While partnering with insurance companies has its perks, insurtechs should be cautious about aligning with incumbents and forgoing the advantages of starting from scratch as full-stack carriers, according to a panel of startup CEOs at the CB Insights Future of Fintech conference.

Startups that take on the entire insurance value chain are at a financial disadvantage, but technologically, have an edge. Lemonade CEO Daniel Schreiber said he would not trade places with CIOs at incumbent insurers because it is “radically different than the startup world.” That's because a lot of the assets that insurers have built up over time -- particularly legacy systems and distribution channels, are becoming liabilities.

CEOs of Lemonade, Metromile and Ladder (left to right) discuss insurtech growth strategies
CEOs of Lemonade, Metromile and Ladder (left to right) discuss insurtech growth strategies CB Insights

Jamie Hale, CEO of Ladder, a life insurance company, agreed with the other two panelists that being able to ignore legacy systems is a big advantage for startups. He said there’s a general belief that big insurance companies will have great data warehouses, but that is not the case. “For a lot of legacy reasons, they don’t have the best data,” he said. “Their systems don’t communicate.”

“I’m interested to see how many [startups] mature and not just be different versions of distribution systems [when they mature],” said Dan Preston, CEO of Metromile.

Preston, formerly the head of technology at Metromile, also noted that the startups on the panel were part of an “underlying shift” because they are all insurance companies carrier risk, not just companies serving as vedors to the industry. Panelists said that they don't see the need to partner with carriers because their technology platforms are able to stand on their own merit in terms of providing a next-generation insurance experience. While it's not easy to compete with traditional insurers' financial strength, a strong reinsurance strategy can mitigate that issue, and allow disruptive companies to thrive in the market.

“It is important for us to partner in the right places, but not become a traditional insurer,” said Schreiber.

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