Insurtech: Adapting to a new way of looking at insurance

Related: 3 reasons Lemonade’s CEO wants to disrupt the insurance industry

For example, when it comes to life insurance, quick and easy life insurance apps are really for the “well under 40’s.” As a practical matter, a platform which only requests minimal information is really about life insurance for the young and healthy, specifically those individuals that an underwriter really doesn’t need to ask many questions about.  Otherwise, there is nothing quick or easy about getting life insurance.  Medical questionnaires and, quite often, medical exams, all of which are historically required as you move towards the brick wall of being 40 years old or over are simply not compatible with getting insurance through an app, but they are helpful in order to appropriately assess the risk for that category of insured.

But, what if there were different or much easier ways to underwrite? Is that even possible? What if there was an app that could help facilitate the collection of medical records, arrange and transfer them to an underwriter, relieving a customer from having to spend hours on phone calls and paperwork? What if you could monitor how often somebody exercises, i.e., their lifestyle? With more innovative ways of gathering and using data, could there be an opportunity to easily sell life insurance to the “almost 40’s and older.”? What if there was a five year contestability period, would that cut down on the booklet of historical health information needed?   Is there really a reason to cling onto the legacy systems? Or has the insurance industry done things in a certain way for so long that they can’t think of another way?

In addition to the uphill battle against tradition, there is also the daunting problem of the 50 state insurance regulatory landscape.  Even the most nuanced differences in insurance regulation from state to state can make a difference in advertising as well as the design, ease and use of an insurtech’ s platform. In an industry that is “all about the fine print”, marrying up a complex and inconsistent insurance regulations and new technology can be challenging.

One of the biggest issues I typically work with a new startup on (or when advising a venture capital firm investing in an insurtech startup) is that their proposed product or app often trips over numerous insurance regulations.  Startups should really be thinking about insurance regulatory compliance sooner rather than later, well before they finalize the platform they are building.  Often, with just a few tweaks, regulatory violations can be avoided.  While insurance regulators are working with many startups to find some flexibility in the various insurance regulations, providing a customer with appropriate information and adequate disclosure remains a top priority. 

I often get the following comment from insurers: “We are interested in insurtech startups, but we still don’t know how to integrate their platforms into our existing business.”

Also, many insurers are simply not willing to let go of their legacy systems, at least not yet. However, the warning signs are out there: Some predict that insurance companies may lose up to 20 percent of their business to startups.  As a former underwriter before going to law school (and now with decades of legal experience), I can see many ways for insurtech to partner with and ultimately integrate into a traditional insurer.  For example, by better understanding the software and information gathered, underwriting can be altered and streamlined with less human intervention, creating more efficiency and ultimately higher profit margins for insurance companies.  When the willingness to adapt and collaborate becomes part of the culture, everyone can win.  As the saying goes:  “If you can’t beat them, join them.”  

See also:

A closer look at the future of insurance

3 insurtech trends to expect in 2017

The power of technology in insurance

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