The cyber insurance space could reveal what InsurTech 2.0 will look like. PropertyCasualty360

In InsurTech 2.0, technology is not just a technology selling angle, it is the driving force, the tide that lifts all ships. While the 1.0 cohort’s focus on the top line proved poorly suited for insurance, the 2.0 generation has achieved historical We stick with what worked for us and still balance our ambitious growth targets. (Credit: Shutterstock)

That’s it for the calculations. After more than a decade of capital-backed growth, the tech industry has been forced to shrink, dramatically changing the way startups are evaluated and evaluated. This sudden change has shocked operators, VCs, and employees in general.

Looking back at the insurtech industry, especially in early 2021, when many technologies were skyrocketing, the public market was chasing a handful of major insurtechs with their tremendous growth strategies and selfish paths to profitability. began to punish with The similar business models of these early insurtechs, and similar fortunes over the past two years, suggest a group worthy of the name Insurtech 1.0.

But what about the new phase InsurTech 2.0 It seems? One of the newest types of insurance, the trajectory of cyber liability, shows what we can expect from this next industry wave.

Where 1.0 Missed

The first significant cohort of InsurTech startups were generally focused on mass market insurance products. House That includes the BOP of small businesses. Despite having different product lines, these companies were united by his one business thesis, which was dominant in the tech industry at the time. It’s about approaching a market that appears to be very large and inefficient, solving that inefficiency with new technology and digital user experiences, and adopting whatever means necessary. At almost any cost — to get a critical mass of customers and keep the competition out. In fact, the problem that ultimately led investors to lean toward InsurTech 1.0 was not a failure of technology or user experience, but a misreading of underlying market fundamentals.

Few insurance customers switch insurers in any given year. This means that these very large addressable markets for personal line products are actually much smaller than they appear. It is the customer whose price has increased due to the factor, i.e. the least profitable potential customer. Finally, agents and brokers are a popular part of the insurance value chain. Insurance is complicated. What looks like an inefficient middleman to the tech investor represents comfort and peace of mind to the typical insurance customer.

InsurTech 1.0 companies failed to show sustained progress in improving metrics such as customer acquisition cost, lifetime value per customer, loss rate and combined ratio. Most 1.0 companies are still in business, but many are beginning to incorporate distributors into their distribution models, lowering their goals for new products and expansion into new markets to focus on achieving profitability. .

let the technology shine

Software should be designed to help agents and brokers succeed, and rather than non-existent, should strive to make the underwriter’s job easier. Rather than disrupting the industry, we operate within the existing framework of the insurance industry. This ensures that the value created by innovation is shared up and down the insurance chain and shared with reinsurance and risk capital partners, brokers, agents and policyholders.

In InsurTech 2.0, technology is not just a technology selling angle, it is the driving force, the tide that lifts all ships. While the 1.0 cohort’s focus on the top line proved poorly suited for insurance, the 2.0 generation demonstrated historically significant benefits such as accurate risk assessment, prudent pricing, and an emphasis on loss ratios. We stick with what worked for us and still balance our ambitious growth targets.

A final key element of InsurTech 2.0 is the reorientation of the relationship between insurers and policyholders. By continuously communicating with policyholders beyond the purchasing process, companies can realize the full potential of technology and enable proactive risk management. This builds trust and allows you to arm your policyholders with valuable information that makes them safer. A year he doesn’t have to rely on one pricing-focused conversation.

Cyber: The Forerunner of InsurTech 2.0

cyber insurance continues to provide room for innovation that fits perfectly into the 2.0 model. Consider that data is the lifeblood of nearly every successful insurtech. The sheer amount of data available within cyber is unparalleled when compared to the dangers of dealing with the physical world. Insurtech 2.0 Cyber ​​insurers can leverage data science techniques that would not be possible without the vast and diverse data sets inherent in cyber.

It’s established that the cyber industry was in the right place at the right time to build a new model for InsurTech, but 2.0 is more than just one line. Many companies will build on the concept of taking what already works in insurance and using technology to make it possible.

Phil Edmundson of Corvus Insurance.  (Credit: Photo provided) Phil Edmundson of Corvus Insurance. (Credit: Photo provided)

The cumulative effect is better results — better results for brokers and policyholders, better technology experience for underwriters and, of course, better loss prediction, better pricing and better selection. In a broader market environment that seeks profitability and business fundamentals over the idea of ​​growing over time, these advantages will become apparent as the companies in our cohort continue to grow.

Philip Edmundson is Founder and Executive Chair of Corvus Insurance, a specialty insurance MGA that offers smart cyber insurance products powered by AI-driven risk data. A 40+ year insurance industry veteran, Phil started his career at Willis and later co-founded broker William Gallagher Associates (acquired by Arthur J Gallagher in 2015), the Worldwide Broker Network and the Council of Insurance Agents and Brokers. was an active leader in both Phil is managing his partner at Edmus Ventures and has invested in insurtech companies such as Verifly, Hi Marley, reThought, Agentero and CoverWallet.

The opinions expressed here are those of the authors themselves.

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