Carriers partner with some insurtechs to hold off others

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Insurance companies view the insurtech space in two segments. One, the most prominent, are emerging software vendors that carriers want to partner with to bring their innovations into the legacy business. But there are also insurtechs that are planning to take on risk themselves and compete directly with carriers, industry experts discussed at the Future of Fintech conference in New York this week.

Lemonade, Metromile, Ladder and Slice Labs are just a few examples of industry newcomers looking to take incumbents head on, rather than offering digital platforms for those legacy companies to use themselves.

“Anywhere we’ve left a breakpoint in the customer experience, there’s opportunity for new companies to come in,” said Beth Maerz, VP of customer experience and innovation at Travelers Insurance, conceding that insurers still have multiple pain points attached to legacy systems.

Fortunately, not many insurtechs will become “the publicly held Travelers,” says Tom Hutton, managing partner at XL Innovate, which has invested in eight insurtechs since launching in 2015. Some will not make it.

“The sixth or seventh provider will be gobbled up by the sixth or seventh largest insurer,” he said. “So that’s good news for VCs.”

Outside of mere competition, there’s ample opportunity for large incumbents to apply insurtech, Maerz says. Travelers is currently in talks with startups like Cape Analytics, a provider of computer vision and machine learning technology intended to automate property underwriting. Back in March, the insurer announced the acquisition of U.K.-based Simply Business to advance its digital agenda.

“We can try to build the entire stack ourselves, or we could look for an opportunity to enter into an [alternative] channel with a small business that we think fits our business model,” said Maerz about the Simply Business purchase, while hinting at how difficult attracting data science talent to the insurer’s home state of Connecticut can be.

Future of insurtech

Panelists agree insurtech has “decades to run,” despite the notion the market may be becoming too saturated. On the contrary, the sector is only in its early stages, Hutton says.

“Insurtech will bring lower cost of operations, better product and inevitably less people [at companies],” he explained. “There are a number of problems in insurance that need multiple approaches.”

Attune, a startup formed by AIG, Hamilton Re and Two Sigma in September, plans to tackle a very specific problem in insurance. Its CEO James Hobson wants to simplify how small businesses get covered using big data. The startup is working on building its new platform that can distribute policies in real-time.

“We have the tremendous advantage of doing it with partners and then branching out,” said Hobson. They’re all involved from a strategic standpoint, not just money.”

Attune will look to work with more insurance partners in the future as it continues to add products, Hobson added.

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