Lessons Learned From The First Wave Of Insurtech

Innovation Lessons Learned From The First Wave Of Insurtech Amit Nisenbaum Forbes Councils Member Forbes Technology Council COUNCIL POST Expertise from Forbes Councils members, operated under license. Opinions expressed are those of the author. | Membership (fee-based) Jun 15, 2022, 06:00am EDT | Share to Facebook Share to Twitter Share to Linkedin A seasoned start-up CEO, Frigate Commander and Naval Academy instructor in the Israeli Navy, Amit is currently the CEO of Ahoy! getty Those with firm roots in the world of startups and technology are often critical of more “traditional” legacy industries, which they see as slow to evolve and adapt.

Insurance, for example, has long been viewed by many startups as laggard and ripe for disruption at the hands of new technology. While there is no question that the first wave of insurtech startups has made a positive impact, they should take care not to be too dismissive of what has made insurance into a multi-trillion-dollar global industry . I say that as a career entrepreneur and startup executive myself who is always on the lookout for ways to use technology to improve older systems.

But the insurance business has given us many time-tested fundamentals— i. e. , risk analysis and quality underwriting—which should be preserved, improved and optimized, not deconstructed and disrupted.

Innovators in the insurance industry should keep the following in mind: Seek opportunity. Employ great technology. But maintain the fundamentals.

In short: Be an insurance company first, a tech company second. MORE FOR YOU Google Issues Warning For 2 Billion Chrome Users Forget The MacBook Pro, Apple Has Bigger Plans Google Discounts Pixel 6, Nest & Pixel Buds In Limited-Time Sale Event What Insurtech Got Wrong The first wave of insurtech made landfall in about 2010 and has since shaken the industry. Technology has helped create more personalized insurance offerings, prompting users to enter relevant information and, within moments, receive a price quote for a policy.

Simple and effective, not only for consumers but for the insurtechs as well, enabling them to accelerate claims processing, assess risk faster and meet evolving consumer needs. The insurtech model, though, has perhaps erred in its overall conception of the industry and in its market approach. It believed that legacy insurers weren’t evolving quickly enough in the digital age.

There is truth to that claim considering technology is the primary puzzle piece for improving the industry. But focusing on fast growth and operational improvements rather than improving the quality of underwriting or reducing the risk fundamentals is a mistake that has capped the potential of early insurtechs. Righting The Ship The coming wave of insurtech would be wise to revisit the insurance business’s fundamentals, namely how to improve on actuarial models and how to best put agents’ knowledge and experience to use.

Insurance has, after all, stood the test of time. It is a meticulous and deliberate industry that has demonstrated its value for generations and that’s why 26 property and casualty insurance companies finished among the Fortune 500 in 2021, with 10 of the 26 also appearing on Fortune’s Global 500 list. Insurtechs should draw on the best of what makes an insurance company “insurance.

” While technological advances to the operational side of the business are sure to help an insurtech succeed—reducing administrative and overhead costs while accelerating many processes and improving customer service speeds—it should not be the primary focus. Insurtechs that want to set themselves up for sustained success need to focus on how to power improvements to their risk analysis and underwriting capabilities. AI-powered systems are perfectly poised to have an enormous impact on the accuracy of risk assessment, with their ability to process more data and empower companies to craft better policies.

Writing smarter policies and crafting better coverage plans will enable a company to remain differentiated even once competitors catch up and optimize their administrative and internal operations. Bottom line: To succeed, the coming wave of insurtechs must consider the lessons of the first wave. They should be insurance companies with efficient underwriting models, bolstered—not replaced—by technology.

Keep what works in the insurance business—and plenty does work. That said, there’s no doubt that existing distribution channels, specifically insurance agents, can successfully be supplemented by embedded insurance products, apps and websites to reach customers, but as a total replacement? Unlikely. What Should Insurtech’s Focus Be? The short answer? Specialties.

For my company, it’s recreational boating, where we meld cutting-edge technology, industry expertise and tried-and-true insurance fundamentals. Make your company’s insurance tech unique, too. Don’t provide yet another version of home or car coverage.

Identify what you can offer to eventually become a leader in that market. Yes, defining and capitalizing on coverages that may not yet exist is a challenge—but one potentially worthwhile. After all, the global specialty insurance market size that was valued at $73.

8 billion in 2020 is projected to reach $178. 5 billion by 2030. That’s quite a compounded annual growth rate of 9.

3%. Yet specialized insurance offerings are still scarce since they’re often bundled with standard home and car insurance. But clients still want to know that standing behind their policies are experts who know that specialty’s intricacies.

That’s what my colleagues and I—skippers all—did in identifying maritime/boating insurance as rare, and then filling the void. What is your underserved industry in the multi-billion-dollar market of specialized insurance? Identify it, then get down to tried-and-true basics beyond an app and a website. Make your insurtech one that you sell to customers in partnership with existing distribution channels, like insurance agents and insurance companies through embedded insurance products, and ride the coming waves of the Insurtech evolutions.

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