Insider Tech Live Conference
The opening session of Insurance Insider’s InsiderTech Live event focused on the state of the InsurTech market and the evolution and future of embedded insurance. The panel also debated the possibility that although insurance is a very large industry, InsurTech is taking more and more market share away from traditional channels. More insurance will be sold, digitally. In general, the InsurTechs should gain market share over years.
Two companies the panel focused on were Lemonade who wanted to be in multiple lines of business. and Pie Insurance, which specialises in knowing Worker’s Compensation backwards and forwards. So, both companies have different approaches – you can be narrow focused and successful, like Pie, or you can have a broader vision like Lemonade.
At the same time incumbents are spending big, suddenly the leading insurance players are investing significant amounts in technology. All early-stage companies are going to pivot, which means that the ability to be agile and flexible is essential. Typically, that plays to their strengths because they can do that much easier than the big incumbents. On the flip side, there is a degree of nervousness for investors.
There has been an acceleration of IPOs right from some early stage InsurTechs. If you look at their prices, they are struggling to put it mildly and struggled to maintain momentum. The reason for that is the overall stock market is high. Bonds are high because interest rates are low, real estate is high, there is a lot of money in circulation so you have to look at the valuations in insure tech and fintech relative to other sectors. Multiples are high compared to historical values, but the panel remain very bullish on insure tech. It’s a rising tide but it doesn’t mean every company is going to be a winner.
The potential is huge, however, and the example of PayPal was cited. One single payments company is worth more than every insurer tech in the world combined. It shows how much room there is still left to grow in the Insure tech space. Even though valuations are high, insurer tech is still going to be worth a lot more as an industry, five years from now, than it is today.
There is about $60billion of SPAC (Special Purpose Acquisition Company) capital out there looking for appropriate transactions so they are not going anywhere. There will be a lot more in the pipeline, and the frenzy will keep going for a while.
The panel turned to the concept of embedded insurance. One panelist said that people possibly think of embedded insurance as a default insurance or automatic insurance, or just baked into the product, which is a very narrow interpretation or definition of embedded insurance. Others see it as a $3 trillion opportunity.
Embedded insurance is certainly an exciting space. The property and casualty industry is very broad ranging from personal lines to commercial lines to specialty lines so everyone’s definition of embedded insurance will vary based on what product lines you focus on. One member of the panel, which specifically focuses on the small commercial space, defines embedded insurance as the bundling of coverage within the purchase of a product or a service. The insurance product is not necessarily sold to the customer, but instead, provided as an ancillary offering within an overall offering with multiple products.
Another panelist explained that embedded insurance can be extremely customised based on the purchase, at the time of purchase, and also enhancing value of the overall purchase because it is bundled, so it’s no longer an ‘asynchronous transaction’. It becomes something that’s really crafted for what the customer is experiencing at that moment and optimised in a way that is a ‘no brainer’ for the consumer.
According to the panel, all the ecosystems in which we embed our insurance solutions will help drive a more accurate underwriting process. Data is a key element that supports better underwriting, creating a more elegant user experience or journey. The key to success will be making it a no brainer for the customer, not because you are selling it to them in a way where it makes it hard for them to opt out, but because it’s so obvious that they should buy because of the way you’ve distributed and priced it. It’s about the customer.
According to one of panelists: “We built our policy admin system from scratch, and built it to be product agnostic and fully API driven so that any company that wanted to work with us, could just plug in their own front-end software and own it. We just sit in the background from a technology perspective, as the system of record.”
In our next blog on the event, we look at the debate surrounding electronic trading and new risk-based apps that are taking risk management to a new level.