Why insurance technology startups are going to Des Moines

Far from the Silicon Valley hub of financial technology, the next great insurance tech idea may be hatched in Des Moines, Iowa.

Since 2015, insurance technology startups from around the world have converged there to learn how to grow their businesses. The Global Insurance Accelerator is a 100 day early-stage startup program backed by major firms including American Equity, Principal and Mutual of Omaha. They’re working on tools make the claims process run better, and new ways to assess risk and detect fraud. The program will graduate its third class this year, and interest among major insurance carriers continues to grow.

“When you look at insurance companies, at the end of the day they’re data companies, and the products they deliver are virtual,” said Brian Hemesath, managing director of the Global Insurance Accelerator, whose fund offers participating startups $40,000 of seed funding in exchange for a 6 percent equity stake. The program is part of a larger trend where insurance carriers are developing their own venture capital arms to support new products from startups.

Hemesath notes that Des Moines, a major hub for the insurance industry, is a good fit to host the program, given that over 60 companies are headquartered there. Cost was not a driving factor, he said, but the low cost of living allows the program to offer free housing to the cohort. In addition to the accelerator program, earlier this year, ManchesterStory Group, a venture capital firm backed by a group of insurance companies from across the country, just began operations in Des Moines.

The startups are developing products for insurance carriers, including those that improve business processes, security and underwriting methods. The 2017 class includes InsuranceMenu, a platform to help small businesses connect with health insurance providers and RE-Sure, a tool that integrates blockchain technology into the insurance sphere.

Roland Chan, a current participant from Toronto said that in addition to workshops on market strategy, underwriting and regulation, what made the program stand out was the networking aspect. Chan is the founder of Find Bob, a machine-learning powered succession and partnership planning platform for insurance agents and financial advisers.

“The first three weeks were speed dating networking,” he said. “We were introduced to over 90 industry stakeholders, carriers, insurtechs and government agencies.”

A demonstration day later this month and presentations to an international conference of over 450 insurance executives will mark the culmination of these efforts.

Hemesath said some key issues are how to develop better underwriting technology (for example, how to assess a customer without a credit score), data sharing including the exchange of APIs, and how the industry can use data from emerging technologies such as wearables.

While early insurance technology innovations were in the consumer space, Chan said the next frontier for them will be to help large companies more easily deliver their services.

“A lot of the early bets have been made on disrupting the consumer experience, but the next wave is going to be about supporting other aspects of the value chain,” he said. “Insurance is one of the oldest segments of financial services that has had the least amount of innovation in the last hundred years — there’s going to be tremendous opportunities.”

5 trends we’re watching this week

5 trends in finance this week

[alert type=yellow ]Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s newsletter .[/alert]

  1. As more pay by smartphone, banks scramble to keep competitive in consumer banking (NYT)
  2. R.I.P. Bitcoin. It’s time to move on (more on the theme that Bitcoin is permanently broken). (Linkedin)
  3. The challenges of insurance in the era of drones, cyberwarfare, and connected wearable devices (TechCrunch)
  4. Young high-earners driving fintech revolution as early adopters of new tools, platforms (ComputerWeekly)
  5. Francois de Lame of PolicyGenius on how to build a digital-first insurance brand (Tradestreaming)

[interview] Paying for the insurance we actually need via a peer-to-peer model

friendsurance - paying for insurance we need
Friendsurance's Tim Kunde
friendsurance’s Tim Kunde

Tradestreaming had the opportunity to chat about the future of insurance with Tim Kunde. He’s co-founder and managing director of Berlin-based friendsurance, a company taking aim at disrupting the insurance industry. It’s doing so by changing the way we purchase and subsequently, behave with insurance coverage.

Tim graduated with a Masters in International Management. He started his career with The Boston Consulting Group, advising various companies on consumer goods and insurance matters. He is responsible for marketing, business development, sales, IT, product, customer support and CRM.


What was wrong with the way traditional insurance worked? Why do you think it was expensive and opaque?

In 2010, the founders of Friendsurance realized that many people own insurance that they don’t or only rarely use. However, insurers don’t reward caution and fair play – even though this means less work and lower costs for them.

We don’t think this is fair.

This is why we have developed a disruptive peer-to-peer insurance concept, which rewards small groups of users with a cash-back bonus at the end of each year if they remain claimless: the claims-free bonus, which has been selected as shortlisted project at Word Summit Award 2015.

How does this all work?

Policy owners with the same insurance type form small groups. A part of their premiums is paid into a cashback pool. If no claims are submitted, the members of the group get some of their money back at the end of the year. The claims-free bonus is available for new insurances and can also be added to existing home contents, private liability and legal expenses insurances very easily – without any change in coverage, premium or provider.

You provide bonuses if groups go claims-free during a period. How does that work? Do policy holders really change their behavior in this model? What’s the role of insurance companies in your model? Do they benefit as well?

how friendsurance works
how friendsurance works

The claims-free bonus can be added to existing insurance contracts: A deductible is integrated into the contract, or rather, the existing deductible is increased to the maximum. The increased deductible comes along with a lower premium. The difference between the old contract without deductible and the new contract with deductible flows into the cash back pool.

The premium reduction allows the cash back in case of no claims. In case of a claim, the policy owner does not have to pay for the deductible himself because it is covered by the pool. Therefore, the policy owner profits from the low premiums of insurance contracts with deductible without having to take the risk of high expenses in case of claims.

As the claims-free bonus rewards careful and fair behavior, we record a claim frequency below market average. For insurance companies, improved behavior means reduced cost of claims and also reduced processing cost for small claims.

Additionally, the claims-free bonus helps to increase customer satisfaction as well as customer loyalty. Currently we are cooperating with approximately 70 domestic insurance partners.

You’re active in Germany — will friendsurance model extend internationally? Do you have expansion plans?

Friendsurance has always been planned as international project. We are currently checking expansion possibilities in other markets.

It feels like the insurance industry is ripe for disruption but fewer firms are focused there. Why do you think that is? Why did you target this industry when you created friendsurance?

That there are few startups may be due to the fact that the insurance industry is still very regulated and lacks trust, making it hard to convince consumers of new ideas. You need long vision and patience. But we can see a change: Recently more and more startups are entering the insurance market.

Can you give readers a taste for what else you have planned with the product/service in the future?

We plan to offer additional insurance categories and expand to other markets.


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