Who will win the InsurTech Gold Rush?
Last week, North America’s InsurTech community gathered together in Chicago. The event was OnRamp, billed as the “leading conference for insurance innovation”. To get a view from inside the conference tent, I asked an InsurTech founder to give his perspective on what’s happening stateside. So, it gives me great pleasure to hand over InsurTech Weekly, for one night only, to the Dr Dre of insurance, Mr Chris Cheatham.
By Chris Cheatham
I have a confession: sometimes I feel like an insurance technology outsider. I have not created a digital experience for online insurance buyers. I have not created an app or device that collects user data for insurers. I don’t aggregate the lowest insurance prices.
I am the founder of an InsurTech pickaxe company.
For the emerging InsurTech industry, this means you can do one of two things;
- You can mine for insurance consumers and data (the gold). Popular mining companies include PolicyGenius and CoverHound, which help consumers buy insurance products at the lowest price.
- Or, you can provide the pickaxes to manage new customers, data and processes. Our policy analytics software, RiskGenius, is an example of an InsurTech pickaxe.
You can discern whether an InsurTech company is a miner or pickaxe based on its disruption factor.
Miners are trying to disrupt existing service providers, including insurance carriers, brokers and wholesalers. PolicyGenius wants to replace agents selling life insurance. Insureon hopes to replace agents selling commercial insurance.
Pickaxes, on the other hand, want to replace existing software solutions. With our policy analytics software, RiskGenius is aiming for the legacy policy review applications on the market that rely on keyword searching. Our software also competes with traditional business software applications, like Microsoft Excel and Adobe.
InsurTech Pickaxes or Miners?
Technology pickaxe companies are often just as valuable as the miners. For example, Dixon points out that Akamai, an online video infrastructure supplier, is worth more than YouTube.
Despite this, mining companies get most of the press and this was certainly true at the recent OnRamp Insurance Technology Conference in Chicago. Make no mistake; the conference was wonderful as there were over 400 attendees and a full day of insights.
I hope to see more conferences like OnRamp.
The conference organizers did a wonderful job creating just enough time for networking and presentations. I particularly enjoyed the one-one-one meetings between carriers and InsurTech companies setup by the conference.
But I had more than one of the carriers comment to me that it was nice to hear something other than IOT, telematics or distribution business models.
Who will win the gold rush?
I believe InsurTech pickaxe companies will be more important than the mining companies for three reasons;
- First, insurance is complicated. So far, the insurtech mining companies have focused on simpler products, like consumer insurance and small business insurance.With these products, the miners are competing on price and user experience. The risks are understood and, as a result, carriers issue the same policies.But if miners want to move into more complicated insurance, they will have to leverage complicated risk analysis solutions. Zenefits is an example of what happens when an InsurTech company unsuccessfully tries to move from small business to enterprise clients.
- Second, most insurance carriers still have broken technology systems that need fixed. InsurTech miners are actually exacerbating the technology problems created by legacy insurance technology.Carriers struggle to connect to miners’ software, which is reportedly one of the reasons Google Compare ran into problems. Only the pickaxes will be able to fix legacy software problems.
- Finally, if the miners are successful, then telematics, the Internet of Things and digital purchases will lead to more data. Insurance carriers and brokers — and the miners — will want to leverage this data. The data can’t be leveraged without technology investment. The pickaxes are already making these investments and will help traditional insurers and miners utilize new areas of data.
The most valuable company, though, will figure out how to combine gold (insurance data) with a powerful pickaxe (machine learning) to identify valuable insights that go beyond actuarial tables used by traditional insurance professionals.
Are you ready for the great InsurTech gold rush?
The theme of Chris’ North American perspective resonates with my own experience of InsurTech on a global stage. When I’m asked to define InsurTech, I always start at the macro level. It’s about Distribution and Data, aka, mining and pickaxes.
Right now, the majority of InsurTechs are in the Distribution space. Which is hardly surprising given that there’s a fundamental trust and transparency issue in personal lines. And the new InsurTech kids on the block are forever creating new and innovative digital solutions to fix the way consumers engage with insurance.
But. (And I agree with Chris on this point.)
It’s the pickaxe firms that are going to have the most impact. This tech-fuelled rapid evolution that’s started in the insurance industry is going to be data driven. And insurance businesses will become tech businesses as a result.
Thanks again Chris for your contribution to InsurTech Weekly.
This week’s guest post is written by Chris Cheatham, CEO of RiskGenius. Chris is an attorney with a passion for technology, which he has applied to the insurance industry. Readers can find out more about RiskGenius and Chris in this post from the InsurTech Weekly back catalogue here.
The editor of InsurTech Weekly is Rick Huckstep, an advisor, speaker and InsurTech thought leader. Rick runs The Digital Insurer in Europe.