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Why is it so hard for property/casualty insurance carrier professionals to accept the idea that InsurTechs are bringing value to the insurance industry—and changing it for the better?

I have found myself asking question whenever we publish an article in which an executive criticizes InsurTechs, an article about profit struggles of publicly traded InsurTech carriers or one about the outright failures of others.

These articles get more attention from our readers than almost anything else we publish.

Readership was sky high for Mark Hollmer’s recent article, “At ITC Vegas 2021, Chubb CEO Greenberg Put InsurTechs in Their Place.” Some might argue that readers were drawn in because Greenberg is an industry thought leader whose opinion they care about.

Maybe. But the unparalleled number of views, shares and “Right on” comments seem more likely to be part of a pattern to me.

In August, when I wrote an article focused on one finding in Willis Towers Watson’s quarterly tally of InsurTechs, and titled my article “While Funding Levels Rise, So Do InsurTech Death Rates,” that article, too, was the most read article of the month.

And you may remember the series of articles co-authored by InsurTech watchers Matteo Carbone and Adrian Jones, documenting the financial struggles of the three VC-backed InsurTech carriers who have since gone public—Root, Lemonade and Metromile. While Carbone and Jones are both strong supporters of InsurTechs, the articles titled “Root and Lemonade: Real Unicorns or Ponies in Halloween Costumes? and “Bigger and Redder: A Look at Q1 ’18 for Lemonade, Other InsurTech Carriers” attracted so many readers and shares that they were among the top five most popular articles of 2018 and 2019.

The industry’s love of hating InsurTechs seems evident.

LinkedIn commenters, who point out that publicly traded InsurTechs haven’t made underwriting profits, are clearly the ones that get the most “likes” and “loves” among my P/C insurance industry connections.

But it seems too easy to magnify those financial results and ignore the benefits these companies are bringing forward.

Our industry has experienced other waves of startups in recent decades. I’m pretty old, but I honestly don’t remember whether ACE or EXEL struggled with profit margins in their earliest days, or how long it took for other startups to get to profitability. I do know that hard market launch timings eased some problems of young startups, but even the most renowned of these companies today had their share of bumps on the road to success over the course of their histories.

And for every ACE Limited that blossomed into a Chubb, and every EXEL that ultimately became AXA XL, there’s probably an Overseas Partners or Quanta or Rosemont Re that went into runoff.

I also don’t remember a whole lot of scrutiny and criticism and ballyhooing when any classes of Bermudians stumbled. Things might have been different if LinkedIn and Twitter were around in the early days of those waves of disruption.

As I listened to the thoughts of the leaders of the InsurTech companies, I heard promises tied to making the world safer and society better.

I heard a deep sincerity when I listened to Root’s Alex Timm talk about addressing customers’ needs, dropping biased rating variables and using his insurance company business model to build enterprise software that can help competitor carriers move to telematics-based pricing, too. And when I just heard Lemonade CEO Daniel Schreiber a few minutes ago talking about the launch of Lemonade Car, with features like special rates for EVs and hybrid cars and intentions to plant trees to offset the carbon emissions of insured drivers of other types of vehicles, I was disappointed when the CNBC interviewer reminded him about the stock ticker, and at the same time impressed by the InsurTech’s ingenuity and commitment to cause. (Editor’s Note: This column was written before Lemonade announced it would acquire Metromile)

Just hype? Am I just easily entranced by nice stories?

I can’t invest in the stocks of companies I write about, and I am not endorsing any particular issue. I am not an investment analyst. But listening to inventions of these and other InsurTechs over the course of this past year has led me to ponder some questions: Is there a way to measure the value of publicly traded InsurTechs without looking at their stock prices? Should we be putting the typical KPIs of combined ratios and loss ratios aside—at least temporarily—as we try to evaluate their worth to society in the near term? Are there better measures of commitments to reinvent insurance business models to achieve societal and customer goals instead of financial ones?

Earlier this year, I asked one of our frequently contributing journalists to reach out to insurance industry and InsurTech analysts to identify such metrics, which would place more fitting values on InsurTechs. The article he ultimately filed delivered opinions that LinkedIn commenters applauded—about how investors typically overvalue InsurTechs; about how they’re incorrectly using the same metrics they use to gauge a technology company performance when gauging an InsurTech company’s future performance; and about how gross premiums, combined ratios and surplus are the only way to measure success. One expert even offered the opinion that investments in InsurTechs have the same degree of rational appeal as an investment in Dogecoin.

This all seems too harsh to me. I’m still looking for something else. No, it’s not net promoter scores—the metric that InsurTech leaders tend to produce when I ask for their success measuring yardsticks when I interview them for Carrier Management profiles.

Recently, I was encouraged to find two commenters who seem to be thinking the same way.

Tony Cañas, client advisor at The Jacobson Group and co-founder of Insurance Nerds, delivered his views on a video he posted on LinkedIn. “Insurance is too important for society to primarily measure them as investments,” he said, commenting on “the obsession with the post-IPO performance” of Root, Lemonade and Hippo that he’s witnessed. “It’s just not the way I think about these companies—InsurTechs or incumbents,” he said.

Cañas, like me, said he fully understands that eventually the newer companies need to show enough of a profit to survive—in time. But for now, he’s interested in how well they take care of customers and employees. “And are they leading the way on important issues like DEI and climate change?”
Cañas is an influencer in InsurTech circles, and his post is making a dent. He had about 1,000 views last time I looked.

Separately, on a recent InsureTech Geek podcast segment, Sam Hodges, the co-founder of InsurTech Vouch and a repeat entrepreneur, addressed a question for interviewer Rob Galbraith about finding the balance between improving the product and service experience side and managing the bottom line. Fielding the question just after Galbraith had shared some highlights of Root’s improved third-quarter loss ratio, Hodges said, “Too many people are focused on short-term results and not nearly focused enough on the integral of results over time…”

“These are businesses that take time to build in the right way,” he said, going on to ask, “Is it OK sometimes to subsidize some losses upfront in order to get data and more rigorous underwriting so that several years in you can do things more thoughtfully?”

Answering his own question, Hodges said, “I think conceptually that’s a totally appropriate thing and that’s honestly where equity risk capital comes in, and hence I think the appetite of a lot of venture capitalists in this space.”

“Make that be my gentle pushback to folks that are consistently critical of InsurTechs,” Hodges said during Episode 52 of the InsureTech Geek podcast.

I came across this interview as I was doing research about Hodges and Vouch, an InsurTech devoted to providing management liability and other commercial insurance coverages to fast-growing technology startups, in preparation for a profile article I was writing about the company for the fourth-quarter magazine.

Read more about Vouch and Shepherd in the fourth-quarter edition of Carrier Management magazine.

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During my interview with Hodges, he declined to share Vouch’s profit numbers. That wasn’t unexpected as the same has been true for every other InsurTech I have profiled in the last five years.

For a second profile in the same edition, I interviewed Justin Levine, the CEO of Shepherd, another InsurTech co-founder who has experience in launching other technology companies.

After describing Shepherd’s efforts to rethink the underwriting process of construction insurance, Levine gave me a profound answer to my usual question about measuring the success of his InsurTech.

“In five years, in 10 years, I think if the incumbent insurers look more like Shepherd…than we do like them, then we have succeeded,” he said.

Likewise, Root’s Timm suggested the same type of thinking when Prashanth Gangu, chief operating officer and president of Insurance Services for SiriusPoint, interviewed him during a session of this year’s InsureTech Connect conference. “What we need to do is continue to use our shareholders’ money to continue to invest and make our technology best in class—so that we truly can build the best-in-class operating system for insurance,” Timm said, also referring to making the industry better.

“You’d rather use the capital that you’re raising from the markets to build better technology so that consumer needs can be met, and the technology can then be used by other players, including the incumbents,” Gangu said.

“Absolutely,” Timm said.

Making society better. Making the insurance industry better. Both seem like worthy goals—bringing true value to the insurance industry, which sadly can’t yet be measured by financial results. But the InsurTechs who survive will have transcended the hype and disrupted the industry.