The path to success is different for each business and is in part determined by a variety of unique factors. While there are general indicators of progress, it is the specific details of each company’s strategy, processes, products, services, and financials that make all the difference. This is especially true for so- called “disruptors” that defy traditional convention and trailblaze a new path for others to follow. In the insurance industry, the emergence of InsurTech companies has opened the door to a world of previously unimaginable possibilities. New technology has changed the way carriers evaluate risk, write policies, pay claims, and engage with customers. As the industry continues to change at lightning speed, there are many InsurTech companies with innovations searching for a path to market. While there is no one size fits all approach, the experiences of companies like Lemonade and HIPPO have uncovered common challenges experienced when coming to market. To help clients, prospects, and others, JLK Rosenberger has provided a summary of the key details below.
Key InsurTech Challenges
- Product Positioning – One of the most common challenges faced is a lack of understanding about the product’s pitfalls. Many Insurtech’s assess value based on how the products make it easier or better when compared against the old way of doing things. While important, if it does not facilitate an increase in production, or alternatively, a reduction in loss ratio, the perceived value diminishes. In other words, the technology should help change the bottom line of insurance companies. Drawing a clear line between the product and bottom-line impact will ensure success when coming to market.
- Business Structure – Since many InsurTech companies elect to enter the insurance markets as Managing General Agents (MGAs), many considerations need to be made in the early stages. These include which carriers to represent, coverages to offer, and the steps involved in establishing a presence across all 50 states. The last point is important because many MGAs pay for presence, meaning they do not have any business in the state but must meet various filing requirements.
- Carrier Reporting – Since many InsurTech companies are primarily focused on technology, the knowledge about the insurance industry and operational rules are often acquired later in the process. Unfortunately, this lack of experience can be a challenge when it comes to insurance carrier reporting. This often translates into a lack of certainty about the format and frequency of reporting.
- Data Analytics – Another area where InsurTech companies often face challenges is with data analytics. The collection, review, and analysis of information is essential to evaluating risk and targeting markets. Using data to develop predictive tools in the insurance industry is exploding. To be successful, all this data needs to translate into improvements in underwriting or reduction in loss ratios to insurance carriers.
- Data Security – Not only is collecting and analyzing data important but so is ensuring data security. This means companies will need to conduct a risk assessment and resolve any issues to comply with regulations such as the California Consumer Privacy Act.