Insurtech in 2020: What’s on This Expert’s Radar
At the crossroads of insurance and technology, Insurtech startups entered the industry a few years back with the promise of innovation and disruption to the insurance model. Now, technology has become a vital part of how insurers do business.
“I spent several years researching and analyzing the insurance industry and discovered just how truly outdated the industry was during my time working on insurance at McKinsey,” said Assaf Wand, co-founder and CEO of Hippo Insurance.
“From sales to claims, the entire process was fragmented, with no real focus on the end-customer,” he added.
Hippo, a technology-driven homeowners insurance company, was designed with this in mind.
“I believed Hippo could make a profound difference, but in order to do this, we had to re-imagine the entire process and build it from the ground up,” explained Wand. Technology played a huge role in creating the company, as well as placing the customer and their preferences at the center of how policies were underwritten.
Wand sat down with Risk & Insurance® to discuss what 2020 might look like for the Insurtech landscape, from changing standards for new startups to the utilization of off-the-shelf insurance tech tools.
What were some of the significant changes/developments in Insurtech that occurred in 2019? How might these changes/developments continue to impact the insurance industry as we move into 2020?
This was a defining year for Insurtechs and set the pace for what’s to come.
Insurtechs in 2019 began to understand the true complexity of the insurance industry as well as the difficulty in earning an underwriting profit. As such, we’ll see more Insurtechs becoming tech providers as opposed to direct-to-consumer product providers.
We’ve also seen major partnerships formed; there have been completely new Insurtechs brought to life incubated inside legacy incumbents — take Arturo, one of our most formidable partners this year.
There have also been continued investments made into Insurtechs by larger players, reinforcing the idea of what could become more M&A deals in the future. After the biggest acquisition in Insurtech history in 2019, there will be a continued shifting of the playground between legacy incumbents and disruptive players, and that will no doubt lead to the creation of more billion-dollar companies.
Looking back a bit further, how have Insurtech companies evolved over the last several years? Has Hippo Insurance also grown with the changing landscape?
Insurance is one of the most highly regulated industries out there, and thus it takes time to expand at the pace of tech-enabled businesses in other sectors. It took Hippo nearly two years to launch into our first state, California, as we built out a fully proprietary policy management system and reinsurance partnership. We’re also in the business of protecting someone’s most valuable financial asset, which is why we built our home insurance products with the customer at the center of everything (from type of coverage to pricing).
We’re in 20 states and expect to be in over 35 by the end of next year. This coming year, I expect the Insurtech winners will be defined across verticals who have exceeded the expectations of their customers and are catering to new economic demands.
What are some of the top concerns/challenges Insurtechs might face in the new year?
This was a year of grounding in Silicon Valley where growth for the sake of growth is no longer enough to drive the validity of large-scale valuations.
There will most likely be more scrutiny on Mega Rounds and less frothy evaluations in the future. Startups will have to prove themselves against the path to profitability. The public market has undergone more scrutiny this year — and the private sector is starting to follow suit.
What are some of the top innovations in Insurtech to keep an eye on in 2020?
From an underwriting perspective, we expect there’s going to be a transition from big numbers to big data, which will allow for a more granular approach to pricing risks.
For home insurance specifically, underwriting risk has traditionally occurred at the zip level, and big data allows providers to zero in at the property level to help customers receive more comprehensive coverage.
So what’s in store for Insurtech in 2020?
There will be even more recognition that full stack innovation is necessary for Insurtechs to take full advantage of opportunities and growth trajectories.
The utilization of off-the-shelf insurance technology may give Insurtechs a competitive advantage over legacy carriers but will likely be insufficient to give them a competitive advantage over other Insurtech providers. This pace of innovation will lead to more owning of technology over renting of technology by Insurtechs.
We’ll also see a continuation of mergers and acquisitions — we expect that the market will begin to identify the category leaders in an attempt to acquire them, which will create a scarcity of M&A in our space.
It’s an exciting year ahead for the insurance industry, including Insurtechs. We at Hippo have just closed our first acquisition, bringing Sheltr’s protective home maintenance platform and full team in-house, to further our mission of helping homeowners protect and insure their homes. As we and others in the industry make strides to bring the customer back to the center of the insurance product we’re eager to see a shift across industry as a whole. &