Top 5 InsurTech Companies Disrupting the Insurance Industry
The Insurance Landscape is Changing
We recently published an article taking apart the rapid ascension of Lemonade, its controversial business model, and the overall impact it could have on the insurance market.
The way Zappos claims to be a “customer service company that happens to sell shoes,” Lemonade is claiming to be a “technology company that happens to sell insurance.” By integrating AI and behavioral intelligence into every inch of the company, from customer acquisition to underwriting to claims, Lemonade has been able to achieve over a $2B valuation in three short years.
And while it currently looks like a world-eater, we also discussed what its competitors can do to slow it down. Like many upstarts, Lemonade is in the precarious position of competing against the incumbents, as well as the other upstarts in a race to disrupt the insurance industry.
One of the key differentiators that Lemonade has over the other upstarts we discuss in this article, however, is the fact that it is an actual licensed insurance company, retaining claim liability on its own balance sheet. This frees them up to pay claims faster and operate under their unique business model.
In this article, we will highlight some of the other top InsurTech companies attempting to disrupt the market.
Build versus Buy, the age-old question
Lucky for the carriers, many of the upstarts are actually supporting them, rather than trying to displace them. These companies allow bigger, traditional carriers to either receive additional revenue streams through online interfaces and/or quickly integrate AI, machine learning, predictive analytics, and behavioral intelligence into their existing business, underwriting, and claims processes.
By doing so, carriers can streamline and reduce their customer acquisition costs, automate underwriting and claims, and intelligently reduce risk and fraud leading to better customer experiences and cheaper policies.
While the build vs. buy battle rages, oftentimes, sticking to what you’re good at and enlisting the help of partners is the right play. For insurance carriers, taking advantage of cost-friendly out-of-the-box machine learning and behavioral intelligence solutions allows them to keep pace or stay ahead of the supposed ‘disruptors.’
If the aim is to avoid the same fate as the Taxi industry, partnering up with reputable 3rd party artificial intelligence companies and getting a head start on data collection can be the difference between maintaining your competitive moat and losing market share.
The jury is still out in regards to Lemonade’s staying power, but I wouldn’t be so quick to bet against it. And I wouldn’t be so quick to dismiss the fact that it only operates in the Home and Rental markets currently, it won’t be long before they start expanding their offerings.
Lemonade has raised close to $500mm dollars since it was founded, which is only about 3% of the $16.5B that has been invested in the InsurTech space in the last decade. With that said, let’s turn our attention to some other players entering the fray…
If you’ve recently searched for or purchased life insurance, you may have heard of Ladder. Started in 2015 and backed by Fidelity Security Life Insurance, Ladder is attempting to make purchasing term-life insurance as simple as ordering delivery. Ladder acts as a streamlined digital interface for customers to buy term-life insurance directly online.
Using a combination of machine learning and predictive analytics during underwriting, Ladder is able to streamline a typically weeks-long process down to a few minutes. The key benefits include a quick online application, no brokers or policy upsells, and a flexible way to increase or decrease your coverage amount.
Given Ladder is not taking on the financial risk of underwriting the policies, the bet is on their ability to sell life insurance products online, versus the traditional way of selling through an agent. Most insurance carriers sell either part or all of their policies through agents, so by cutting out human involvement with a broker-less Ladder, they can theoretically pass savings along to would-be customers to entice them to purchase a policy.
Having raised over $50mm from backers such as Allianz Life and Northwestern Mutual, Ladder is one of the top InsurTech companies aiming to take a bite out of the $128 billion life insurance market here in the US.
Ladder is competing directly with Haven Life which is owned and backed by MassMutual. Both companies offer end-to-end online purchasing with nearly instant approval mechanisms. The only difference is Haven Life is actually owned by MassMutual versus simply being underwritten by them.
Automated underwriting is the future of insurance and Haven Life is ahead of the pack when it comes to machine learning and predictive analytics in underwriting. Haven Life also highlights its easy-to-read and easy-to-understand plain language policy, as well as a life insurance calculator to help determine how much coverage one needs.
One interesting thing that Haven Life offers is competitive price comparisons – After determining how much coverage is needed, Haven Life offers price comparisons between Haven Term, issued by MassMutual, and policies from other top-rated insurers. If the shopper chooses to go with another provider, he or she is directed to the insurer’s traditional application process. This structure gives Haven Life customers complete transparency on price and control over choosing which policy is best for their situation.
And last but not least, customer service. Intelligent technology doesn’t mean a lack of helpful customer service. Help during the application process is available during business hours via phone and live chat.
Hippo Insurance is focused on the housing market offering homeowners and condo insurance quotes in as little as 60 seconds.
It was founded in 2015 and has raised over $200mm to date. Hippo partnered with big backers such as TOPA Insurance for underwriting and Munich RE for reinsurance. With that big of a war chest, it is no surprise that Hippo is known as one of the top InsurTech companies disrupting the market.
Simplifying customer acquisition has been a huge priority for Hippo which is why they allow their customers to apply for insurance online, by phone, or even through Facebook Messenger. They pay very close attention to the customer experience and are constantly optimizing their application process to achieve the lowest possible customer acquisition cost.
Hippo also takes an innovative approach during underwriting by leveraging data from sources such as property records, permit filings, and aerial photography of roof conditions, allowing them to provide continued risk monitoring and more accurate risk profiling than traditional, subjective answers provided by customers.
By automating the process and modernizing coverage, they claim to save customers up to 25% on premiums. In addition, Hippo relies on connected, smart home sensors and IoT devices to identify and prevent damage before it occurs. For example, Hippo’s policyholders will receive a free smart home device kit with multi-purpose sensors that send digital alerts at the first sign of water damage directly to their smartphone.
Similar to Lemonade, Jetty offers renters insurance but they seem to be approaching it as more of a B2B play. When you first arrive at their website you will read, “Get more great residents in the door with Jetty. Expand your applicant pool, sign leases faster, and reduce operational costs – all with the click of a button.” Jetty is trying to make it easier for both sides of the renting equation, renters and property managers.
There is an option to click into a ‘renters’ branded website, and while they do offer renters insurance direct-to-consumers, Jetty is also partnering with property managers and landlords to offer renters insurance directly through the property.
To add even more value to the renting process they offer two additional products: insured security deposits and a lease guarantee option.
Writing a check for the first month, last month, and security deposit can feel impossible for some. To help, Jetty allows its customers to pay 17.5% of the initial security deposit. Jetty then insures and guarantees the full deposit amount for the landlord. In addition, if a renter doesn’t have an available co-signer, Jetty will co-sign a rental agreement to secure the lease.
You might notice a theme here, but Jetty also started in 2015 and currently has $40mm in funding.
Clearcover, like the rest, is a fancy, quick way to get car insurance in a few minutes. Also like the others, Clearcover is using technology to cut costs in a variety of ways. For instance, through its API platform, it integrates with partners that interact with customers when an offer of insurance or an insurance quote is relevant. That ranges from insurance shopping partners, partners in the car sales and refinancing industry, and companies that deal with personal finance management.
They sell a majority of their policies online with no human interaction and boast 60% of their claims are handled fully digitally. Clearcover users receive AI-generated quotes and choose the one that best fits their needs. And if they are ever involved in an accident, they just snap a few pictures and fill out a short form.
Clearcover started in 2016 and has raised $55mm to date. They have lots of competition from both incumbents and newcomers like Root Insurance. Root is actually closer to a Lemonade in that they underwrite their own policies and use a new approach to assessing driver risk by analyzing driver behavior through their smartphone.
It’s abundantly clear that the insurance industry is undergoing a digital transformation. As a result, traditional carriers are boosting their technology departments, partnering with InsurTech companies, and attempting to squash the innovative disruptors that are trying to claim their throne. Billions of investment dollars continue pouring into the market and there is one common denominator that unites all of the unique approaches: artificial intelligence.
Whether you are cutting out the middleman and selling direct to consumers, partnering with companies that have streamlined online experiences, or utilizing AI-enabled automated underwriting, integrating AI and behavioral intelligence throughout the customer lifecycle is crucial.
And the only way to thrive in the future of insurance is with good data. And the easiest way to get good data is to partner with those of us making it easy to do so.