The evolution of the Insurtech phenomenon is fascinating. I have had a unique perspective on this progression – for the first 20 years of my career, I worked for large, successful insurance companies that were trying to figure out how to best engage with these insurtechs. Now that I have started up my own analytics company, although we are not an insurtech company, I sit side by side with many of these start-ups that are trying to find a path to working with established companies.
The transition from insurtechs being a disruptor of the old, stogy insurance industry to an enabler for the future is absolutely happening – we are getting closer and closer to finding the right engagement models so we all benefit from bringing great innovation to the marketplace.
The graph below from Deloitte shows the number of insurtech start-ups by year and the amount invested in them over a similar time period through Q3 2019. The number of start-ups peaked in 2016 with 212 new companies, but the funding is still very strong, as evidenced by over $3.2B through the first 9 months of 2019. There may be fewer companies that are just starting up, but the investment per company that provides true business value is up substantially.
Being at a large carrier during the ramp-up, we definitely experienced that exponential growth – the insurtechs were coming in from so many different doors of the company that just coordinating who was doing what was the first priority. My former boss used to ask the team if the insurtech was “just some pretty hair and makeup” or there was actually substance to their offering. Many of them had innovative user-interfaces (the hair and makeup), but not much behind them that had further practical application. Many struggled to successfully make the connection with how their innovation could actually be deployed in such a highly complex industry. We studied them all, partnered with some, and used their creativity and unbiased approaches as inspiration for us to continue to challenge our traditional boundaries.
Over the last few years with a large company, we experienced a transition from insurtechs being a “disruptor” to being an “enabler” of carrier success. With all the challenges that insurance presents, I now see much more of a desire to partner with carriers to ensure that both sides benefit from the expertise and experience of the other.
There is still more work to be done – watch Bob Frady, CEO of HazardHub at the 6-minute mark – but definitely making progress.
One of our missions within MCA is to bring together these insurtech partners with our clients so they can benefit from such great new ideas and approaches. Being smaller and nimble allows our mutual clients to really capitalize on the insurtech innovation through robust test-and-learn techniques.
To stay current with all the rapid developments in the insurtech space, we decided to build our company in Hartford, CT. Growing up in the area, Connecticut was once the “insurance capital of the world.” This dissipated during the ’90s and 2000’s as carriers relocated offices and talent, especially younger and technology inspired, were not attracted to the area. Thanks to investments in resources from InsureTech Hartford, Upward, Nassau Re/Imagine, and many of the large established carriers, the ecosystem is thriving! (Two local insurtechs that I have been really impressed with are Aureus Analytics and Luminant Analytics). The talent and innovation that is taking place locally are inspiring, and we look forward to bringing these capabilities to our clients.
While the number of insurtechs starting up over the last few years has dwindled quite significantly, that does not mean that the importance of insurtechs has dropped as well. History is always a great lesson – the evolution is shockingly similar to the ramp-up in dot.com companies in the ’90s. Many small companies with a pretty UI started up with an idea and a vision, but only a few that brought enough business value were able to grow and thrive. But those few can change entire industries…Amazon began in 1994!
The Dotcom Bubble