Insurtech funding topped $4 billion in 2018, according to Fintech Global, and is on track to surpass that in 2019 with no signs of slowing down. Do you think there will be an inflection point or bubble where we will see a steep decline in funding?
While funding continues to increase for insurtech, there will be a bubble at some point and funding will settle down a bit. Insurtech is like every other new innovation, technology or solution, follow a hype cycle where buzz, expectations and expected value result in inflated expectations (read more). There’s a lot of hype in the marketplace, and similar to what we witnessed with fintech in the ’90s, we will see reduced funding and many of the startups will evolve/transform, get acquired and many just disappear. When the dust settles, insurance companies will figure out how to get true business value out of the capabilities that were created during the process. There will be awareness in the insurance market that technology can be used to improve bottom-line results, grow new markets and enhance the customer experience.
Why do you think some insurtechs will rise to the top while others fall to the wayside—what qualities do you see in a successful startup?
Many insurtechs are “point of solution” focused. For example, they’re using improved fraud detection or using AI to improve underwriting and rating. Very few companies are looking at the full customer journey, a true end-to-end solution. There are many reasons for this; the primary one being it is way too much for any one company to bite off. But in the end, the companies that can change the insurance mindset will succeed. For example, we have worked with insurers that may launch several “innovation” projects, knowing up front many of them will fail. However, they also know that the few projects that do succeed will drive significant business benefits to the company. Companies that think like this will be leaders in the market.
As a veteran in the industry, working at Vertafore for 10+ years and now Insurity, what do you think has been the biggest inhibitor for the insurance community that’s prevented it from evolving at the same pace as other industries?
The biggest factor and nothing new: dependency on archaic legacy technology systems. In the past, insurance companies did not focus on necessary investments to enact change. They didn’t see them as revenue-generating investments, but rather as unnecessary expenses. In addition, many insurance leaders are from a generation that didn’t grow up around technology. We have seen the impact that technology such as cloud computing anytime/anywhere and AI has had on industries that are fully adopting these capabilities. Finally, there was no real catalyst for change. Insurance companies were not losing money; for the most part, they were running a profitable business. Now that customers have regular experiences with online banking, Uber and Amazon, consumer online expectations have shifted; insurers need to quickly react to a new expectation of conducting business.
And what do you think is the biggest differentiator between what we’ll describe as “winners” and “losers” 5-10 years down the road, particularly when it comes to industry incumbents?
I think that we will declare “winners” based on those companies that recognize the need for change and who build and support an open technology ecosystem – a technology ecosystem where you can interconnect different platforms, like using granular connectors (APIs) and a true digital platform to capture information in a meaningful way to deliver a differentiated customer experience. Many large carriers who have resisted the cloud in the past now see the cloud as a core component in their technology plans to enable security, speed to market and efficiency.
Insurity is a 2019 sponsor of The Council of Insurance Agents & Brokers’ Insurance Leadership Forum (ILF), Dig-In conference and InsureTech Connect (ITC). What does Insurity hope to achieve at these industry events—brand awareness, funding, connections, etc.? How might a small brokerage or early-stage startup leverage these events?
Industry events afford the Insurity team a unique opportunity to achieve multiple objectives in one place. Events are a great way to learn about trends and innovation in the marketplace. These are well attended by dozens of industry experts and market leaders. Attending industry events offers an opportunity to deepen our knowledge of the market and validate the investments we are making in the industry. Events such as ILF also allow us to spend quality time with industry experts, insurers and business partners. For smaller companies, they can leverage the same benefits at events that can be categorized into four areas: education, influence, business development and partnerships. Insurity began as a DOS-based system called “Gen-a-rate” in 1985. We have strived to stay ahead of the curve—from MS-DOS to Windows to .NET, to callable web services, to cloud-based hosting to now creating granular, RESTful APIs that help our clients and partners leverage an open ecosystem and integrate with multiple technologies and sources of information. To paraphrase Steve Wozniak talking about Apple at the Dig|In conference: “We built computers to make humans better.” At Insurity, we pursue a similar objective: “We make technology to simplify insurance.” The evolution of our product offering has been driven by the fact that there is no more “owning the stack.” Applications need to be able to integrate backward and forward with both new and existing systems. They must be stable, secure and scalable, and you have to be able to execute them across an ecosystem of multiple systems. Insurity has over 20 years of experience with cloud implementations which has propelled us to be the dominant cloud provider in the insurance core system marketplace. Leveraging our leadership in digital enablement, data analytics and regulatory maintenance allows our clients fast and secure access to the best solutions, through the most advanced technology infrastructure available.