In contrast to their direct-to-consumer counterparts, startups developing software for insurance companies have commanded lower valuations and fewer headlines. While some are doing great work in pockets of the industry, we are yet to see a startup emerge as a dominant challenger to the likes of Guidewire, Duck Creek and Majesco.
Executive SummaryWith direct-to-consumer startups slowly gaining market share and incumbent competitors using third-party data to uncover better risk insights, the market for insurer software should be booming. Yet, it's not at the moment. Here, Matthew Jones, the principal of fintech venture firm Anthemis and author of CM's VC Viewpoint series, suggests some reasons why and offers advice that will help startups make more progress in offering technology to the insurance industry, such as a focus on small deployments rather than complex integrations.
No doubt about it, building technology for insurance companies is hard.
An often-repeated line in many InsurTech startup pitches is that insurance companies are inefficient organizations, rife with legacy technology. Green screens! Mainframes! In certain parts of the insurance industry, this is absolutely true—who hasn’t heard those hilarious jokes about well-paid COBOL engineers? But in vast parts of the industry, the reality is somewhat more nuanced.
We forget that the insurance industry has historically been a fast adopter of new technology. As the original big data industry, insurers have adopted new technology since the 1960s. As vast amounts of computing power made its way into the industry, innovators harnessed it and pointed it at problems as simple as maintaining customer records and as complex as modeling natural catastrophes all around the world.