Although more than 6,000 people attended this year’s InsureTech Connect conference in Las Vegas, three words uttered by one well-known attendee got the most attention from readers of Carrier Management’s website reports from the event.
“It’s just hype,” Chubb’s Chief Executive Officer Evan Greenberg said, according to the first report that CM Editor Mark Hollmer filed from Las Vegas. In other words, Greenberg doesn’t believe that InsurTech startups have fulfilled their long-promised goals to transform every aspect of the industry they touch.
In a post-event report, Hollmer solicited the reactions of InsurTech executives and InsurTech watchers. Highlights of both reports are summarized here.
What Greenberg Said About InsurTechs
Greenberg acknowledged that technology is making a substantial mark in the insurance industry and that this trend is important. At the same time, he made equally clear that he sees carriers as being much higher in the industry ecosystem than the startups that have emerged.
“Technology is changing the insurance industry in a serious way because it is providing tools and capabilities to improve all functions and activities—from the initial notion of connection, to customer experience, to the process of underwriting and risk-taking, to the rest that occurs in a value chain all the way to clients…,” Greenberg said. “But insurance is the art and science of taking risk. Fundamentally that’s the business. Everything else is for the pleasure of and to support that.”
With that in mind, Greenberg said the hype factor among startups must be placed into context.
“InsurTechs may be using technology and improving [parts of the industry], just as traditional insurers are—i.e., customer experience, improving what we do with…data and analytics to be more insightful about taking risks. But changing the fundamental nature of risk-taking? Nah, not at all,” Greenberg observed.
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What They Said: Hype vs. Enthusiasm
InsurTech executives, partners and investors told Hollmer that Greenberg missed the mark about what InsurTech startups have already contributed to the P/C insurance industry and what they stand to do in the future.
Caribou Honig, a partner at SemperVirens Venture Capital, who is chair and co-founder of InsureTech Connect, said: “Hype and enthusiasm are two sides of the same coin. It should be no surprise that entrepreneurs might come across as of hype, even to the point of unwarranted hyperbole as Evan Greenberg implies. But the enthusiasm shown by VCs and incumbents for the benefits of deploying tech to insurance is quite warranted.”
Kat Utecht, co-managing partner at the venture capital firm Core Innovation Capital, said, “I completely get where he’s coming from. It’s cognitive dissonance. He must believe that stance.”
“Clearly, I believe the opposite, where I am investing in companies that will revolutionize the industry…Whether it’s in P/C, life, health—most of these companies have access to human resources and data sources that incumbents wish they had.”
David Gritz, co-founder and managing director of InsurTech NY, said, “Greenberg argues insurance will always be about the art and science of taking risk and nothing more. While this is in line with the views of most InsurTech founders, the way the science is applied to taken risk can be done differently than it was 100 years ago.”
“Once InsurTech moves from hype to mainstream, what is left will be the carriers that have merged with InsurTechs and the carcasses of those who did not.”
Richard McCathron, president of InsurTech Hippo, said, “We agree underwriting is key and critical for success in the industry, which is why Hippo has focused deeply on this area within our business—hiring a world-class risk team, leveraging strategic data integrations and driving toward industry-leading loss ratios.”
“Keep in mind that, when it comes to underwriting and risk-taking, not all InsurTechs are created equal.”
Where They Agree
Like Greenberg, Honig agreed that InsurTech is not disrupting the insurance industry. “It’s proving to be transformative instead.”
“The fundamental nature of risk-taking is unchanged, but the ‘how’ of risk-taking is changing across the value chain. Those who embrace such a transformation—startups and incumbents alike—will benefit. Those who ignore it will find themselves on the losing end of the shift,” Honig said.
Describing how Chubb embraces technology and moves forward with digital transformation, Greenberg said: “Part of it is about the culture. It’s about the skillsets. It’s about the organizational structure. Chubb is an underwriting company. Chubb in the future is an underwriting and engineering company. It sounds simple; it means a lot more.”
Honig said he was “heartened and impressed” by that description. “I’ll admit it dovetails with my own view of what makes for a ‘tech company’ as one that solves problems first and foremost by hiring engineers and deploying software, rather than defaulting to just hiring more functional experts,” Honig said. “In a sense, the future of Chubb and the future of InsurTech startups looks like one and the same.”
Utecht said, “I don’t think InsurTechs have to disrupt the old guys. They can partner with them, and most of our companies are doing just this.”
At Hippo, McCathron highlighted the “real challenge of finding the right balance” in combining the “customer-first approach” of many InsurTech business models with the “disciplined underwriting and insurance acumen” espoused by Greenberg and the incumbent community.
“Some legacy carriers struggle to put their full suite of business lines through the lens of the customer,” McCathron said. “In our business, it doesn’t have to be one or the other; focusing on the customer experience in all our business lines brings each one of them together to work in symphony on behalf of the customer and the business.”
Partners or Competitors?
Chubb’s Greenberg wasn’t the only carrier executive fielding questions about the role of InsurTechs in the P/C insurance industry at ITC. At a separate session, InsurTech carrier CEO Alex Timm of Root was asked to address incumbents in the personal lines space—who might view Root as a threat to them. “If they were in the audience, what would you say to the Progressives and the GEICOs and the State Farms and Allstates,” Prashanth Gangu, chief operating officer and president of Insurance Services for SiriusPoint, asked Timm during a one-on-one interview that took place on one of the ITC conference stages.
“We focus on the consumer, not on competitors,” Timm responded. “And I think there’s actually a lot of reason why they should be our partners. I think that because [together] we can serve more consumers in better ways.”
“My message to them would be [that] they’ve got a long, hard road ahead of them. I don’t envy them. Turning around a company that has a large, exclusive agency distribution channel that has shrunk in half over the last 10 years, and trying to figure out growth, is going to be pretty difficult.”
“Taking something that is written in COBOL or C+ and actually trying to make it into a modern technology tech stack that can actually deliver real consumer experiences is going to be really difficult…”
“We don’t have to be a threat. Instead, we should try to form an ecosystem and put the consumer at the center of the ecosystem rather than continuing to try to fight it out in the marketing worlds, seeing who can buy more TV ads. That doesn’t work for anybody,” Timm said, after describing enterprise technology that Root has developed for its own business, which Root is now making available to other insurers.
At still another session, Adrian Jones, a partner at HSCM Ventures, responded to an audience question along the same lines: “What do you tell a carrier that does not believe in partnering or collaborating with startups?”
“We’ve all been there, right? We’ve all dealt with carriers who say this whole InsurTech thing is just going to blow over,” Jones said, noting that the question is as relevant today as it was five years ago.
Going on to offer a thoughtful comeback, Jones noted that at least 55,000 people are working in InsurTech today (based on workforce numbers on LinkedIn, not including venture capitalists and others in the ecosystem). “Somebody is going to figure out something really cool among those 55,000,” he said. In addition, $34 billion in capital has come into the sector in just the last four or five years, just [from] venture capital. And the number of public companies and unicorns is roughly 50 taken together, he said.
Partnerships are a wise move for carriers looking to keep up with the pace of technological change. Jones shared a statistic about AI, for example, saying that AI efficiency has experienced a 44-times increase since 2011. “Look at any measure of cloud computing or cost of bandwidth, where you don’t even have to look to the future. You can just look at the very recent past and you see how much has changed,” he said.
Asked to discuss the best ways for carriers to help InsurTechs, aside from providing capital, Jones said insurers need to be more thoughtful about how they engage with InsurTechs than they were four of five years ago. “It means not saying, ‘Oh hey, this is a cool shiny object. Let’s give it a try. Let’s do a million POCs [proofs of concept] and let’s see if something sticks.'”
Instead, he said, carriers need to be “much more strategic and much more focused” on specific problems they need to solve: “We need to get better at underwriting whatever, or processing whatever, or dealing with our agents in a better way—making ourselves more accessible, for example.”
Then, it means “being much more aggressive and saying ‘here are the handful of companies which have a potentially very interesting solution,’ and making that more of a long-term partnership,” he said.
Expressing a similar view earlier in his presentation, Jones framed his views in terms of “What’s In” and “What’s Out” for incumbents. “Deep partnerships with InsurTechs” and “ROI analysis with real resources” are in; “open-ended but small innovation budgets, pilots, dozens of PoCs” and “the Silicon Valley petting zoo” are out, he said. Explaining his Silicon Valley reference, Jones described a time when companies would “send a bunch of executives to Google or Facebook or wherever else and say ‘look at your cool beanbag chairs,’ and they would come back and buy beanbag chairs for their offices.”
“That is done, thank goodness. We are replacing that with actual real, no-kidding, deep partnerships, sometimes including M&A,” he said.
Giving other examples of maturation in the relationships that incumbents are forming with InsurTech startups, Jones said that instead of hopping on to be the first partner of a startup, carriers that become the fourth partner are part of the “in” crowd. “On the MGA side, we’re starting to see more focus on investment capacity and oversight, not just ‘oh hey, this looks cool. Here, take my pen and go underwrite for me,'” he said.
(Additional reporting by Susanne Sclafane; top photo by Mark Hollmer)