What’s Next for Insurtech? This ITC Vegas CEO Panel Shares Its Forecast
When it comes to Insurtech, for those outside the space, there’s a lot to take in. The capabilities, the technology, the innovation — not to mention the promised insurance solutions Insurtech aims to provide.
To make sense of it, risk and insurance professionals gather each year for the Insurtech Connect conference in Las Vegas. ITC Vegas 2022, held in late September, brought together brilliant minds from across the industry, where they were able to share what’s new and exciting in the Insurtech world with the insurance technology companies themselves.
In one such session, five Insurtech CEOs from bolttech, Corvus Insurance, FinTLV Ventures, Hippo and Next came together to discuss the future of the business, speaking candidly about where they believe Insurtech and its relationship with insurance at large will be heading. Some topics covered included valuations, growth versus profitability, cyber challenges, the debate between going public or staying privately held as a startup, and the rise of embedded insurance.
With the spotlight on Insurtech founders and CEOs given the somewhat disappointing financial results of Insurtechs lately, the session provided many opportunities for discussion and disagreement.
Moderator Gil Arazi, founder & managing partner at FinTLV Ventures, kicked off the session by recognizing the diversity in the various Insurtechs represented on stage, with expertise ranging from cyber insurance and property coverage to distribution models and embedded insurance.
Working Together to Grow
Echoing a key theme that emerged from ITC 2022, the CEOs reinforced the need for Insurtechs to partner together. Rick McCathron, CEO of Hippo, talked about focusing on partnerships between Insurtechs: “We all want each other to succeed, and the market is massive. We Insurtechs need to stick together. We’re all painted with one broad brush. If one fails, we all fail.”
McCathron elaborated on this idea by explaining that the investor community doesn’t truly understand the insurance industry and by extension, the work Insurtechs do. He said the Insurtech community needs to better educate investors on the different value propositions each Insurtech brings to the market.
“We have to do a better job educating the streets on the uniqueness of what we’re doing to modernize the insurance industry. We can’t compare to each other. Insurtechs need to explain what differentiates them to the investor community,” McCathron said.
Guy Goldstein, CEO at Next, spoke about finding a balance between profitability and growth in the early stages.
“Growth is extremely important, and in the early days, you want to grow fast to create scale because scale matters. But even growth needs to be profitable. Every customer you bring in needs to be profitable. Bringing in customers you lose money on doesn’t bring value to the business.”
He broke it down to the bottom line: “The entire company needs to be profitable and return revenue to investors.”
Embedded Insurance Will Drive Future Innovation
Embedded insurance is gaining momentum globally, with recent reports showing the value of the embedded insurance market was about $3 trillion in 2020 — and it continues to grow.
Examples of embedded insurance products include traditional ones like travel insurance sold along with flights and more innovative products like the host protection insurance policy offered by Airbnb.
McCathron noted that 50% of Hippo’s new policies derive from an embedded insurance product. Pointing out this is another place where partnerships are critical, embedded insurance partnerships are a simplified way for products to get to customers the way they want to be reached.
Arazi added how embedded insurance products outside the U.S. are helping people get insurance coverage for the first time. These policies can also act as a way to help uninsured people obtain coverage more easily since they are offered along with a product the individual is already purchasing. Schimek noted that the industry is at the beginning of the embedded insurance journey and far from the end.
Goldstein added to the discussion by citing the benefits of the embedded insurance sales journey.
He explained, “When we provide a 100% seamless and fully digital experience for customers where they don’t need to leave the original website [to purchase insurance], it’s a win. It’s easy for customers and good for the company embedding the insurance because it increases revenue and the stickiness of customers.”
Insurtech 2.0 and the Future of Insurtechs
The panel spent time imagining the future of Insurtechs, describing the next revolution as Insurtech 2.0. Madhu Tadikonda, CEO of Corvus Insurance, described the next stage of Insurtechs entering the marketplace.
“The initial Insurtechs, known as ‘Insurtech 1.0,’ are now evolving, leading to a focus on ‘2.0’ and what this next stage will bring. This is evident within the areas of Insurtech that have a clear need for enhanced data and technology, like cyber,” Tadikonda said.
He continued, “Insurtech 2.0 organizations are cornering their own share of the market and further scaling technology and underwriting capabilities. I expect to see more Insurtechs moving towards the 2.0 model, honing in on those areas where the current offerings don’t work or where risks exist that just can’t be underwritten in more traditional ways.”
Schimek at bolttech had some advice for the Insurtechs and legacy insurers working to build the future of insurance: “Creating the future of any industry, creating the future of the insurance industry, is hard. You’re going to have to have the ability to withstand a lot of uncertainty and challenges. This isn’t unique to Insurtechs. It is really tough for Insurtechs and established players that are working really hard to help people find more ways to protect the things they need to protect in their life,” he said.
“You’ve got to have a really good business model then you have to have balance. If you don’t have the financial discipline to run a company that can achieve sustainable high growth with a clear path to profitability, you’ll struggle.” &