Tag Archives: barry rabkin

Should Incumbents Ally With Startups?

Incumbent insurers have taken decades, and, in many instances, hundreds of years building a business and creating a book of business (almost entirely through the hard work of agents, brokers and MGAs). Why should they share their customer information with startup insurers (regardless of how or why the startup insurer is using technology)? Potentially invest in the startups, yes. Give away customer information — not so much.

Two triggers for the question

There are (at least) two triggers that formed the question of whether incumbents should partner with startups:

  1. Discussions with a CEO of an insurance startup on how technology-dependent startups insurance firms can scale; he mentioned the possibility of looking at the pharma/biotech industry dynamic (i.e. startup biotech firms partnering with traditional pharma companies to achieve scale)
  2. Thinking about what’s in it for traditional insurers to partner with startup insurers that are coming to market using new technology. If the technology-dependent startup insurer believes it is primarily “a tech firm that supports/offers one or more parts of the value chain (distribution, underwriting, or even customer service),” then what really differentiates the startup insurer from a traditional technology company?

See also: Insurtech Has Found Right Question to Ask

Left to their own devices

Might technology-dependent startup insurance firms, if left to their own devices, succeed on their own? Possibly, but there are several hurdles:

  1. They must comply with insurance regulations (at least state and possibly federal)
  2. They must be and remain financially viable. Unlike technology startup firms, the state insurance regulators can’t allow the startup to generate loss after loss. Firms like Salesforce and Amazon can go years without profit, but that situation is not true in the insurance industry.
  3. They need scale (and profitable scale, at that), and, as the CEO mentioned to me, the startup has to “get the word out” and become known. How much is in the technology-dependent startup insurance firm’s marketing/advertising budget (and how is the company spending the money)?

If the technology that the technology-dependent insurance startup uses is its “secret sauce,” then an incumbent insurer can:

  1. Test the technology itself
  2. Invest in the startup to accelerate the lessons of using the technology
  3. Acquire the startup

See also: Insurtech: One More Sign of Renaissance

But my advice to each incumbent insurance firm is to never give away or share your customer list with any technology-dependent startup insurance firm. It makes no sense to do that.

Insuring a ‘Slice’ of the On-Demand Economy

In our emerging on-demand economy, Blue Ocean strategy will abound for P&C and life and annuity (L&A) In this post, I will focus on the Blue Ocean strategies that are needed in the P&C insurance industry.

The essence of Blue Ocean strategy, as discussed in W. Chan Kim’s and Renee Mauborgne’s 2005 book Blue Ocean Strategy, is “that companies succeed not by battling competitors but rather by creating ‘blue oceans’ of uncontested market space.” Society’s expanding on-demand economy is generating newly uncontested P&C insurance markets.

These new insurance markets are being formed from the blurring of consumer and corporate exposures that have historically been considered separate exposures by insurance companies, intermediaries, regulators and customers.

My objective in this post is to discuss the emergence of a new insurance player, a licensed insurance intermediary, that offers insurance that the Transportation Network Company (TNC) drivers—specifically Uber and Lyft drivers—should purchase to protect themselves, their ride-share vehicles and their passengers.

TNC drivers have insurance requirements for all three time periods

From the moment they “tap the app on” to the moment they “tap the app off,” Uber and Lyft drivers generate a fusion of personal and commercial automobile insurable exposures. The fused automobile insurable exposures are in play throughout three three time periods during which drivers need to protect themselves; their personal vehicles being used as ride-share vehicles to pick up, transport and drop-off their passengers; and, of course, their passengers.

The three time periods are:

  1. Time Period 1: This period begins when an app is turned on or someone logs in to the app but when there is no ride request from a prospective passenger. The driver can be logged into Uber, Lyft or both, but the driver is waiting for a request for a ride.
  2. Time Period 2: This period begins when the driver is online and has accepted a request for a ride but has yet to pick up a passenger.
  3. Time Period 3: This period begins when the driver is online and a passenger is in the car but has yet to be dropped off at the destination.

No, your personal automobile insurer probably does not cover the ride-share

It would be foolhardy (at best) and extremely costly (to the ride-share drivers) to assume the insurance policy that covers the driver’s personal automobile would also cover the exposures the driver generates as a TNC driver throughout the three time periods.

However, there is an expanding list of personal automobile insurers that:

  • cover time period 1 for ride-share drivers—TNC companies do not provide coverage during this period; and
  • will not cancel a driver’s personal automobile insurance policy if the driver tells the insurance company she is using the vehicle as a ride-share vehicle while driving for Uber or Lyft.

But the fact remains that there is a paucity of insurers that cover the personal and commercial automobile risks for people using a vehicle as a ride-share vehicle during all three time periods.

Further, drivers could very well find themselves with insufficient coverage even if the TNC provides coverage during time periods 1 and 2.

The paucity represents Blue Ocean uncontested market opportunities

The opportunities are the drivers’ need for insurance coverage to:

  • the fullest amount possible given the requirements of each state and each driver’s situation (i.e. the cost to repair the vehicle will differ by vehicle and state where the driver operates)
  • fill the insurance gaps between 1) the driver’s personal automobile coverage; 2) what Uber or Lyft provide during time periods 2 and 3; and 3) what each state requires.

Simply put, depending on the type of vehicle the driver is using as the ride-share vehicle and the state where the driver is operating, it is entirely possible that whatever insurance the TNC provides—even if it meets the minimum requirements of the state—is inadequate to financially help the driver (Note: this is not meant to be an exhaustive list of financial requirements):

  • remediate/restore the ride-share vehicle to its pre-damaged condition;
  • pay for physical rehabilitation for the driver, passengers or pedestrians who are injured in an accident caused by a ride-share driver or a third-party;
  • pay for property remediation caused by the ride-share driver
  • pay the lawsuit of ride-share vehicle passengers who claim the driver attacked them;
  • pay for the lawsuit of ride-share drivers who claim a passenger attacked them; and
  • make payments in lawsuits brought by passengers or pedestrians injured or killed, or owners of property destroyed or damaged by the ride-share driver.

Slice emerges to provide hybrid personal and commercial P&C insurance

Slice Labs, a new player in the insurance marketplace based in New York City, is emerging to target this specific uncontested market space by providing Uber and Lyft drivers with access to hybrid personal and commercial automobile insurance for all three time periods. In a March 29, 2016, press release, the company announced it secured $3.9 million in seed funding led by Horizons Ventures and XL Innovate.

I truly appreciate and personally respect Slice for taking the time to enter this Blue Ocean market space in the “right way” by first becoming licensed in the states where the company wants to operate. Currently, Slice is licensed to conduct business for Uber and Lyft drivers in seven states: California, Connecticut, Iowa, Illinois, Pennsylvania, Texas and Washington.

Getting licensed

Moreover, Slice’s business model is to operate as a licensed insurance intermediary with underwriting and binding authority. The intermediary has become licensed as insurance agents for personal and commercial P&C, excess and surplus (E&S), and accident and health (A&H) insurance. Slice also has managing general agency licenses in the states where that license is required to sell the hybrid insurance coverage. Slice is taking this path of licensure because it is using a direct model and doesn’t plan to distribute through agents (intending instead to distribute through the TNC platforms and directly to the drivers).

Further, because this is a hybrid personal and commercial automobile insurance opportunity, Slice is designing and filing the requisite policy forms in each state where it wants to operate.

Slice is underwriting the risk, but it is not financially carrying the risk. For that, Slice will be working with primary insurers and reinsurers. Slice has not yet reached the point where it can identify which (re)insurers are providing the capability. Obviously, without having the insurance financial capacity, Slice can’t operate in the marketplace (unless Slice plans to use its seed financing and future investment rounds for that purpose—assuming that is allowed by each state where Slice wants to operate).

It is also important to know which (re)insurers are providing the capacity. I hope Slice releases that information very soon.

Conducting business with Slice

A driver purchases the hybrid policy by registering on the Slice app (registering is the process of the driver receiving and accepting the offer to apply for insurance), which triggers Slice’s underwriting process. At the completion of the underwriting process, Slice generates and sends the driver a price for the policy that will cover the driver’s fused personal and commercial automobile insurance requirements for each cycle of turning on and off the Uber or Lyft app.

Once the driver purchases the policy, Slice sends the driver the declaration page and policy in a form required by each state. Slice will send the DEC page and policy digitally if that is allowed by the state. Moreover, the Slice app will show the proof of insurance, the time periods the insurance policy is in effect and the amount of premium being charged during the time period from “app on to app off.”

If there is a claim, the driver will file the first notice of loss through the Slice app. Although Slice plans to work with third-party adjusters to manage the claim process, the driver will only interact with Slice until the claim reaches a final resolution.

What do you think?

Will this uncontested market space remain uncontested for very long? I sincerely doubt it. The addressable market is huge: every Uber and Lyft ride-share driver who does not have the requisite insurance or doesn’t have sufficient insurance (the two are not necessarily the same animal).

What do you think of Slice, of this market opportunity and of other on-demand economy opportunities that reflect a fusion of personal and commercial insurance exposures?

Technology Companies to Watch in 2016

Here is a baker’s dozen (plus one) of technology firms that I find exciting or interesting and feel are companies to watch. Some, like Guidewire and Salesforce, I have followed and written about for many years. Others are technology firms I have recently written about (e.g. Clari). Some technology firms are public, and others are private.

Caveats:

  • The following 14 companies to watch (including two pairs of partnerships) are technology firms that I think insurers should be watching or possibly consider whether to use in 2016.
  • I didn’t use any “scientific reasoning” or market share data to include (or exclude) companies. Other than Apple, Google and IBM, I do not own shares in any of the technology firms. (Not that I own enough shares of any of these companies to retire to the beaches of Maui anyway….)
  • By including technology firms on this list, I am in no way implicitly or explicitly saying that I will only follow/research/write about these firms in 2016. That is not the case: I plan to write about other technology firms in 2016.

My personal list of exciting or interesting technology firms

Here is my list in alphabetical order:

  1. Apple-IBM partnership (specifically the insurance industry applications)
  2. Box
  3. CafeX
  4. Clari
  5. Dropbox
  6. Facebook
  7. Google (specifically, Google Compare)
  8. Guidewire
  9. Librestream-Symbility partnership (Symbility is Librestream’s partner to go to market in insurance)
  10. Salesforce
  11. Slack
  12. Vlocity

Going forward

Do with this list what you will.

Next year, I plan to create short snapshots of these firms (or partnerships) in which I discuss why insurers should care about these technology firms.

However, I do suggest that you – whether an insurer or technology firm – create your own watch lists. Add to them, delete from them and otherwise keep your lists (and the reasons you have certain firms on the list) vibrant.

How to Juggle the Present and Future

Unlike companies in quite a few other industries, insurers have a book of business of clients who potentially expect to conduct business in a different (and “older”) manner than new prospects might. Life insurers have to provide service to clients for three, four, five or more decades. P&C insurers selling long-tail coverage also have to provide service for multiple decades.

Why does this matter?

This matters because insurers that keep the same clients for 10 or more years have to approach applying technology like a juggler striving to keep multiple objects in the air. Insurers must juggle the technology expectations of present clients with what future clients will be comfortable using.

I’m not saying that insurers can expect to succeed in the present or the future by keeping the multiplicity of unique core administration systems that most insurers have. I am saying that insurers must craft their client go-to-market strategies and concomitant technology tactical initiatives to enable the insurers to service clients using a range of capabilities.

Commerce, and many other aspects of life (e.g., work and entertainment), are rapidly becoming mobile. Millions use social media channels throughout each day. But … that does not mean that insurers should look to mobile or social media to interact with all of their clients.

Continually probe

Insurers must continually probe the manner in which current and future clients want to interact with them.

I think the result will be a client interaction choice board supported by current and emerging technologies that will continually change at the pace of insurers’ clients’ comfort levels.

What do you think?

How to Find Mobility Solutions (Part 2)

Before continuing from the “How to Find Mobility Solutions (Part 1)” post, I want to repeat my bias: I think that until insurers, and insurance agencies/brokers, can operate entirely using apps on smart device they can’t really call themselves “mobile-next.”

Potential insurance mobility solutions

Focus on enabling producers to use a smart device that has the requisite apps to:

  • Manage their day (and week and month) — seeing list of sales opportunities, setting up appointments, finding meeting locations and going to meetings, using the native calendar/GPS/mapping capabilities of the smart device
  • Get notices about traffic conditions and suggested alternative routes to take if the producer is driving to a meeting
  • Get alerts about severe weather
  • Pull information about the customer from an agency management system or a carrier’s customer relationship management (CRM) system before the meeting
  • Note comments about the progress of each sale after each meeting, whether by using the keyboard, stylus (if applicable) or voice entry
  • See charts showing progress-to-date or progress-to-goals
  • Pull all relevant forms into a “potential sale area” on the device — forms related to the sale of a specific line of insurance and required by the insurance company or regulators
  • View the status of each sale in process and see the steps the carrier still needs to complete, with time estimates of each step
  • Get a quote for any insurance products the producer is allowed to sell
  • Walk a prospect through a policy application form either on the producer’s device or by sending it to the prospect’s smart device
  • Coordinate a 3-way video session with a subject-matter expert, the prospective client and the producer to answer questions the prospect or producer might have about the insurance product
  • Start a video session with a customer-service representative (CSR) or other colleague in the agency or in the carrier to ask questions or collaborate on an issue – from campaign management to new products to new requirements triggered by new regulations
  • Complete the policy application form, including getting the prospect’s e-signature if that can be done at the moment. If completion isn’t possible at the time of the meeting with the prospect, then enable the producer to store the policy application and filled-in data on the producer’s smart device and also upload the information to the relevant agency or carrier systems
  • Get alerts about any of the producer’s customers filing a claim, including the “when, where and why” of the claim
  • See how much time until the next meeting takes place (this is specifically for a smart watch) and get an alert (sound or haptic touch on the wrist) when the producer is close to or at a meeting location.

I realize this is only a starter list of mobile applications for a producer. What would you add?