Are the next big insurtech ideas being formed now?

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The first couple weeks of school-at-home were tough. First, my son would monopolize one of our computers for hours at a time, leaving my wife or I to work from our phones. The lessons his teacher sent were sometimes unclear, and she hadn't resolved a good way to ask or answer questions. There were authentication issues for district accounts, compatibility problems based on computer type or browser, and bandwidth issues on the internet. Everyone was irritated and frustrated.

But while it felt like it took forever for that phase to pass, it did -- in maybe two weeks at most. Since then and through now, my son breezes through his schoolwork, connecting with his teacher if he has questions about the clearly labeled and linked lesson plan that he reads on the refurbished netbook we picked up through a school program. As the end of the school year looms, and the threat that a New Normal could greet us with more of the same in August, we feel confident that we can handle this evolving relationship between student, teacher and educational institution.

Perhaps the biggest change from the COVID-19 crisis is how it forced humans to find ways to interact when real life was flatly off the table. Yes, the “connected age” has us all over social media and sending text messages every second of the day. But you may have been used to being able to Slack that message across the office, then exchange a glance with your co-worker to confirm; or your text message chain could’ve ended with a meetup at a local tavern.

When I think about the insurtech revolution that has reshaped the industry over the past several years, I see a number of “innovations” that were really just more efficient ways to get “the old way” to work. When you’re in the same room, Slack is just 21st-century note-passing; similarly, a widget that directs you to an agent who will ship you a 25-page paper application is just 21st-century direct mail.

That doesn’t mean there’s anything wrong with these innovations. But now that humans writ large have become, if nothing else, more “power users” of automation and digital transaction technology, some of the smaller hops of innovation can be pushed to the side in terms of bigger leaps.

The reports that quantify insurtech funding found something interesting about the first quarter. While the total number of insurtech deals remained flat at 59 from Q4 2019 to Q1 2020, according to CB Insights, deal volume fell precipitously -- especially after the coronavirus froze liquidity and strategy.

There are some things that we can extrapolate from that fact. First, perhaps this was going to be a really good quarter for insurtech funding. What was missing from this quarter were the big deals. The longer tail on those maybe led some to be abandoned while smaller deals were closed faster and easier and made it in under the crisis. So it’s hard to say that this represents a leveling off independent of COVID-19’s obvious impact on all business.

Second, though, is that there is money that has been held up and is looking for a new home once this resurfaces. Companies are going to be made or broken in this time period, and unfortunately some will close. They may have been in line to get funding this year. And standing by to soak up that funding could be younger companies that will have started later in the insurtech timeline. Some may have even started as a reaction to the coronavirus crisis.

In its quarterly insurtech briefing for Q1 2020, Willis Towers Watson writes that “It is quite possible that COVID-19 will hasten the closing of another cohort of InsurTech firms; however, if we ever needed a reminder as an industry of the importance of technology, remote functionality, online interaction and digital processes, it is this current environment in which many of us find ourselves.”

That means that a generation of innovation steps could be skipped in part. That means an accelerated transformation timeline for the insurance industry: Solutions will come to market that were reactions to items that never even really got off the ground. And rather than running into organizations and consumers that are reticent to adopt new processes, these companies will be staffed by, and selling to, people who when pressed to adopt rapidly to extraordinary circumstances, learned how to do everything from educate their kids to buy margaritas digitally, en masse.

Willis Towers Watson also pondered whether the drop in funding represented a step down on the hype curve for insurtech. Most of us knew this was a wave, and waves always break, after all. But that doesn’t mean that insurance innovation will end. It’s equally possible that the post-COVID world will have a second wave of insurance innovations that skip the easy stuff and go straight for the major disruptive overhaul of an industry that’s needed more than ever.

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