Who’s afraid of InsurTech: An overview of the industry

top insurance startups

Q1’16 topped the record for seed and A investments in InsurTech startups by VCs. Investment in insurance tech startups rose from $800m in 2014 to more than $2.6b in 2015, according to the Financial Times.  

With the hype, some pundits are trying to ring the alarm bells, claiming incumbents are threatened by agile newcomers. According to a recent report by PwC, nine in ten insurers fear losing part of their business to technology companies.

Are those fears substantial? Though we might be drawn to the David vs. Goliath narrative, or enticed by the prospect of big corporations facing “death by a thousand papercuts,” neither metaphor is accurate.

CB Insights insuretech ecosystem

Power not shifting anytime soon

Using data from CB Insights, we classified the leading insurtech companies according to their attitude towards current incumbents.

Out of 124 companies, 31.5 percent have positioned themselves as partners to incumbent players. Analyze Re, which provides real-time analytics technology meant to improve pricing and planning of reinsurance contracts, is an example of a partner-friendly insurtech startup

40.3 percent of top insurtech upstarts are considered reformers. Reformers don’t aim to replace the current market participants, but they do provide an analytical and comparison layer for customers to find the right insurance products at the best terms. That being said, reformers do have an effect on margins, as they add transparency and ease-of-use to the ecosystem. PolicyGenius, which offers customers advice, quotes and comparison, and easy online applications for various kinds of insurance is a good example of this category.  

Only 28.2 percent of companies in the dataset are challengers, actively taking on the status quo. This category includes new digital native insurers like Oscar Health.

That means over 70 percent of insurtech startups don’t directly threaten incumbents, giving current leaders in the space plenty of time to develop their own responses to demand for new technologies.

Incumbent-lead innovation

Incumbents aren’t content taking a back seat in the innovation process, though. Many of the world’s largest insurers, including Aviva, Axa, Allianz, AIG, MetLife and XL Catlin have established their own in-house venture capital funds. Startup deal making by insurance firms is on pace for a record high in 2016, according to CB Insights data.

Many insurers have also opened their own incubators and innovation programs to keep pace with the startups. Insurance giant Allianz has a digital accelerator program to tackle the group’s digital challenges. AXA opened up AXA Labs in 2013, and has invested 950 million euros in digital technology since, according to Bloomberg Intelligence.

Even with the investments in innovation, legacy insurers should focus on retaining, servicing, and growing their customer bases. According to a 2015 survey conducted by IBM, only 43 percent of customers trust the insurance industry. To counter this perception, insurers must improve their image to build trust with today’s consumers.

In recent years, technological and social trends are changing the needs of customers and the way insurance companies operate. The rise of the sharing economy, for example, gave birth to pay-as-you-go policies. The consumer’s demand for mobility and transparency puts an emphasis on multi-platform digital experiences for managing policies.

On the operational side, connected devices in homes, cars and on consumers themselves allow insurers to collect and analyze far more data than was ever possible. This, in turn, could allow them to personalize coverage, better tailoring policies to the consumer, while also reducing their underwriting risk.  

“Added together, these digital trends offer insurance companies an opportunity to stretch their businesses beyond the boundaries of traditional insurance,“ states Accenture’s Technology Vision for Insurance 2016 report.

The plethora of technological trends will change the way the insurance industry operates and services its customers. The degree to which insurers react to or embrace these changes can be the key to their success.

How to get millennials to buy life insurance

Insurance, so they say, is the next fintech frontier. And yet, all of the hype about insurtech is forward-looking; as of May 2016, insurance remains gloriously non-technological.

Though internet insurance has, to a certain extent, changed the insurance landscape, human agents still dominate the insurance market. In fact, it would seem that far from shrinking, the industry is acquiring more and more human personnel: from 2004 to 2014, the number of insurance agents, brokers, and service employees in the US ballooned from slightly over 879,000 to 1,007,000.

Has the influx of insurance agents helped boost insurance sales? Not in the life insurance sector, it hasn’t. Bloomberg’s Ben Steverman summarized McKinsey & Co. findings on why life insurance sales are plummeting: “complex and confusing products, paperwork that takes forever to fill out, salespeople who push their wares rather than provide objective information.”

PLummeting life insurance sales
per Bloomberg

For now, then, the insurance industry is stuck in a particularly dull limbo: on the one hand, traditional insurance sales techniques aren’t working, and certainly aren’t drawing in millennials. On the other hand, insurtech, set to revitalize the industry, isn’t quite in place.

So until the insurtech revolution begins, here are 3 steps insurance companies can take to encourage millennials to purchase life insurance today:

Take a page from big banks

As part of their greater move to cut costs and boost efficiency, banks are closing down bank branches like crazy and moving more and more of their services online. In a recent podcast interview, Jamie Dimon revealed that Chase’s online banking platform, Chase Online, has 30 million users as of May 2016.

Insurance companies have everything to gain by following in big bank’s footsteps and gravitating their services online: they’ll reduce costs as well as become more accessible to millennials, who are key drivers as early adopters of digital payments over cash and cards. At the end of the day, millennials are accustomed to simple, intuitive apps that allow them to make business transactions online. If insurance companies fail to take their first digital step by at least partially moving to internet sales, they risk being left behind when some of the new insurtech startups gain traction.

Get on top of your storytelling

As with any brands looking to engage millennials, insurance companies should create arresting content across social media platforms. In particular, life insurance companies should be – but aren’t – utilizing media platforms like YouTube as well as more nascent video platforms such as Instagram and now Snapchat to convince millennials that life insurance isn’t a luxury, it’s a necessity.

Trov, an on-demand insurance platform for single items, has shown that the insurance industry can create short, beautiful video ads that demonstrate why you need home owners insurance. Of course, Trov has the advantage of being an app that’s incredibly simple to use, making its argument all the more compelling: insuring your possessions is important, relatively cheap, and can be done with a single swipe – why wouldn’t you insure?

However, even without the seamless mobile app and the low price tags Trov has to offer, life insurance companies can generate moving video content about the impact of life insurance on families and friends. A video depicting the loss of human life and its financial consequences has at least as much potential to engage millennials and go viral as a video depicting the loss of a guitar, no matter how beloved.

Build/join communities

Ben Steverman is right – life insurance is a major “life-and-death financial decision that no one wants to think about.” Nevertheless, if life insurance providers succeed in creating powerful narratives about loss and its financial wake, their online platforms have the potential to become a safe space for millennials to share their grief and learn about end-of-life financial decisions.

One company that was able to grow their exposure and the trustworthiness of their brand through community facilitation is American Express. The company’s OPEN Forum provides advice, content, and resources to small businesses, and also serves as a platform on which small business owners can share their stories. With 400,000 Facebook likes and 202,000 Twitter followers, Open Forum proves that growing a committed online community around financial topics is doable and very worthwhile.

However, even insurance companies that don’t have the resources to set up their own online greenhouse for communities can get in on the action by joining existing digital conversations on death and dying. Reddit, for example, has a thread called Death: Let’s Talk About It. If life insurance companies enter this type of community respectfully and offer concrete financial advice to people who are dealing with death and grief, these companies have the potential to gain grateful, loyal clients.

Photo credit: Internet Archive Book Images via VisualHunt.com / No known copyright restrictions

Lemonade, insurance, and banking mashups

P2P Lending's Developing Debt Market


Lemonade, the hiring-like-crazy, raising-money-like-crazy, getting-PR-like-crazy insurance startup just added another big name to its roster. In addition to the minions of execs the company recruited out of AIG, the p2p insurer just hired behavioral economist, Dan Ariely. The Duke professor is probably best know for his wacky, creative experiments that populated the pages of the books he’s written about our irrational financial behavior.

Ariely’s role at Lemonade is technically titled “Chief Behavioral Officer”. So, ostensibly, his role will be to help develop the user aspects of the insurance platform to ensure it provides enough billion dollar triggers to get users addicted to the platform and turning to it for repeated dopamine hits.

“If you tried to create a system to bring out the worst in humans, it would look a lot like the insurance of today,” Ariely said in a statement. “We’ve spent recent years deepening our understanding of honesty and trust, and our conclusion is that insurance is crying out for a makeover.”

While the hype machine is working overtime, we don’t have a lot of details yet what p2p insurance (or at least, Lemonade’s flavor of it) really looks like. We aren’t without clues, though. We do know that there is some type of reinsurance scheme (Buffett’s Berkshire Hathaway has its hands in it) and the firm has said that it won’t make money by denying claims. So, if in fact, the firm is collapsing the 3-tier insurance stack, it will have to allay fears that the company won’t be around to payout when a claim is made. The big funding round, the name-brand reinsurers, the executive migration — all may be necessary parts of the Lemonade gameplan.


A couple of years ago, Simple (then called Bank Simple) was billed to be the future of banking. Simple was a really nice user interface that sat on top of the banking stack but never quite impacted the industry the way some had hoped.

Number26, a Peter Thiel-backed next generation German bank, is another attempt at creating the bank of the future. Instead of building a vertically-integrated bank, some banks like Number26 are taking the mashup approach: integrating with various services and product providers to provide more comprehensive service. Number26 is integrating Transferwise, a p2p currency exchange, so that clients of the bank can exchange currencies easily within their accounts.

Marc Andreessen, founder of Netscape and considered by some as smart VC money, once boasted that he’d fund anyone who wanted to start a full digital bank. That spurred a pretty vigorous conversation about whether a truly disruptive bank needed to be built completely from the ground up or a virtual bank could be produced by doing away with branches and just creating digital hooks into banking infrastructure.

Because of the costs and complexities in building a full banking technology stack from the ground up, many banking startups, like Number26, are taking the approach of integrating their money apps into other non-financial apps (like Qapital recently did by integrating on IFTTT). This can essentially take a banking app with limited functionality as a standalone and back it into being a much more robust offering.

Number26’s co-founder and CEO Valentin Stalf says its ambition is to create a single app that integrates the services of multiple fintech startups, providing an aggregated showcase for the best emerging alternatives to traditional banking services on a single screen.

trov’s Scott Walchek on designing the world’s first on-demand insurance for single items

trov inventory and insurance app

Scott Walchek is CEO and Founder of trov

What is trov and what was the genesis story? What was the inspiration behind starting it?

Scott Walchek, trov
Scott Walchek, trov

Trov is an application and digital insurance platform that together reinvent the way people insure their things by harnessing the information about all they own. Designed for the emerging generations of digital natives, Trov completely redefines the way people protect their possessions by letting them choose just the things they care to protect, and engage insurance for as long as they need it – a year, a month, a week, day, hour…whatever.

Together, the Trov app and platform enable the world’s first on-demand insurance for single items and feature micro-premiums, micro-duration policies, and entirely disintermediated claims – all from a smartphone. This “streaming insurance” will empower numerous new use cases including automatically turning-on protection based on date, time, location, and event.

In 2010, for the first time in history the make up of Global Household Wealth was evenly split between financial assets (cash and its myriad equivalents), and tangible assets (personal and real property) [from 2011 Credit Suisse Wealth Databook]. It intrigued me that while there were innumerable tools for analyzing and managing financial assets, there were no similar and simple tools for managing tangible wealth. That intrigue was followed by a recognition that there was enormous value latent in the information about the things that people own – and if we could capture that information and give people agency over it on their mobile devices, then we could positively impact numerous substantial markets. The first of these market disruptions would be in the P/C insurance space where emerging generations were demanding their financial services be delivered on their mobile devices, on-demand, and a la carte.

Insuring belongings has traditionally been hampered by the inefficiency of cataloguing all our stuff. How does trov change all that? And in doing so, how does the role of insurance change?

One of the biggest problems with traditional home contents insurance is that people pay a set amount of money year on year, without many questions, yet are often unsure what is actually being covered. We frequently hear of incidents when people report claims for their belongings and then their most valuable items are not actually covered.

Trov provides on-demand protection for the things that are important to you and you always know exactly what is covered and in what situations. Instead of trying to document all of your important items after an incident occurs, Trov makes it ridiculously easy to collect and update information about the things that are important to you – as you acquire them. You are then given the option to easily “swipe to protect” the items that are most important to you and then easily “swipe to unprotect” items that you may have discarded, sold or have lost value to you.

Furthermore, we’re working on opportunities for adaptive protection that is adjusted based on your situation. Imagine having insurance for your skis turned ON automatically when the ski season begins and OFF in the Summer, when you no longer need the same level of insurance.

The role of insurance will change from a once-a-year transactional relationship to a more active ongoing relationship with your things –  protecting just what you want, when you want – so you can get back to enjoying them.

What were some of the challenges in making insurance as easy as interacting with our phones? How did you solve for them?

Trov is 100% mobile, meaning it has no desktop/browser version.  This is a self-applied constraint that has forced us to be very selective in the features we introduce. Furthermore, by keeping the application entirely mobile, it has actually allowed us to introduce more unique features that are only available on mobile devices. These include things like taking photos with the app, detecting location for your home, scanning barcodes and receipts. If we had a desktop version, then none of these features would be possible.

Insurance today is bogged down by heavy process and forms, often requiring the need to talk directly to a person. By moving the entire process to the phone we’re making getting insurance as simple as a ‘1-click’ Amazon purchase. What’s more, claims can be as simple as a quick text message exchange with reimbursement or shipping of a replacement item happening in minutes – instead of days or weeks.

By placing the entire insurance process on a phone, we quickly realized which processes were absolutely necessary and which were simply functions of an arcane insurance model. Needless to say, we discarded what wasn’t necessary and made the entire process much simpler.

What’s in store for 2016 for you and trov?

In 2016, we will begin to roll out our on-demand insurance platform.  Limited release launch will take place in Australia and the UK in the first half of 2016.

Photo credit: Seattle Municipal Archives via Visualhunt.com / CC BY

The Startups: Who’s shaking things up (Week ending January 3, 2016)

fintech startups shaking things up

[alert type=yellow ]Every week, Tradestreaming highlights startups in the news, making things happen. The following is just part of this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming newsletter.[/alert]

Protect your downside and follow these 20 top insurance startups in 2016 (Tradestreaming)
Our list of the top insurance technology, or insurtech, startups to keep an eye on this year.

2015 Automated Platform Performance Review: Betterment vs. Wealthfront (Meb Faber)
Meb Faber with some good analysis on how Betterment performed this year vs. Wealthfront (and where Schwab and Vanguard come in)

San Francisco-based Credit Karma acquires mobile notification startup Snowball (BizJournals)
Snowball acts as a universal inbox for all incoming chats. “We’re seeing a huge movement of consumers toward mobile, particularly in younger demographics. Android is a key platform for us,” Credit Karma Chief Technology Officer Ryan Graciano told TechCrunch. “And these guys have really amazing experience on Android, in particular.”

Startups raising/Investors investing

Digital financial advice firm NextCapital raises $16M in funding (Chicago Tribune)
Chicago-based NextCapital, which helps financial institutions offer automated financial advice for investors, said Thursday it had raised $16 million in Series B financing.

AXA Strategic Ventures invests in four startups (PEHub)
AXA Strategic Ventures said it made four new investments during the second half of 2015. They include Bee, a mobile-first, in-person bank; Price Method, a predictive analytics company; GoldBean, which provides advice, education and low-cost trading for financial beginners; and CoPromote, a programmatic influencer marketing platform.

Ayannah raises $3M (Deal Street Asia)
The firm announced last October that it intends to offer the full stack of digital payment platform from payments, commerce, analytics, to spur financial inclusion in emerging markets like the Philippines.