Zoe Chew

May 13, 2022

Insurtech: Key Trends & Monetization

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Issue #14

Insurance is one of the oldest industries. It has its root back in 1752. Everyone needs it. It protects the financial downside and provides cash in the long term. The middle and upper class spends on insurance for tax optimization. Companies buy insurance to attract and retain talented employees.

Insurtech companies exist to make buying insurance a delightful process. Today, you can buy insurance online, submit/receive insurance claims, “group-purchase” a policy (peer-to-peer insurance), find your coverage needs, and compare policy pricing. They compete with incumbent insurers which often rely on human brokers, pushy sales agents, and lengthy claim processes to help clients get paid.

We’ll examine companies that provide consumer-facing insurtech products—for home, health, auto, life, small businesses, and more.

Then, we’ll reveal exciting whitespace where new players can capitalize and monetize.

1. Key trends

(1) Insurtech is growing exponentially:

(2) Insurtech companies are getting successful exits:

(3) Making other life areas insurable:

(4) Embedded insurance, any business can offer insurance products:

  • Monetize insurance by distributing, selling, and bundling insurance into a built-in, native product experience.
  • Trōv offers APIs that enable companies to increase recurring revenue by offering digital, embedded insurance products.
  • Tint helps you embed insurance and integrate guarantees into your tech platform, without coding.
  • Cover Genius is the insurtech for embedded insurance that provides end-to-end solutions.

(5) Full-stack insurtech is becoming more popular:

  • New companies are capturing the whole value chain of the insurance economy including underwriting (risk assessment of insuring a customer) and cash claims.
  • Unlike agents, full-stack insurtech own their insurance licenses and keep 100% revenue ownership.
  • For example: Clover Health, Oscar, Next Insurance, Root

(6) Mobile-first insurance:

  • Accessing, processing, and distributing insurance products is available on mobile.
  • Lemonade provides insurance services for renters and homeowners via a mobile app. Users use a chatbot to purchase plans and ask questions.
  • PasarPolis sells most of its insurance products through mobile apps.

(7) Neoinsurance/Microinsurance:

  • Neoinsurance refers to fully-digitized or digital-only online insurer that delivers end-to-end user experiences. Metromile offers pay-per-mile to insure the number of miles you really drive. Root's premiums is based on your driving behavior.
  • Microinsurance focuses on low-income households—typically in developing countries such as South Africa and Asia. They provide insurance to underserved individuals who are excluded from traditional insurance. Blue Marble Microinsurance provides coverage for coffee farmers against excess rainfall and drought during the coffee growth cycle.

(8) Crypto transactions are insurable:

(9) Rise of APAC insurtech:

  • PolicyBazaar, an Indian online insurance aggregator is filing for IPO. The platform “curates” insurers on its website where users can easily compare and buy policies.
  • Sunday, a Bangkok-based startup raised $45M Series B operates as a “full-stack” model that covers underwriting and claim processes.
  • Fuse, an Indonesian insurtech raised $25M. The platform primarily focuses on Business-to-Agent partnerships and also has a B2C layer through micro-insurance policies.

2. Market players, competitors & databases

👉 Explore the database here

3. What problems do they solve?

(1) Slow and complicated claim process: 

  • Home insurance claims may take 48 hours to 12 months. Car insurance claims take between 1 to 2 weeks to settle. Life insurance claims take 30 to 60 days to resolve.
  • Root allows users to file a car accident claim online in 3 minutes via an app where users can upload car accident photos. 
  • Hippo will assign a Claims Concierge for home damage incidents, gather photos, inspect, pay the claims and provide vetted home repair professionals. Users reported having their home inspected the “next day” and claims were done in a “super quick and timely manner”.

(2) Overpriced insurance:

  • Traditional insurance is unfair to consumers due to complicated processes and policies. 
  • Bright Healthcare makes health insurance affordable by offering $0 specialist visits, generic prescriptions, and cash rewards. 
  • Metromile helps consumers save 47% on average through pay-per-mile insurance without overpaying auto insurers. 
  • Branch makes insurance less expensive by bundling auto and home insurance at the point of transaction.

(3) Mismatch between insurance providers and consumers' demand & expectations:

  • For consumers, it can take up to 6 months to buy a policy—including research, filling out questionnaires, document collection, background verification, etc. 
  • For insurance companies, it takes several days to a few weeks to complete the insurance process. In order words, it’s hard to serve customers at scale. 
  • Insurtech marketplaces like Lemonade, The Zebra curate insurance products from multiple providers, onboard stakeholders, provide instant quotes for comparison, and find the best deals. They bring together providers and consumers to transact value in a shorter time.

(4) Helping those who’re not protected by insurance:

  • Independent workers do not have access to employee benefits compared to full-time employees. 
  • Stride Health makes insurance available to rideshare & delivery drivers, freelancers, and contractors—starting at < $10/month.
  • Bikmo protects your passion by offering insurance for cyclists and triathlons starting from £3.73/month.
  • Zego offers hour-by-hour insurance for scooter drivers, private hire & van couriers.

(5) Making access to insurance coverage at zero cost:

  • Insurtech companies bring down the costs of buying insurance to zero through employers.
  • Gusto helps employers to offer health and financial benefits to support their workforce.
  • Collective Health helps employers to offer “digitized health benefits” to employees through curated programs, connected administration, and smart member experience.

(6) Severe gap in insurance coverage leads to uninsured population:

  • More than 80% of the South African population is uninsured; 30% are uninsured in India; 22.5% are uninsured in Indonesia, and 18.7% of Hispanic/Latino Americans do not have insurance coverage.
  • Naked provides car and home insurance for the South African market.
  • PolicyBazaar is the largest insurance comparison marketplace in India
  • Justos creates access to car insurance for the Brazilian market. 

4. Business models & monetization

The majority of insurtech companies are layering different business models to create multiple revenue streams and go-to-market opportunities:

(1) Peer-to-peer (P2P) insurance model

  • Lemonade P2P model pools claim money based on small groups of policyholders that pay premiums. If there’s money left in the pool at the end of the policy period, policyholders get a “cashback” in the form of donation. 
  • Lemonade takes a flat fee from customers’ premiums and donates leftover insurance premiums to social impact.
  • This model allows insurtech companies to offer lower & affordable premium rates than the partner-agent model, and maximize profits through digitized claims processes.

(2) Commission fees from insurance agents: 

  • One of the most common business models for online marketplaces. Marketplace owners get a share of transaction value through the vendors.
  • Companies like The Zebra, Gabi, and Policygenius act as online insurance brokers. They earn a commission fee when customers purchase a policy through one of their insurance company partners.
  • Success factors using this model rely on the number & quality of partnered vendors, ability to maximize earnings for vendors, simplicity of the platform, conversion rates, and potential to reach a larger customer base.

(3) Usage-based model:

  • By Miles and Metromile employ the pay-per-mile model. The fewer miles you drive, the lower is your auto insurance premium.
  • This will help consumers to save insurance premiums and make insurance more affordable.
  • A consumption-based model will also drive purchase conversion and provide surges in revenue based on the increased usage of the users. 

(4) Direct-to-consumers (D2C): 

  • While insurance comparison marketplaces work with insurance partners to provide insurance products and generate revenue in the form of “commissions”, full-stack insurtech can go “directly to consumers” by securing licenses, processing underwriting and cash claims and taking full ownership of the revenue.
  • D2C insurtech platform typically generates revenue from the end consumers rather than from vendors, intermediaries, and middlemen. 
  • This model often provides a better user experience to customers and increases retention rates through quality control.
  • Example: Clover Health, Oscar, Next Insurance, Root

(5) Offline-to-online model (O2O): 

  • Leverage online channels to drive sales in the physical stores, and vice versa. 
  • PolicyStreet employs this model to communicate insurance complexity and provide reassurances through in-person channels.
  • A hybrid online & offline presence can increase customer awareness through foot traffic and reach demographics that are not digital savvy (Baby Boomers generation).

5. The next big things

This section explores where the future of insurance is heading, what new solutions will look like, where’s the market demand, and answers the “why now” questions (most important slide in your pitch deck!) for your investors:

(1) API-driven insurtech:

  • APIs enabled these consumer experiences: online quote comparison, instant purchase, one-click-access multiple insurance providers, and insurance at the point of sale
  • These API use cases will be exploded into areas such as data aggregation, workflow, e-commerce, and quoting, according to CB Insights
  • New solutions will look like “Stripe for insurance”.

(2) Insure crypto assets:

  • The future of insurtech is decentralized. As crypto assets are becoming more widespread, new solutions are needed to safeguard cryptocurrency. 
  • Use cases include (1) theft and cyberattacks (2) coverage for loss of funds (3) loss of private crypto key (4) account theft and device hacking.

(3) Insure the on-demand economy:

  • More and more people are working in the self-employed, gig economy. This group of people doesn't have access to employee benefits. 
  • As the sharing economy is projected to hit $335 billion by 2025, more solutions to protect workers in the sharing economy will rise. 
  • Startups in this space, e.g. Zego, Metromile

(4) Wearable tech and data-driven healthcare insurance:

  • Apple Watch, Fitbits, and Oura Ring monitor heart rate, sleep, stress, breathing, and fitness data. 
  • In the future, health insurance solutions will look like “telematics for the body” that adjust your insurance premium (or get insurance discounts) based on those health habits recorded in wearable devices.

(5) DeFi insurance for NFT (Non-Fungible Token):

6. Startup opportunities

  • OS for insurance companies. Help insurance businesses digitize their operations, including compliance management, claims management, contracting, insurance agent onboarding, self-serve lead generation, CRM, etc. Start by identifying specific industry use cases and workflows that can be turned into management software. For example, AgentSync, Wrisk.
  • IDaaS (Identity-as-a-service) for insurance. Okta is solving the identity verification problems for enterprise customers. However, there are a lot of frictions when it comes to using it. There could be an alternative of Okta, but for insurance customers, agencies, and businesses. For example, verifying claims, customer identity, licensed advisors, etc. Or, verifying patients’​ coverage data to ensure that their medical bills are paid correctly.
  • Insurance but social & community-driven. A peer-to-peer insurance platform that allows friends, families, or individuals with similar interests to pool capital, protect against risks and contribute to each other’s losses. Users can find people to connect with, look into each other’s policies, create a community group, chat, etc. Insurance coverage can be interest-based, e.g. sports equipment, gaming gear, music equipment, household electronics, furniture, clothing, etc. Startups in this space: YuLife, Pineapple, So-Sure