Startup insurers are not often built for scale or longevity. They usually have the advantage of writing on someone else’s paper, so they can go after historically unprofitable market segments and focus on customer experience. Often, the goal is to prove a business model, as most are running on limited funding. Yet a handful of startups are positioning their models for long-term growth—some as carriers, others as solution providers.
Startup MGAs Are Becoming Carriers…
Startups often present like insurance carriers, but incumbents usually write the risk. Yet, as Novarica EVP Jeff Goldberg observed, many of these startups are now becoming full carriers. This is mostly true in higher volume and lower complexity personal lines. Startups like Buckle (personal auto for rideshare drivers), Next Insurance (small commercial coverage), and Clearcover (auto insurance) have recently taken steps to transition to carriers.
Lemonade’s recent IPO proved this route is viable. The success of Lemonade and companies like it may attract more investment dollars into the InsureTech space. It will be interesting to see how these newly minted insurers contend with customer acquisition costs and maintain sustainable loss ratios.
And Software Providers
Some MGA and carrier startups are licensing their platforms as tools for incumbent insurers. Pivoting to platform sales can provide a new revenue stream and potentially offset customer acquisition costs. Developers of niche products like Trov (insurance coverage for individual items) and Slice (on-demand homeshare and rideshare insurance) offer their underlying tech stacks for niche product development. Similarly, Metromile licenses its claims AI platform for FNOL, claims fraud, and claims process automation.
Startup insurers are unlikely to take substantial business away from incumbent carriers. Startups like Metromile and Lemonade have proven that the market will adjust (as it always has) should new companies gain traction. Startup insurers licensing their platforms are realizing that customer acquisition costs can be high and that it may be advantageous to position themselves as partners to established insurers. Successful or not, these developments may be worthwhile experiments that the entire industry can learn from.
You’ll find more information on startups tackling digital and analytics capabilities for life insurers in our InsureTech industry report, InsureTech for Insurers: 200 Startup Profiles. Novarica will also be releasing an update in September that contains 250 profiles.
As always, feel free to get in touch with me ([email protected]) or Novarica EVP Jeff Goldberg ([email protected]) if you’re interested in discussing InsureTech trends and the current landscape.
Add new comment