Insurtech Partnerships: What Insurers Want and Get
Remember the scene in the 1989 movie When Harry Met Sally? During lunch with Harry at a deli, Sally very publicly fakes a wild orgasm. A nearby patron, when asked what she’d like to order, signals in Sally’s direction and tells the waitress, “I’ll have what she’s having.”
That was 30 years ago (when some insurtech entrepreneurs were still in grade school) but today’s insurance executives are like the unnamed customer. They see what other carriers are doing with insurtechs and want some of what they’re having.
What carriers want is a date that will lead to a mutually beneficial relationship and they are even willing to pay for it, according to speakers at the Property/Casualty Insurers Super Regional Conference. Carriers want to solve problems. They want to improve the experiences of their customers, both agents and end users. They want to understand change that is happening. They want to move faster. They want a more innovative company culture. They want to save money and make money.
What carriers do not want and are not expecting is to transform their entire business or the industry overnight. This is good because contrary to public relations messaging from a few, most insurtechs aren’t promising to do that. Insurtechs, too, are looking to solve problems, improve customers’ experience, build relationships, foster an innovative culture, help change the industry over time, and save and make money. And have some fun.
Dan Reed has as much insurtech fun as anyone in the insurance industry as managing director of American Family Ventures, the early-stage venture capital arm of American Family Insurance that started investing in 2010.
“We look for strategic options. The strategic options, essentially, are a way for us to transform our business over the long term in response to the great uncertainties of our industry,” he said.
AmFam organizes its investments around three themes: innovation, advanced analytics and connectivity. Its current and evolving portfolio includes CoverHound, hometap, Bunker, Wireless Registry and LeaseLock.
“By making these investments, we do seek a financial return with the investment, but really we look for opportunities to work together, reconnaissance on how the world is changing,” Reed said.
Integrity Insurance takes an operational approach, according to Bobbie Collies, leader for sales and marketing. Integrity and its parent, Grange Mutual, look to insurtech for help in three areas: keeping the company relevant in the marketplace, differentiating itself and achieving greater “speed to market and speed to value.”
Her company starts by asking what problem it wants to solve. Brent Hammer, innovation leader at Grange Mutual, talks about checkers and chess, according to Collies. “Is it a checkers problem or a chess problem? If it’s checkers, it’s something that we can probably solve internally… If it’s chess, we just don’t have the expertise, so we are looking for insurtechs to come in and help us with the chess game.”
Grange Mutual has its own incubator for its agents and associates and has been involved in two Ohio-based tech accelerators and venture capital initiatives for startups, Finrech71 and Rev1. Among its various tech-inspired features, Grange has an Amazon Alexa voice service, a ridesharing gap coverage, and a mobile app for policyholders. A special platform that gathers feedback from agents and policyholders has led to modifications in the processing of debit and credit endorsements, consolidated payments for personal and commercial lines, and simplified claims processes that include Pix It now, which uses text messaging to submit photos of damage.
While much of the insurtech buzz has been around distribution, there may be more happening in business operations, according to Joe Schneider, managing director for KPMG Corporate Finance.
“There are a lot of interesting partnership opportunities for carriers on the claim side of things. They’re these little niches that you never ever would have thought of,” he said, citing startups using artificial intelligence to review policy language and virtual claims estimates.
Reed has seen some of the insurtech claims activity. For example, his firm sponsored the Stanford Data Science initiative involving machine learning technology. The model searched claims data around the polar vortex event and uncovered more than $100 million in claims eligible to be reimbursed by reinsurance. “It took like a month. It was unbelievable. It made us think, it’s almost difficult for a carrier our size to overinvest in the next generation of analytics. I think there’s real return that we have there,” Reed said.
Insurers see the need to better understand customers.
Carriers have information on their customers, but it is often housed in separate systems that do not talk to one another, so the insurer does not get to know its customers holistically, according to Schneider. “[Some of the machine learning and other things help people have a more holistic understanding of, at the end of the day, who’s the buyer, who’s the user of this product,” he said.
Collies said startups and technology can help carriers and agents understand their customers’ journey from the first time they engage to when they get a policy, when they’re paying a bill or engaging with the carrier on a claim. The challenge, Collies said, is, “How do we bring that all together so they’re having the best customer experience possible, and how can insurtech support that?”
Integrity focuses on the company’s independent agents as the customer. “How can we make those customer experiences even better, so they can focus on the end user, the policyholder in different ways than they have in the past,” Collies said.
She thinks there is more work to do in distribution.
“I think that there’s a lot of people trying to disrupt the distribution channel for independent agents,” she said. “I don’t think anyone has quite got it right yet.”
But there are now more insurtechs focusing on the experience between carriers and the independent agency force, looking at “ways we can better communicate and make that a more efficient and effective and a lower cost model, so that we can compete with those that are trying to do direct to consumer.”
Some benefits from insurtech partnerships are less measurable than others.
“[T]hose initial strategic options sometimes pan out, but oftentimes, just taking action, just getting out of the building and engaging with
the innovation in the world around us leads to opportunities that we really hadn’t planned for,” Am Fam’s Reed said. “I think that’s been important for us.”
According to Schneider, there is value in just talking with insurtechs. “If nothing else, you’re a little bit smarter about what’s happening out there to the best-case scenario where all of a sudden you may have intangible ROI and a niche of this type of claim or something like that,” he said.
AmFam’s Reed also welcomes what he calls the “cultural” effect.
“It takes a long time but it’s starting to feel profound at our company where the entire executive suite is talking in a knowledgeable way about innovation, where the executive team down to the directors get together, and they talk about who can move the ball forward,” he said.