Insurtech is here
The insurance sector was the last frontier to be disrupted by today’s digital financial revolution. This was primarily due to the centuries-old industry being heavily regulated and slow to change that left few incentives for major insurance behemoths to innovate. So, in the early 2010s, when many Fintech startups were entering the banking, payments, and asset management sectors offering top-of-the-line user experience and a new way for customers to bank, pay, and manage their investments, the $1 trillion insurance industry was relatively unmoved.
It wasn’t until several years later when startup companies began tackling the insurance industry. Suddenly, between 2020 and 2021, a series of insurance startup disruptors emerged and made their debuts in the capital markets completed the financial disruption and confirmed that the Insurtech revolution is here!
The common theme amongst successful Insurtech companies have been using technology such as bots and machine learning to create customer-facing efficiencies and big data to better assess risk and price policies.
In this article, we are going to look at some of the major Insurtech players that have emerged and dominated the renter’s, homeowner’s, health, and auto insurance industries.
Lemonade, a New York-based renter’s insurance startup, pioneered the way for Insurtech initial public offerings (IPO) in July 2020.
Through its website and mobile app, potential customers can get a quote for a renter’s insurance policy for as low as $5 per month. Customers can then pay premiums, renew, and submit a claim all from the app. Lemonade has also pledged to donate underwriting profits to policyholder-selected charities to align its interests with its policyholders’. Doing so was beneficial to reach new insurance buyers and rebrand insurance as a technology-forward, financial security product.
The efficiency, convenience, and its platform’s intuitive design has made Lemonade a leader in the renter’s insurance space competing against traditional players like Allstate and Liberty Mutual. Lemonade began with renter’s insurance but has expanded to offer homeowner’s, pet, life, and soon, auto insurance.
Root, an Ohio-based auto insurance startup, went public through an IPO in October 2020.
I last change my auto insurance in 2015. I deliberately have not shopped around mainly because of the traumatic experienced I went through when I had to shop around for auto insurance. I searched online, submitted countless surveys, fielded multiple agent phone calls, just to be quoted. Instead, I’d be asked for my email and phone number and wait for someone to reach back out to me. It was a clunky process that I did not want to repeat any time soon (or ever).
Root changed all of this. The ordeal I went through back in 2015 was simplified to a 5-minute process, all done within the Root app.
With a clear value proposition in the marketplace, it was no wonder Root’s IPO was the largest in Ohio history!
Clover, a Nashville-based health insurance startup, entered the public markets via a Special Purpose Acquisition Company (SPAC) in March 2021.
Healthcare in the US is a convoluted mess. Health insurance isn’t any clearer. Clover emerged as the ideal option for Medicare-eligible policyholders by providing a transparent shopping experience with affordable plans.
In September 2021, Clover touted enrolling over 26 million members in its Medicare program in line with its mission to provide high quality and affordable healthcare to senior citizens.
Hippo, a Palo Alto-based homeowner’s insurance startup, entered the public markets via a SPAC in August 2021.
Hippo’s value proposition was providing customers a quick and simple way to shop and buy a homeowner’s insurance policy. With a few clicks and a couple data points, it’s smart system can provide customers a quote within 60 seconds and then purchase that policy within minutes.
Hippo also offers smart-home protection capabilities offering new customers a free water leak sensor that can detect small problems that can prevent it from becoming big problems. Hippo is changing the way insurance is viewed by doubling down on preventative measures and focusing on customer service so that claims are closed quickly, and major losses are avoided.
Hippo’s overarching mission is to provide homeowners with a comprehensive suite of home protection products and offering insurance is just the beginning.
The companies mentioned above are just a few with successful exit stories that have pierced and disrupted their respective insurance markets. But the Insurtech market is ripe with many more startups in all sectors of insurance including life, disability, flood, worker’s compensation, and business. This is an exciting time within the insurance market and clear that Insurtech companies are here to stay!