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VC Roundtable: Where is insurtech's room to grow?

Published January 21, 2021 12:10 PM
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Updated January 26, 2021 3:00 PM
1 Min Read

We asked our VC panelists six questions. The third: Where is there still room for growth in insurtech? The industry is far from “fully digitalized,” but given the situation around Covid, how should incumbents and startups look to be working together to continue progressing insurance’s digital transformation?

Go back to our VC roundtable homepage, with bios for participants and more.

Kyle Beatty, American Family Ventures

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Harrison Steg
There is enormous room for continued innovation in insurance. I think the most important thing incumbent insurers can do to work effectively with startups is to begin with a very clear strategy for transformation and the have executive sponsors in a driving seat to create focus and speed of action. Sharing this strategy openly and having true intent to act will attract great startups teams to partner with carriers.

Eric Emmons, MassMutual Ventures

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Eric Emmons, MassMutual Ventures
If you think about it, insurtech is an extension of well-known enterprise software trends. Insurers were just slower adopters of technology, primarily because they are risk-adverse and operating in a regulated industry. SaaS maturity in other verticals has helped de-risk enterprise SaaS in insurance, but still today there are a number of on-prem deployments among insurer incumbents. When we started MMV in 2014, not all the large carriers had yet implemented private cloud architecture. There is significant money to be made in the next five years building out the next couple of layers of insurance technology. The incumbents are well-capitalized and have been discussing the need to engage in banking-like digital transformation for over a decade now.

We are now seeing incumbents acquiring technologies and/or distribution channels – see the recently-announced acquisition of Bold Penguin by American Family, whose venture firm had led that insurtech’s early financing rounds, or Assurance IQ’s acquisition by Prudential back in 2019. Correspondingly, the public markets are showing an appetite for new insurtech issuances, especially for consumer-oriented plays, as demonstrated by Lemonade, Root, SelectQuote, and others.

Sam Evans, Eos

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Significant opportunities exist across all parts of the insurance value chain. We expect to see focus and acceleration around usage-based insurance, enhanced customer journeys, self service and remote claims assessment, rapid acceleration of digital health solutions linked to health and life insurance, growth in cyber solutions particularly for SME’s, growth in alternative and affinity distribution relationships and in commercial lines further development of active risk management and proactive policyholder engagement.

Erik Ross, Nationwide

Erik Ross
Insurtech as a standalone sector from Fintech is a little over five 6 years old, and the pandemic has been the main driver of digitization of the incumbents, so we are in the early innings of both. The insurance industry has been one of the last digital holdouts so it will take some time to really get the transformation flywheel truly moving, but all signs point to this being well underway. Insuretechs, for their part, are rapidly gaining in number and sophistication, and look no further than the public insurtechs as evidence that there is plenty of room to run for startups focused on insurance.

Martha Notaras, Brewer Lane Ventures

Martha Notaras
COVID-19 has focused the minds of many established players. Instead of running multiple proofs of concept and experiments, incumbents are looking for startups that will be good partners and deliver results that make managers look good in front of their boards.

Ben Bergsma, Munich Re Ventures

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Richard Morgenstein
I don’t believe we’re anywhere near the peak of insurtech. We’ve seen quite a wave of successful startups on the distribution side of the value chain. I think we’ll see this wave continue to expand to emerging markets such as India and Latin America, where mobile penetration rates are very high but insurance penetration is dramatically low. For startups that are working with incumbent carriers specifically, I hope to see sales cycles shorten in 2021 as the need for digital transformation should be readily apparent by now. The claims process should be more intuitive. AI/ML should be leveraged in the underwriting process. Workflow tools for agents/brokers should increase productivity. There is so much opportunity in this space!

Ryan Helon, Rev1 Ventures

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We still see significant potential for growth, especially in technologies that improve insurance operations and enhance the efficiency and productivity of distribution channels. Rev1 primarily invests in companies that target insurance carriers as customers. There are still many opportunities to improve core insurance operations, and many carriers are open to working with external partners to work to solve problems and improve their operations. There are still many opportunities to use new data sources to price risk – many of these will be within commercial lines. There is also room for more efficient transfer of policyholder data and we believe policyholders will begin taking greater control of their own data (similarly to what we have seen in the Fintech space). Insurtech startups should seek to partner early-on with the incumbents that are most likely to implement quickly. Everyone wants a top-five carrier to be their first customer, but we feel strong that it’s more important to secure the first customer as soon as possible.