How insurtech startups are challenging the legacy players

How insurtech startups are challenging the legacy players

By Jingyao (Jing) Qiu

Millennials have become strangers to insurance. A 2017 Insurance Barometer Study found that only 52% of millennials have life insurance. Another 2018 study from Google found that only 60% of people age 25-34 have home insurance. Many factors have contributed to this phenomenon, among which is that the multitrillion dollar insurance industry is slow to keep up with the social and economic changes of recent years. The 290-year old Danish insurance giant Tryg recently called for renewal across the industry. Fortunately, the industry has found one solution to their problem: insurance technology (insurtech). Powered by insurtech, a number of insurance startups have emerged in recent years and aim to challenge the incumbent players.  

Insurtechs enable new business models for startups

The development of a number of insurtechs has allowed insurance startups to rewrite the fundamentals of insurance – policy creation, underwriting, and claims management. It has also allowed startups to increase transparency, cut costs, and boost revenue. A number of insurtechs are used to fulfill unmet needs and to improve consumer experience. Below we’ll discuss two examples of how insurtech enables new business models.

IoT allows usage-based insurance (UBI) model for auto insurance:

IoT, or internet of things, is a network of physical objects that has the capability to collect and exchange date via embedded sensors without human interaction. In the case of auto insurance, these sensors allow collection of data that represents an individual’s real-world driving behaviors, such as speed acceleration, time driven, distance driven…etc. These metrics then allow insurers to offer usage-based insurance with individualized rates. Premiums are determined in a more accurate way than demographic profiling. This technology can also lead to reduced fraud, better driving behaviors, and more positive customer interactions. As a result, both claims costs, policy administration, as well as acquisition costs can be reduced. In many cases, the resulting profit can be partially rolled over to the consumers. Metromile represents one of many insurance startups that utilize UBI to create individualized auto insurance. Last summer, it  secured a $90 million Series E co-led by Tokio Marine Holdings and Intact Financial.

Enhanced mobile technology transforms the customer experience:

The advance of mobile technology has changed the way insurers market and sell their products. Not only do millennial customers want more transparency and convenience, they want more direct control of every single step of the process, from their phones. It is not surprising to see that most of the insurance startups offer a mobile application-based platform. Mobile technology has transformed the customer experience. Customers now can receive quotes, report claims and loss investigation information, and even summon insurance agents to their home from their phones. Trōv represents one of many insurance startups that offer so-called “on-demand insurance”. Its app-based service allows quick insurance of personal and work electronic items such as laptops, smartphones and high-end cameras. This five-year-old startup has raised a $45 million Series D this year led by Munich Re, bringing total funding to nearly $90 million.


With the advance of insurtech, we’re now witnessing insurance startups such as Root Insurance joining the billion dollar startup club, after raising $100 million for a $1 billion valuation. As the breadth of insurtech expands, we expect to see more investments in startups in categories such as life insurance, flood insurance, and insurance assessment services. In Q2 2018 alone, there are 71 deals in insurtech investments totaling $527 million. Outside the U.S., Europe begins to emerge as a new insurtech hub, with the number of insurtech deals increasing by 118% in 2017, according to a recent Accenture report. In addition, Asia-Pacific also saw a significant 27% rise in deal numbers, with a 169% rise in deal values. As the pace and breadth of technological development increases, we can only expect the pace of dealmaking in this sector to accelerate, and insurance plans with easy enrollment, flexible coverage, and affordable price.

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