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Insurance Technology is Just Scratching the Surface

by Chris Cheatham | Mar 30, 2016 | Technology | 4 Comments


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It's been a good ride over the last year for the insurance technology ("insurtech") community. In 2015, insurtech raised over $2.6 billion. In the first quarter of 2016, insurtech broke a record for money raised.

And yet, I am looking at the companies that are emerging from these fundraise events, and I keep thinking, "Really, that's it?"

There have been some outliers. Lemonade and other peer to peer companies are interesting to me because they have an opportunity to create fundamentally new technology that connects people and just happens to also provide insurance through the connection. I am still awed by the magic of Uber and I hope a Peer to Peer company can replicate that experience.

But when it comes to other insurtech innovations emerging with funding rounds -- well, I am a bit underwhelmed. I call these companies the Aggregators and the Process Improvers. 


The Insurtech Aggregators 

Most of these companies -- PolicyGenius, CoverHound to name two -- are insurance aggregators. Google Compare also played in this space. These companies have created online marketplaces to compare insurance quotes.  I understand that these companies are an important step in the insurtech industry.  These comapnies provide an online, digital buying experience for users that don't want to work with a human being.  

I am a commercial insurtech guy.  The aggregators do not pose a threat to insurance agents playing in the commercial space.  And frankly, insurance aggregators have been around for many, many years.  


The Insurtech Process Improvers


I have mostly been disappointed in the "innovations" emerging in the form of commercial insurtech companies.  Many (most?) of these companies seem to be replicating the Zenefits business model:  create tangential software and give it away free in exchange for being the broker of record.  For example, many of these commercial insurtech companies will do one to three things with software: 

1. Store your policies for easy retrieval.  
2. Help you fill out policy applications faster.   
3. Retrieve Certificates of Insurance faster.  

Sadly, those three "innovations" are not much more than document management. Will document management be enough to convince hordes of small businesses to switch to an online broker? I'm skeptical.  But I also think its important for people to realize that these "insurance process improvers" are not going to fundamentally change the insurance product.


True Innovation Will Emerge from Insurtech 2.0


Meanwhile, the really hard insurance technology problems are being handled quietly by a small group of insurance technology experts. Yes, I am of course talking about the RiskGenius team, and our policy analytics software solution. But I am also talking about all of the other "quiet" insurtech companies out there that are methodically changing the hard parts of the insurance industry through technology.


So why am I telling you this? I believe the insurance aggregators and process improvers represent the first wave -- Insurtech 1.0 -- and there is much, much more to come. Google has already folded up its Compare aggregator, and you will likely see other Aggregators do the same. The struggles of Zenefits on the health side suggests that Process Improvers have a long way to go on the commercial insurance side. However, Insurtech 1.0 is instructive for no other reason then it will pave the way for Insurtech 2.0.  


I can't wait to see how Insurtech 2.0 starts making sense of all of the data to improve the insurance industry.