, but it does happen. And, in a legacy industry ripe for change, it will happen sooner rather than later.

The question is whether it will be led from the inside or whether the industry will be dragged kicking and screaming into the future from the outside.

Insuring What You Want, When You Want

DIAmond Award winner Trōv is one of the most widely referred to cases when speaking about disruption in the insurance sector. But what is Trōv exactly about? What is the business model? How successful is it? Trōv’s founder and CEO Scott Walchek will share his vision in a keynote presentation at DIA Amsterdam, this May. To warm up, I interviewed Scott last week.

Trōv is the world’s first on-demand insurance platform for single items. It is a mobile app that allows users to insure whatever, whenever. It empowers customers to insure “just the things you care about” for whatever period you prefer. Trōv users simply snap a picture of a receipt or the product code of a product. This creates a personal digital repository for all things tangible. For selected items, Trōv offers a quote to insure each individual item. Customers can then simply “swipe to protect” to purchase the insurance. It is equally simple to “swipe to unprotect.” With Trōv, long contracts are not necessary. Even the claims process is automated with the use of chatbots and available on-demand on a smart phone.

Trōv is founded by Scott Walchek. Scott is a successful technology entrepreneur. Over the past 25 years, he built companies such as Macromedia, Sanctuary Woods, C2B Technologies and DebtMarket. He was also a co-lead investor and founding director of Baidu, China’s largest search engine.

Scott is also one of the 75 thought leaders who contributed to our new book “Reinventing Customer Engagement. The next level of digital transformation for banks and insurers.”

What inspired you to create Trōv?

Scott: “At some point I realized there is an enormous latent value in the information related to the things people own. From obvious things such as receipts and warranties to actually having an overview of what you own and what the current replacement value of each item is. We want to curate ways to turn this into value for consumers. From keeping information on items up to date to, for instance, arranging insurance for these items.

We’re a technology company, not an insurance company. We’re new in this space. So I started with testing our first ideas about a proposition and the assumptions behind it with several senior executives of large P&C insurers such as AIG and ACE. What I assumed is that at the end of the day the core metric of success is the ratio of insurance to actual value. The better this ratio, the better the balance sheet.

Of course, this is an oversimplification, but everyone agreed that in essence this is how over the past 200 years value in insurance is created. Now, what is remarkable is that insurers do not really know what consumers own, and what the exact value of these goods is … What if they did know? This would disrupt markets. It would lead to much better risk assessment driven by real knowledge of the true value of what people really own.”

See also: Insurtech: The Approaching Storm  

Trōv’s main target users are millennials, a target segment that most incumbents find very difficult to reach and engage with. Why does Trōv strike the right chord among this generation?

Scott: “We’re in the Australian market for a year now and entered the U.K. market a few months ago. Around 75% of our users are aged between 18 and 24. It appears that we are successful in tapping into the specific needs of this group. We do this by explicitly tapping into four key millennial trends. The first is “on-demand.” We can see that from how millennials consume entertainment, shopping etc. Services need to be now, 24 hours a day, on my device. The second trend is, “Don’t lock me into a lengthy contract.” We enable micro-duration. Customers can turn their insurance on and off as they see fit. In practice, they hardly do. But it is about the psychological benefit of being able to do so. The third is what we call “unbundled convenience”: “Let me choose what to protect, the things I really care about.” The fourth is: “people/agent optional.” Millennials want to engage with their smartphone without having to talk to an actual person.”

Trōv is based in the San Francisco Bay Area. But you decided to launch first in Australia and the U.K. Why there?

Scott: “Ha ha – there’s a linear story and a non-linear story to that! The linear story is that microduration is still new to the industry, so our hypothesis requires testing. The regulatory environment is important if you want to get to market fast. Australia and the U.K. have a single regulatory authority versus the 56 bodies in the U.S. But we’re also in the process of filing in the U.S. The non-linear story is that I just happened to meet Kirsten Dunlop, head of strategic innovation at Suncorp Personal Insurance, at a conference in Meribel in France. She immediately understood the strategic impact of Trōv, and that is when it took off.”

Because the Trōv concept is so new to consumers, it must be extremely interesting to learn what exactly strikes the right chord …

Scott: “Customers just love the experience. Our NPS is +49. However, we’re learning every day. With a completely new concept such as Trōv, it is impossible to know exactly what to expect, honestly. It turns out that Trōv reveals new consumer insights. There is still a significant number of valuables that our audience wants to insure but that we cannot provide a quote for, for instance. Although more than 60% never turn off an insurance, the ability to switch an insurance on and off turns out to be an important psychological benefit. This appears to be category-dependent. Sporting goods are switched on and off more often than smartphones and laptops.

We’re constantly measuring and improving every step of the funnel. From leaving Facebook to downloading the app, to registration, to actual swipes. We will share concrete numbers on uptake and conversion rates at DIA Amsterdam. But to already share two big learnings: We designed Trōv for use on smartphones, but, much to our surprise funnel figures multiplied when we decided to add a web interface. And we are actually even attracting better-quality customers.”

In Australia, you decided to partner with Suncorp, in the U.K. with AXA and in the U.S. with Munich Re. What are the success factors of a partnership between an insurtech and an incumbent?

Scott: “At the end of the day, it is about relationships and people. We understand their internal challenges. Everyone agrees that real knowledge of individual insured goods and the actual value of those goods improves the loss ratio. But we need to figure out how this works exactly through experimentation. This requires internal dedication, throughout the whole organization, starting at the top. It is not about conducting small pilots, but the willingness to experiment while going all the way, invest for several years and learn as we go what insurance will look like in the future and how consumers want to engage.”

What are your future plans and ambitions with Trōv? We can imagine that Trōv could also be an interesting partner for retailers and producers of durables. With Trōv, they could seamlessly sell insurance …

Scott: “We have three lines of business. The first is what we call “solid.” This is about expanding the Trōv app geographically, covering more categories and continuously developing the technology. Trōv will be launched in Japan, Germany and Canada shortly. Then there is “liquid”; offering white-label solutions to financial institutions, for instance in relation to connected cars and homes. The third line of business is “gas”; basically Trōv technology embedded in other applications; insurance as a service. This could be attractive for all sorts of merchants, telco operators etc.”

See also: Understanding Insurtech: the ABCs  

This would make Trōv even more part of the context in which consumers makes decisions about the risk they are willing and not willing to incur. And it also taps into the exponential growth of connected devices, similar to how machine-to-machine payments are increasingly taking place …

Scott: “Yes. What we’re now doing with Trōv is really the beginning. Trōv is about providing our customers with exactly the protection they want, exactly when they want it. With more and more connected devices and sensors and new data streams everywhere we can make the whole experience so seamless they don’t have to do anything at all.”

3 Reasons Millennials Should Join Industry

With more than 70,000 expected U.S. retirees in 2017, the insurance industry faces an imminent talent crisis. Industry leaders have been eagerly searching for ways to recruit and attract young talent to replace the outgoing staff, but, due to poor industry perception, it remains an uphill battle.

The Insurance Careers Movement began as a grassroots, industry-wide initiative to combat the coming talent shortage and the ill-fated perception of the industry. We endeavor to empower young professionals who already work in insurance to share their feedback and experiences, educating their peers and students about the vast career opportunities available to them. As a part of the annual Insurance Careers Month each February, we conducted interviews with more than 30 millennials from a wide range of insurance carriers and agencies about their thoughts on the industry.

Contrary to the general perception outsiders have of insurance, findings from the interviews revealed that many younger workers view insurance as a dynamic field with significant opportunities for growth and development of personal relationships with customers and coworkers. In fact, their responses largely resemble the theme of the movement, referring to insurance as, “the career trifecta,” to emphasize the idea that pursuing a profession in insurance is stable, rewarding and limitless.

Here are the three recurring themes mentioned across all the interviews:

1.It’s Stable

In many of the interviews, one of the distinct benefits of working in insurance is the extensive career options, and the flexibility to try different sections of companies. A recent graduate can begin with underwriting, then branch into marketing, risk management or any other career path she wishes to pursue.

See also: 10 Commandments for Young Professionals  

The insurance industry holds a long, rich history and is in nearly every part of the world. Therefore, there is a vast number of opportunities available in many areas of the field, adding to the stability factor. Ashley Jenkins, controller at Pioneer State Mutual Insurance, said, “Insurance companies are very stable compared with many other industries. As an example, my current insurance employer and prior insurance employer did not have to lay off any employees during the major financial crises in 2008 and 2011.” Additionally, according to the National Insurance Brokers Association, the median salaries in insurance are all well above the national average at around $30,000 a year. With more than 75,000 jobs opening up due to retirement, members of younger generations are being afforded regular growth opportunities, promoting a stable career path that doesn’t exist in many fields; today’s young employee tends to change jobs four times before they’re age 32.

2.It’s Rewarding

Although many jobs require employees to sit in cubicles, a career in insurance allows people to interact and cultivate relationships with other customers and coworkers. Koory Esquibel, TRAC risk analyst at Marsh, said, “One of my favorite parts about this industry, and the reason why it is so easy to recommend to students and new graduates, is the ability to form so many strong relationships with colleagues and business partners.” This is a pivotal time in insurance where improved employee and customer interaction is happening at all points of the workflow. Between mobile technologies to better interact with customers and analytics to improve speeds of underwriting and claims processes, the industry has never prioritized innovation so aggressively.

According to the survey conducted as a part of the Insurance Careers Movement, more than 92% of millennials working in insurance said that they are proud to work within the industry and want to promote the benefits and opportunities it provides. Their answers also revealed that millennials are already putting efforts into recruiting their peers, as 73% of respondents said that they have tried to convince at least one of their friends to choose a career in the risk management and insurance industry.

3.It’s Limitless

With the wave of digital innovation looming and new regulations and product offerings being created daily, the insurance industry is more dynamic than ever before. Employees at all levels, regardless of their areas of focus, are challenged to come up with creative solutions to tackle emerging problems. Yasmin Ahmed at Marsh said that she was “drawn to work in insurance because of the career mobility and succession planning.  Seasoned insurance professionals plan to retire within the next five years, providing more career advancement for young people.”

In fact, according to the Jacobson Group and Ward Group Insurance Labor Outlook Study, the insurance industry has added 100,000 new jobs in the past five years, and 66% of insurers expect to increase staff this year. The number of opportunities and intellectual challenge are perfect for millennials as, according to the My Path survey, new graduates are more interested in career advancement possibilities (25%) and learning opportunities (20%) when considering a job than older generations. Therefore, young professionals consider development within their careers more important than salary or benefits.

While the industry remained largely stagnant for years, the technological disruption is closing the experience gap and opening important roles for those interested in data science careers combined with creativity. In fact, Accenture’s fintech report found that investments in insurtech more than tripled from $800 million in 2014 to more than $2.6 billion in 2015. In addition to the heavy focus and investments in IT, startups like Lemonade are joining the industry with new technology-based business models. The entrance of startups has already brought recent changes as it motivated insurance giants to expand their focus. Some of the world’s largest insurers, such as Aviva, Axa and XL Catlin, announced their efforts to establish in-house venture capital funds and stated that they will be dedicating more than $1 billion investments in startups to spearhead digital transformation. This focus on new technology also creates more opportunities for the younger generation, as they can make contributions to their team regardless of the job titles.

See also: Can We Disrupt Ourselves?  

Most say that millennials are known for job-hopping. However, according to a recent Census study, once they’re satisfied, most will stay at the place of employment for three to six years. The bottom line is that carriers must not blame the generation for their lack of interest in insurance and instead work on raising awareness about the value the industry offers. Right now, a lack of talent is one of the biggest challenges for innovation growth. Insurers will have to make concerted efforts to follow through the recruitment process and provide robust training program to attract and retain young professionals. Through recognizing the underlying cause of the crisis and making an industry-wide endeavor, the insurance industry will be able to grow as a whole and successfully combat the talent shortage.

Will Startups Win 20% of Business?

Headlines about the insurtech disruption are split between issues like improvement to the customer experience and how traditional carriers expect to be affected. The situation is reminiscent of the days when Wal-Mart announced that a store was coming to a small town, and local retailers began screaming that the sky was falling.

We keep a close eye on insurtech at WeGoLook because, as a leader in the gig economy, we find natural partnerships abundant between our on-demand workforce and innovative insurtech services.

According to PwC Global, many insurance carriers see the potential downside to ignoring insurtech:

  • 48% of insurers fear that as much as 20% of their business could be lost to insurtech startups within the next five years;
  • Annual investment in insurtech startups has increased fivefold over the past three years, with total funding reaching $3.4 billion since 2010; and
  • More than two-thirds of insurance companies say they have taken concrete steps to address the challenges and opportunities presented by insurtech.

Will incumbent carriers accept the anticipated losses or will they fight to retain market share?

See also: Be Afraid of These 4 Startups  

The Standard Market’s Reaction

Traditional insurers have begun to throw a lot of money at the insurtech situation. Many of them have significant venture capital funds.

These steps are not necessarily being taken to compete with the startups that are expected to capture the 20% but to retain control over methods of distribution.

Even though insurtech startups appear to be better than incumbents at creating products and distribution systems, many still rely on their insurance partnership with standard carriers for underwriting and claims administration. New pay-per-use companies such as Metromile and Simplesurance, which are not regulated insurers, sell policies that are underwritten by established insurers.

A Threat to Distribution

Insurtech startups will take a significant bite out of the traditional insurance distribution system. Startups and incumbents will be forced into partnerships because both are vital to delivering products.

Insurers are certainly not blind to the opportunities that have become available as a result of technology that will allow them to learn more about the consumer experience and how the consumer behaves.

We’ve already seen carriers such as MetLife and Aviva found and support startup incubators. And even WeGoLook was recently acquired by Crawford & Co.

And this is a good thing!

If incumbent insurers can embrace and adapt to the innovation, creativity and agility of the startups, the insurance industry will be better positioned to meet the needs of the consumer.

The newly created partnerships are destined to make significant progress in solving the problems of the new economy and bring consumer-centric innovative products to the marketplace.

The New Competition Partners

Some of the startups that have already succeeded in taking a bite out of the traditional distribution system:

Oscar

Founded in 2012 with $750 million in venture capital, and one of the first to establish its presence, Oscar was created as a result of the Affordable Care Act. Oscar relies on technology and data so it can improve the healthcare it offers to customers. With annual revenue of $200 million, the company is currently valued at $3 billion.

See also: Top 10 Insurtech Trends for 2017  

Trov

Also founded in 2012, Trov is a U.S. startup funded with $46 million. The company was established to sell insurance by the piece.

The company will provide insurance on a per-item basis and offer policies on a term selected by the consumer.

Although founded in the U.S., the company first marketed its innovative product in Australia and targeted millennials. Like most other startups, the company partnered with a traditional insurer to handle the underwriting.

PolicyGenius

PolicyGenius is banking on consumers’ preference to have all their insurance products in one place and online.

The company was founded in 2014 with $21 million in capital and has partnered with major traditional players such as Axa, Transamerica and MassMutual.

As a virtual online insurance broker, PolicyGenius intends to make a dent in the insurance distribution system through satisfying the preferences of the consumer.

Metromile

San Francisco-based Metromile has created disruption in the auto insurance market by offering pay-per-mile auto insurance.

Through the use of an innovative app working in concert with the Metromile Pulse plug-in, consumers who use their vehicle on a limited basis will obtain significant savings on auto insurance.

The company offers a full customer service team and 24/7 claims service. All policies are underwritten via its partnership with National General Insurance Company (formerly GMAC).

Lemonade

After promising to reinvent the insurance industry, Lemonade offers home and renters insurance by using bots instead of brokers.

After testing the product in New York, the company launched nationwide in 2017. As licenses are approved on a state-by-state basis, the Lemonade footprint will continue to grow.

Unlike traditional insurers, Lemonade charges a flat-fee commission and then gives back unclaimed money to charitable causes that policyholders care about.

See also: Why I’m Betting on Lemonade  

Lemonade is a perfect example of how insurtech startups are revolutionizing the insurance industry.

But There’s Hope

Although the threat of losing market share is demonstrated by the success of many of the insurtech startups, it’s important to recognize that a relationship can manifest that benefits both traditional insurers and the innovative startup.

New business for one startup doesn’t necessarily mean a loss for another.

Also, traditional insurers are already positioned to raise the additional capital needed to compete with the startups — if they choose to do so.

So, will the 20% market loss actually be realized?

If we play our cards right, probably not.