Overview

Predictions for 2019

Happy 2019!

Yes! I am a little bit late. This article has been sitting in my drafts-box for couple of months now. I considered a friend’s advise to skip this article and jump directly to “Q1 2019 recap.” Yes, but, well.. I’ll do it in Q3.

I can hope that 2019 will be as exciting as in 2018. I know, it is a bold statement. Let’s face it, the insurance industry turned into an exciting space with brands and semi-celebs. There are several KPI to measure internal engagement in the industry to its various components.
If you see an increase in the number of:

  1. Number of podcasts

  2. Coverager’s subscriptions

  3. InsNerds Slack members and threads

  4. ITC, Dig-In and OnRamp participants in the USA

  5. New conferences and new faces

Personally, it was a year of change. I left Farmers insurance, co-authored the “The InsurTech Book,” founded BOUND, joined the advisory board of DropIn and continued to run InsurTech-LA. Also, I had the honor to take part in Lloyd’s of London’s first Lloyd’s Lab cohort, moderate several panels and have a beer/coffee with many of you.

Other reflection on 2019

I highly recommend reading the 2019 predictions by Martha Notaras, Nigel Walsh and Stephen Goldstein. https://www.linkedin.com/pulse/10-insurtech-predictions-2019-martha-notaras
https://www.rgax.com/blog/insurtech-predictions-2019
https://www.linkedin.com/pulse/2019-year-ahead-nigel-walsh/

Reflection on 2018

http://www.insurtech.me/blog/2018/1/7/2018-predictions


I am going to keep this short.

1. CYBER INSURANCE      

2018 we saw new companies entering the space. There are still coverage gaps and most of the products are on the same path. My prediction was that it is the start of filling substance behind the “buzz.” I’ll mark it as 1/1

2. THE FALL OF BLOCKCHAIN

No, blockchain did fall -- the excitement did wind down (as we predicted). Two indicators were the slow down to almost a halt of startup pitches that started with “it is an X running on blockchain” and blockchain sessions in a conference. The consortiums and other research institutes are at work and still have funds to continue their work for 2019. I haven’t seen a product that is based on blockchain that reached commercial use. 2/2

 

3. SMART CITIES

The chatter around Smart Cities in the context of insurance started. 3/3

4. ARE BOTS STILL A THING?

Yes, they are. The question is - do we compare them with a static form as a UX unit or one against the other on AI and NLP capability. 3.5/4

5. API

Application Programming Interface (API) is THE 2018 prediction for me. Carriers know that the marginal cost of adding another "digital agent" can cost them millions if they don't have a modern API management system. Insurance companies want to work and receive business from the new InsurTech startups who registered as agents in all 50 states and with the agents who digitized their own business.

6. AGENTS

The core entrepreneurs of the insurance industry. The agents will have two paths to take (i) evolve to an InsurTech agency (ii) buy InsurTech services to make their agency more productive and more efficient. In 2018, the agents will be the buying force of InsurTech products.

7. VENTURE LIFE CYCLE

In 2018, InsurTech startups are going to enter new stages of a venture's life cycle. Scale - startups are going to invest their series A and B and scale their operation, customer base and revenue. Acquisition - for the market segment, technology, and talent. Dissolve - because they had the wrong product, the wrong team, the wrong business model, or that their competitors were better.  



Innovation as a step function

Innovation as a step function

Step Up

The entrance of startups to the insurance industry, nearly four years ago (2015), introduced a change, innovation, that made all the components, whether they are linear or passive, to react. The new teen spirit that the startup introduced acted as a step function that increased the value of the industry. The input may be a nice and clean function. It has a ripple effect that affects the entire pond until is converges on the new and higher level.

Ali Safavi talks about Innovation at a Global scale

Ali Safavi is the Founder and Global Head of Plug and Play Insurtech, an Insurtech-focused innovation platform in partnership with some of the largest insurers, reinsurers and brokers in the world including: Munich Re, USAA, State Farm, SOMPO Digital Lab, Farmers, Nationwide, Deloitte, Willis Towers Watson, Aviva, Swiss Re, and many more. Since its inception, Ali has been a catalyst in building Plug and Play Insurtech to 6 global locations, over 70 corporate partners, 120 accelerated startups, and over 25 insurtech investments. Ali is also a Principal at Plug and Play Ventures, the venture arm of Plug and Play Tech Center where he manages and leads investments in startups in different spaces including insurance, travel and hospitality, and IoT.

We had a lovely InsurTech Talk over wine.

2017

In 2017 InsurTech Los Angeles community grow from 1 to 151 members in Meetup (https://www.meetup.com/InsurTech-Los-Angeles-Meetup/) and over 100 subscribers to insurTech.me.

It has been a year of growth and experiments. We experimented with the events' format and thanks to the feedback we adjusted the format to the community's taste.

First, I would like to thank all the wonderful speakers that made the effort, allocated their valuable time and traveled to Santa Monica to share their wisdom and experience. 

InsurTech Los Angeles first meetup

Thank you Daniel Schrier and Adam Gabrault for providing an industry overview and expending on Customer Experience and the technology solutions that can reduce the frictions and improve the customer's satisfaction. My favorite was Sara the virtual insurance agent. 

March event - founder talk

Thank you Max Drucker, CEO, and co-founder of Carpe Data, for holding the floor for almost two hours. Max with his endless energy held the audience captive and engaged. If you are an entrepreneur and you wish to enter the insurance industry - go and talk to Max. 

May event - Investors Talk.

Thank you Colleen Poynton, VP at Core Innovation Capital and Christine Carrillo, CEO of JOANY (formerly Impact Health) for discussing InsurTech startups and venture capital in front of the Los Angeles InsurTech community and answering their questions. People enjoyed the small panel/talk between Colleen the VC and Christine, who at the time closed a $13M series A.

July event - "InsurTech and Blockchain".

 Thank you Andreas Freund PhD for making the trip from San Diego to be July's speaker and for keeping your peace when people asked you about Bitcoin...

September event - The future of the agency

Thank you Jason Cass for joining forces with me and interviewing Jeremy Hallett. Jeremy has over twenty years of experience as a Life insurance agent and your help and energy were spot on. Jeremy, thank you for flying in from Minnesota and keeping your zen on FB Live.

November event - Geospatial Insights

Thank you Tommy Ashman sharing your founder's story and the development of your product.

Founder Talk With Max Drucker - LA InsurTech March Meetup

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The March 13th Los Angeles InsurTech meetup “Founders Talk” started with a left foot when a dense fog fell over LAX and canceled the flight from SFO of our speaker, Christine Carrillo's, CEO of Impact Health. Luckily, our second speaker, Max Drucker, CEO of Carpe Data, stepped up to the plate and kept the audience fascinated about the topic of InsurTech for an hour and a half. Thanks to Max and all participants the meetup was a great success.

The format of the evening was not a traditional talk, rather more of a living room chat. Max was sitting on the sofa surrounded by the guests. There were neither slides, nor presentations. To start the evening, Max described his and Carpe Data’s (https://carpe.io) background. Then, we continued with a chat.

Carpe Data gathers and aggregates data from from Yelp, Osha, Glassdoor, crime-databases, Twitter, and other data sources. Carpe cleans the aggregated data, builds models on it and sells it to the insurance companies. A good example is how Carpe Data serves commercial insurance. Let's take a restaurant as an example. Carpe analyses the business’s website, checks if it has a happy hour, a deep fryer, hours of operation and crunches more data points, and delivers a clean data set for the insurers to consume.

Max recognizes several value offers:
- Pre-filling applications that helps pre-qualifications
- Qualification validation based on multi sourced data
- Insurance/risk score for small business that allows a better decision making when adding a business to the book
- Something in the data points
- Provide data to underwriters

 

Q: How much of this is, or will, take the commercial underwriter out of the picture? How much of it is automated?
A: If you ask any carrier about their commercial, or small commercial, they will say that it is automated. None of them automate, except for the really really small stuff and then they don’t validate the data. They are passing data through rules and hope for the best. I think that they look at the disruption in the auto insurance and think how they can take it to commercial. 

Carriers should take a look at the operation of commercial underwriting and its input. I ask “how many underwriters use Google street view and how many visit the property?”.

Q: How is the investor echo system reacting to this new trend in InsurTech?
A: It is insane. In the past year there were legit 5-6 conferences. They try to apply what they know from SaaS into insurance. The prize is big, but the sales cycle is very long and there is no predicting it. It is hard, unpredictable and a turn-off. I told investors that “if you have this entrepreneur that had a success and now he wants to import it to insurance... He is wrong, he will fail”. Many investors see it as the last “white space”. Others focus on the distribution like Lemonade, Trov, Quilt, Goji, Ladder Life and more. Most of them are basically agents that re-sell insurance and try to put on it a better UI.

I don’t think that insurance has a branding problem, and I don’t think that people hate their insurance. I think that people like Farmers, All-State and Progressive. I don’t think that the distribution will be the great disruptor of the insurance industry. But, most of the money is there.

Q: What about global insurance for professionals who travel and work from various countries?
A: I don’t know. There will be more and more new insurance products that will need to compensate for the shrinking of the auto insurance in the near future. Pet insurance is a great example for a booming product that surfaced in the recent years.

Q: How your customers in the IT departments respond to this change? (data services)
A: Some actuary groups try to do a little bit from this and a little bit of that. They don’t want to build their own API connector. They don’t want to tap and pull data from 50 new APIs. They will have couple of data scientists that will do it as an experiment, but that is where they’ll stop. They want, and like, to buy data. For example, Lexis sells data to insurance companies in billions of dollars. The IT departments care about data, and getting the data.

Q: Do you collect data regarding cyber security?
A: That’s a great question. One of the product ideas that I thought about, which we don’t do, is specifically for cyber security and cyber insurance. There are companies that sell data about IT stacks and they understand what the company is using internally and externally. Are they using Salesforce? What kind of firewall? Or are they using AWS? And as far as I can tell, cyber insurance, base their price on non-sense. There is no bases or anything. They don’t check if you have the latest patch, or if you are running Ubuntu, or what ever. They don’t ask these questions. They ask “what is your revenue -- ahh the price is $2,000 a year”. I think it is a good opportunity.

Q: What is your recommendation to the entrepreneurs in the audience?
A: My recommendation to entrepreneurs who want to go to insurTech is go and work for an insurance company. In one minute you will recognize a thousand opportunities to disrupt. You need to figure out what are they doing wrong. Then, you want to learn as much as you can how it works and then you’ll go and build the right thing and sell it back. Insurance carriers don’t abuse vendors, they have a slow procurement cycle that you need to know and accept. They are not horrible to work with, they are just rational and risk averse. I will suggest to get experience with an insurance company. I think that the best thing is to go work for one. It will be a huge differentiator to start a company that tries to serve insurance carriers after actually working for an insurance company. There are so many startups out there that don’t know anything about insurance.

Q: Why is the sales cycle so long?
A: People will often say that the insurance companies are risk averse. But, also, the deals are very big. The size of the business rather than the aspect of it is the factor that adds to the time length. You need to learn and understand the process. It takes 3 months to get the business unit engaged, once they are engaged, they will send you over to IT. IT will look at it for another 3-4 months for validation. Then procurement will process it for 3 months. Once you get the work order, the company will need to train everyone and that will take another 3 months. And that doesn’t include an internal campaign that takes 3 months. Going back to the opportunity, if you have the patience and the understanding of the process you have an advantage.

Q: How the investors react to this reality?
A: Some understand, others don’t. They will ask “I’ll bring these superstar salespersons, do you think they can accelerate the sales process?”. The answer is “no, it is what it is”.

Q: How the millennial and the gen-Y consume insurance?  
A: They don’t buy life insurance! This is a big thing. They were not taught about it at school, they don’t know about it. Employers used to provide it - not anymore. Government jobs used to provide it - not anymore. I do think that young people will not buy car insurance. That is a tipping point. The first part of this tipping point will be a dramatic differences between premiums for cars, which are safe thanks to auto pilot technology and cars without the technology. The second part is that Tesla, or Mercedes, or another self driving car will kill somebody and his family will sue the insurance company. The insurance company, then, will sue Tesla. Then everything will change. Tesla will say - you buy a car and the insurance from us, you will get everything from Tesla. They should do that because they are already on the hook for liability.

BTW - what is safer? A 16 years old driving a car or an Uber driver?

Q: We are looking at all these data points for underwriting 1 to 1 scale. Do you think it will apply for a risk pool? Do you think these techniques will scale?
A: Probably. Look at group health application and compensation in general. I am better at 1:1 ratio. Carriers use us to buy a book of business, because we can look at the risk differently. So a book will be a bundle of risks and we can look at how much a package of risk is worth. And we can point to several policies that they should not buy.

Q: Are you looking into reinsurance?
A: The re-insurance are lighting up the investment world. They have invested hundreds of millions of dollars over the past couple of years. They love innovation and they wish to run pilots. If that pilot is successful they will incentivize their carrier partners to use your technology. It is too soon to tell. They are trying.

Q: Are they fishing?
A: Maybe. There is a rumor that they see all the new digital insurers and want to go in for themselves.

Thank you to Kinvey and Carbon Five that helped to setup the event

Thank you to Kinvey and Carbon Five that helped to setup the event