The Six Types of Emerging Digital Insurer Startups

As the number of digital insurance companies continues to increase, traditional insurers can turn competitive threats into partnership opportunities. The goal of such partnerships is not to bring in new business but to experiment with new models for long-term viability.
Even insurers without dedicated funds for startup investments or the inclination to form subsidiary digital brands can find startup insurers looking to work with incumbents.

The digital InsureTech carrier market can be broken down into six distinct groups. These groups tend to focus either on selling new/modernized insurance products (e.g., usage-based auto, paramed-free life) or on selling traditional insurance products to niche/underserved demographics. In either case, they leverage online channels to provide a digital, self-service experience—even if traditional, manual processes still exist behind the scenes. The six groups are briefly explained below:

Convenience Optimizers focus on driving acquisition through consumer convenience, reducing friction within the insurance-buying process.

Product Experimenters are looking for entirely new product approaches, starting product design from a customer need rather than monolithic risk categories.

New Niche Marketers are betting they can reach groups left out of mainstream insurance by lowering operating expenses and using new forms of data.

Engagement Maximizers are rethinking the consumer engagement profile, adjusting product approaches to build in ongoing interactions with policyholders.

Analytics Automators use advanced analytics, AI, and automation, attempting to make better decisions with the same (or less) data as traditional insurers.

Next-Gen Comparative Raters provide consumers with easy access to information about insurance product options and quick quotes.

Working with any of these players will have an impact on an incumbent insurer’s infrastructure. Those looking to build strong relationships will need to understand the modernization efforts required and review processes on both sides to see if they will harmonize.

One of the recurring themes of approaching these partnerships is building the ability to consume, store, and analyze more data and new types of data. Digital players collect more data, engage with consumers in new ways, and track more interactions. Without the capacity to also work with that data, any partnership just becomes an additional, higher-risk, premium-acquisition channel. The goal of a startup partnership should be to learn how to support new types of future growth (with or without that particular partner), and the full scope of data is necessary to make that happen.

Insurers and reinsurers have an opportunity to partner with InsureTech carriers without making massive financial investments or spinning off their brands. For in-depth information on the six types of insurer startups and how to engage to create meaningful partnerships, check out Novarica’s report Engaging with Startup Insurers.

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