Ever since I read the Steve Jobs biography, I have been obsessed with Apple's approach to technology. The company's approach to technology can be summarized with one mantra:
Personal Insurance Tech is Improving
My company has been preparing to launch a new commercial insurance technology product in 2016. As any good entrepreneur would do, I had to understand my target market and my competition. I spent a lot of time last year reviewing products and insurance articles. My takeaway: insurance technology is not insanely great. It's not even close, particularly in the commercial insurance market. However, the personal insurance space is edging closer to a technology revolution.
If you read a lot of insurance articles, you will see the same technology topics discussed ad nauseum.
Telematics. This topic focuses on tracking mileage and automotive use through in car sensors. Insurance companies can then use this technology to create usage-based insurance models.
Internet of Things. This topic is an extension of telematics. Imagine all of the things that are out there that now create data. The temperature of our houses are tracked through thermostats. Our heart rates are tracked via watches (full disclosure: I have a FitBit Surge and absolutely love it). Insurance companies can use this data to improve predictions about risk.
Comparison Platforms. There are also a handful of insurance comparison platforms. The two that I track are PolicyGenius and CoverHound. From what I can tell, these platforms mimic the approach made popular by Progressive Insurance: they compare insurance rates. Presumably, insurance carriers are paying for purchases through these platforms.
I'll make one quick prediction and move on to the main point of this article. I believe there is going to be significant push back against insurance companies using data to provide or deny insurance. As I mentioned, I love my FitBit. But guess what -- I don't want to provide that data to my insurance company. Look for regulatory bodies (i.e. State Insurance Commissioners) to push back on the usage of insurance data. (As an aside, here's an idea for a startup. Collect consumer data for consumers and then broker the sale of that data to the insurance companies. Consumers make money and control their data. This model follows Agricultural Technology startup Farmobile.)
Commercial Insurance Tech is Stagnant
When I review commercial insurance technology, I tend to categorize offerings into one of three categories:
Legacy Software. The technology companies in this category have been around for awhile. A couple examples would be Vertafore and Applied Systems. It's interesting that both of these companies focus on pushing "digital agency" as there primary marketing position. Both of these companies now offer cloud software products. But being "digital" is simply the price of playing in the insurance space; true innovation will be developed outside these legacy software systems.
Machine Learning. These are not so much technology companies, as technology initiatives that are primarily being driven by carriers. Most of the carriers I have talked to are focused on three things: improving actuarial tables, reducing risk and maximizing profit. Similar to telematics in auto insurance, carriers will be able to reduce risk and maximize profit by incorporating and understanding more data. For example, weather insurance for farmers has been revolutionized by climate change data. Machine learning will explode in the insurance space in the next ten years.
Next Revolution Insurance Software. This is a catch all category of new entrants into the commercial insurance technology space. I am admittedly biased to this category as RiskGenius falls here. There are a few other companies I track: AskKodiak, Embroker, and Zenefits. There are a lot more of these companies out there. Many of them will focus on creating collaboration with customers and improving experiences. As this segment matures, my hope is that industry analysts start to split commercial and personal technology offerings.
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