Startups Start Up Insurance
Elevator Pitch: An simple way to pick insurance? [Source: https://www.youtube.com/watch?v=KwUlCzN4-Aw]
While the foundation of insurance and what it stands for - protection of life and belongings - cannot and has not changed, the way it is managed and provided, can and should. Driving this change are a new breed of startups that are doing some exciting things in this space. With the integration of technology in insurance, many new areas like online policy comparison and insurance on demand have opened up and are on the rise. Large insurance behemoths are often unable to make their way into these areas as they lack agility and resources, leaving a lacuna that must be filled. For startups, this gap is an opportunity to make their presence felt in a multi-trillion dollar industry.
But what gives startups in the insurance sector the edge to do this? Firstly, they have the flexibility that large insurers lack. With the right digital tools, startups can quickly adapt and accommodate changes as and when they are needed. Next, investors are realizing the potential of startups and are ready to invest big bucks. According to CB Insights, in 2010, US$ 2.12 billion was raised by companies looking to invest in insurance startups. Of this, US$ 1.39 billion was paid out since 2014. This shows that there is no dearth of funding for startups in the insurance space. Thirdly and most importantly, startups have the advantage of cutting-edge technology and digital tools at their disposal that enable them to conceptualize, develop and offer the products and services that customers want.
Some startups that have made the most of digitally-enabled tools are Liazon, Benefitter, Ever Quote, Stride, Elliptic, and CoverHound. Their digital prowess to adopt a smart and intuitive approach to insurance sets them apart from large insurers. They use digital tools to understand customers and match them with the right insurance plans, based on their need. CoverHound, for instance, interfaces with customers through their website, which has been optimized to allow shoppers to compare auto insurance from top brands. They make it easier for customers to find the right insurer based on location, insurance status and other factors. Elliptic is the world's first company to offer insurance for Blockchain assets, like Bitcoin.
Since time immemorial, insurance policies have been sold by agents. This trend is set to change soon. The sales force comprising of agents is aging - with their average age being 59, according to a report by McKinsey. About 25% of the workforce in the insurance industry is likely to retire by 2018. To prepare for this future, many large insurance companies are investing in digitally adept startup insurance companies, who have the capability and flexibility to scale up with ease - thereby reducing the dependence on agents. And it's not just large insurance companies that are realizing the benefits of startups. A survey conducted recently by the Insurance Information Institute showed that close to 25% American consumers prefer to buy their insurance policies online.
There is another challenge that the insurance industry is facing today - demand from freelance or contract employees for an insurance plan that suits their need. These contract employers do not have an employer will pay for their insurance. In fact, according to the U.S. Department of Labor, freelancers and independent contractors are projected to grow from 42 million people to 65 million in the next five years. Insurance startups with a strong digital presence will be able to step in here and offer insurance assistance to 'on-demand' workers.
In a landscape where almost all industries are adopting digital, insurance cannot be left behind. The easiest, smartest and the most effective way to get on the digital bandwagon is to seriously look at startups who can make insurance smarter, faster and simpler and even a little fun.