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With the Emergence of Insurtech Innovation, Consumers are the Real Winners

Ravi Shah, Investor, IA Capital Group

With the Emergence of Insurtech Innovation, Consumers are the Real WinnersRavi Shah, Investor, IA Capital Group

Consumers haven’t loved their insurance carriers for decades, but it is only in the past half-decade that “neoinsurers” have emerged to compete with carriers directly. Following Lemonade’s successful IPO, Hippo, Metromile, and Root went public and private insurtechs including Kin and Clearcover have raised hundreds of millions of dollars. While valuations in the public market have cooled from those debuts, there remains a significant valuation disparity between traditional insurers and insurtechs and a robust funding environment for insurtechs with global funding in the first half of 2021 surpassing all of 2020.

"One thing is clear in the battle between incumbents and neo insurers- the customer is the clear winner with more choices and better customer experience"

This has resulted in an accelerated adoption of integrating core insurance offerings into leveraged ecosystems with high contextual relevance, demand and adoption for digital solutions replacing tasks traditionally done in-person, and real-time underwriting solutions for both neo insurers and incumbent carriers. Take embedded insurance for example, incumbent carriers and early neo insurers are partnering with insurtechs to leverage inflection points to reduce the cost of customer acquisitions – think of Matic helping consumers shop for insurance as a part of the home buying or mortgage process, Protecht and Extend embedding purchase protection products into an e-commerce experience at the point of checkout, or Tomorrow helping consumers shop for life insurance after creating a will. Beyond distribution, digital solutions are replacing tasks traditionally done in-person. Flyreel,for example, leverages its AI assistant to guide homeowners through a customized self-inspection of their property using their smartphone camera rather than having a home inspector evaluate a policyholder’s property. The company’s advanced computer vision technology documents property features, as well as risks and hazards for underwriting and claim use cases. Other digital solutions leverage AI and NLP to help automate/accelerate the completion the high-volume administrative tasks normally done in-person (document sorting, data entry, customer service). For better real-time underwriting, insurtechs and insurers are incorporating additional data from public and semi-public sources and automating the decline and routing of submissions to boost quoting capacity.

With neo insurers often having better API connectivity via their modern technology stacks to agent or partner/channel distribution and data gathering and analytics for underwriting & claims, there is more pressure on traditional insurers to adapt and partner with insurtechs. One thing is clear in the battle between incumbents and neo insurers- the customer is the clear winner with more choices and better customer experience.

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