In the rapidly evolving landscape of insurance, technology-driven advancements, collectively known as InsurTech, have been pivotal in reshaping the industry. One of the key factors driving this transformation is the strategic use of diverse data sources. InsurTech companies are now leveraging a myriad of data types, including traffic data, user personal information, weather data, open databases, closed databases, and more, to revolutionize the risk assessment process. This data-centric approach is not only streamlining operations but also promising quicker resolutions, cost-effective pricing, and superior services for clients.
TL;DR – there is a lot of empty space in the tech insurance industry! Using the provided list below, it’s easy to spot empty spaces where new startups can thrive and innovate. So let’s get going!
What insurance companies do
Insurance companies handle risk for their clients. Instead of the client taking the risk on himself, for a given free, the insurance company takes the risk and insures the customer that if any of the given risks materializes, they will incur all the costs involved.
Insurance types
Here’s a list of insurance company types based on the types of risks they cover, along with a brief explanation of each, and some examples of incumbents:
Life Insurance Companies:
Explanation: Provides coverage for the death of an insured person and pays out a benefit to beneficiaries.
Examples: Prudential Financial, MetLife, New York Life.
Health Insurance Companies:
Explanation: Covers medical expenses and sometimes preventive care, prescription drugs, and other health-related expenses.
Examples: UnitedHealth Group, Anthem, Aetna.
Auto Insurance Companies:
Explanation: Protects against financial loss in the event of a car accident or theft.
Examples: State Farm, GEICO, Progressive.
Homeowners Insurance Companies:
Explanation: Provides coverage for damage to a residence and personal property inside the home.
Examples: Allstate, Farmers Insurance, Liberty Mutual.
Property and Casualty Insurance Companies:
Explanation: Covers a range of property-related risks, including damage to property and liability issues.
Examples: Chubb, Travelers, Zurich Insurance Group.
Business Insurance Companies:
Explanation: Offers coverage for various risks that businesses face, including property damage, liability, and employee-related risks.
Examples: The Hartford, Nationwide, Hiscox.
Travel Insurance Companies:
Explanation: Provides coverage for unexpected events during travel, such as trip cancellations, medical emergencies, or lost luggage.
Examples: AIG Travel, Allianz Global Assistance, World Nomads.
Pet Insurance Companies:
Explanation: Covers veterinary care expenses for pets, including illness, accidents, and preventive care.
Examples: Nationwide Pet Insurance, Trupanion, ASPCA Pet Insurance.
Cyber Insurance Companies:
Explanation: Protects against losses from cyberattacks, data breaches, and other cyber threats.
Examples: AIG, Beazley, Chubb.
Professional Liability Insurance Companies:
Explanation: Covers professionals against claims of negligence or malpractice in their professional services.
Examples: Hiscox, CNA Financial, The Hartford.
Surety Bond Companies:
Explanation: Provides financial guarantees to ensure that a party will fulfill its obligations under a contract.
Examples: Travelers, Liberty Mutual, The Hartford.
Flood Insurance Companies:
Explanation: Covers damage caused by flooding, which is typically not included in standard homeowners insurance.
Examples: FEMA National Flood Insurance Program (NFIP), Allstate, USAA.
Given this comprehensive list, it appears there’s a lot of room for innovation in the field of insurance!
Notable Disruptive Insurance-tech startups
Some notable insurance-tech startups that are disrupting the industry include:
Lemonade is an insurance company established in 2015, with a market cap of $4.8 billion as of August 2021 and having raised $319 million as of July 2021. The company was founded by Daniel Schreiber and Shai Wininger. Lemonade offers various types of insurance, including homeowners, renters, condo, co-op, and pet insurance. It is known for its digital-first approach, using artificial intelligence for claims processing and operating mostly online and through its mobile app. Lemonade is a Public Benefit Corporation and a certified B-Corp, with a social impact being part of its legal mission and business model. The company’s unique business model involves taking a flat fee, paying claims quickly, and giving back the remaining money to causes selected by policyholders. Lemonade has received positive reviews for its easy-to-use mobile app and AI-enabled claims process, making it a good fit for tech-savvy policyholders. However, it may not be suitable for those who prefer in-person agents and a traditional insurance experience. The company’s Giveback program allows policyholders to direct part of their premiums to charitable organizations. Lemonade has donated over $6 million since 2017 through this program. While the company has received some consumer complaints and has limitations on the availability of its policies, it has also been praised for its transparency and social impact initiatives.
Hippo is a home insurance company that offers tech-friendly coverage. It has received mixed reviews, with some customers praising its quick and easy service, competitive prices, and coverage for smart homes and electronics. However, others have complained about frustrating claims experiences, unexplained rate hikes, and denied payouts. The company is relatively young and BBB-accredited, but has also faced a high volume of complaints. While it offers 24/7 claims reporting by phone, some customers have expressed disappointment with its limited online presence and contact options. Hippo’s website is easy to navigate, but not all pages provide comprehensive coverage details. The company’s goal seems to be providing quick and easy insurance solutions, particularly for tech-savvy homeowners, but it faces challenges in terms of customer satisfaction and complaint resolution.
Next Insurance is a relatively new company, having been founded in 2016. Next Insurance handles various types of insurance, including but not limited to:
- Business insurance
- Construction insurance
- Child care insurance
- Fitness insurance
- Hired and non-owned auto insurance4
Next Insurance is an online-based business insurance company that allows the purchase of policies individually or in tailored packages. The company handles its own claims and is independently rated by AM Best. It is known for its all-digital approach to managing insurance coverage, providing easy online service and support. Customers can submit insurance claims directly through the online customer portal. However, some customers have reported issues with the company’s customer service and claim handling.
Root Insurance is a car insurance company that was founded in 2015 by Alex Timm and Dan Manges. It is a technology company that uses mobile technology and data to offer personalized car insurance rates based on individual driving behavior. The company went public in 2021 and is headquartered in Columbus, Ohio. Root Insurance primarily targets good drivers and offers up to 52% lower premiums for them. The company provides services such as test drive-based car insurance, and it is known for its usage-based insurance model, which tracks driving behavior through a mobile app. As of December 2023, the market cap of Root Insurance is approximately $2.6 billion
Ethos (website restricted to specific countries):
Ethos aims to make life insurance more efficient by simplifying the application process. Users can apply for a policy in just 10 minutes without the need for medical exams or meetings. It is a digital insurance agency that specializes in no-exam life insurance, issuing policies from companies including Legal & General America, TruStage, and Ameritas. It was established in 2016 by Lingke Wang and Peter Coli. The company offers term and whole life insurance policies with coverage amounts ranging from $1,000 to $30,000, and in some cases up to $2 million for term life insurance. Ethos is rated A+ by the Better Business Bureau and has a stellar rating of 4.7 out of 5 stars on Google based on average customer reviews. The company’s target market is U.S. citizens between the ages of 20 and 85, residing in any state except New York. Ethos only offers life insurance policies and does not underwrite other types of coverage such as auto, home, pet, or umbrella insurance. The company’s services include free wills and estate planning for policyholders. Ethos offers a fully digital application process, and most people who qualify for coverage don’t need to take a medical exam. The company uses data such as motor vehicle records, family medical history, and current drug prescriptions to calculate eligibility and set rates. The insurer earned points for its online application process, term life coverage, and added benefits of including free will and estate planning tools with eligible policy purchases.
Zego:
Zego is an insurance company that offers flexible insurance solutions for self-employed drivers, delivery drivers, and fleet managers. They provide app-based cover for drivers, including private hire insurance and delivery insurance. Zego has received mixed customer reviews, with some praising its services and others expressing dissatisfaction with the company’s customer service and pricing practices. Additionally, there are some concerns and complaints about the company’s insurance options and charges. While the search results do not provide the requested details, they offer an overview of Zego’s services and customer feedback.
These startups are disrupting the insurance industry by leveraging technology to offer faster, more convenient, and more personalized insurance products and services to customers.
Types of Data Used by InsurTech Companies
Traffic Data:
InsurTech companies are tapping into real-time traffic data to gain insights into driving patterns, accident-prone zones, and overall road safety conditions. Telematics devices and mobile apps collect data on driving behaviors, such as speed, braking habits, and distance traveled. Analyzing this information helps insurers assess the risk associated with individual drivers more accurately, leading to personalized and fairer pricing models.
User Personal Information:
By harnessing user personal information, InsurTech firms create a comprehensive profile of their customers. This includes demographic details, lifestyle choices, and historical insurance data. Analyzing this information enables insurers to tailor insurance packages to individual needs, ensuring a more precise risk assessment and allowing for personalized coverage.
Weather Data:
Weather conditions play a significant role in various types of insurance, from property to travel insurance. InsurTech companies are integrating weather data into their risk models to anticipate and mitigate potential risks. This proactive approach not only improves risk assessment accuracy but also enables insurers to offer timely assistance and advice to clients in the face of adverse weather events.
Open Databases:
InsurTech firms are tapping into publicly available data sources to enrich their understanding of risk factors. Open databases provide a wealth of information, from public records to market trends, enabling insurers to stay informed about potential risks and market shifts. This data-driven intelligence enhances decision-making processes and allows for more agile responses to emerging risks.
Closed Databases:
In addition to open databases, InsurTech companies are increasingly gaining access to closed databases, often through partnerships with other industries or organizations. These proprietary data sources offer unique insights and a competitive edge in risk assessment. Collaborations with healthcare providers, for example, enable insurers to access medical histories and predict health-related risks more accurately.
What’s next for InsurTech?
While we have reviewed most available insurance offerings, it appears that some types of insurance (e.g. flood insurance) are not well represented in the tech insurance landscape. We’ve reviewed only a handful of insurTech companies, that represent the majority of the available opportunities in the insurance space.
The fusion of diverse data sources is propelling the insurance industry into a new era of efficiency and customer-centricity. InsurTech companies, armed with insights from traffic data, user personal information, weather data, open databases, closed databases, and more, are transforming the risk assessment landscape. The result is quicker resolution times, more competitive pricing models, and enhanced services for clients. As technology continues to advance, the marriage of data and insurance is set to redefine industry standards, offering a promising future for both insurers and their policyholders.
Given that the insurance space is so huge, even the “smaller” opportunities may be good targets for thriving entrepreneurs. So review the incumbents well, and select which field you’re interested in attacking. Even if there are several established “tech” competitors, be sure that the market is probably big enough. There’s still a lot to innovate in terms of technology, access to data, etc.
Given the evident gaps above, it is clear we are sure to hear more from this industry. There are open gaps to be filled, and I am sure that hungry entrepreneurs will step in.
Leave a Reply
You must be logged in to post a comment.