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You cannot take out the insurance with Insurtech

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Jamie Hale is the CEO and co-founder of ladderthe life insurance technology that helps more people get covered in an instant, easy and affordable way.

Find a major industry in dire need of innovation and capitalize on it with technology.

In the past, that was often the proven entrepreneurial formula for building the next multi-billion dollar company; it’s part of the reason why venture capitalists have flocked to the insurtech market, which is estimated to reach $5.4 billion this year. Speaking specifically of life insurance, all you need to do is go through the process of getting covered in the traditional way to seize the huge opportunity for the next company with the right innovative technology to dive into.

But here’s the thing: insurance is not like most technology products where innovation can be limited to modernizing the customer experience. Insurance is essentially about risk: understanding it, pricing it and creating value by diversifying it. If you get that wrong, you’ll never get a chance to really transform the industry because you don’t have the time to do that; losses will quickly eat up your runway, as well as the confidence of your investors. I think this explains some of the turmoil that the insurtech market has been going through this year.

Real innovation is in acceptance

The case for innovation in life insurance has never been stronger. About 102 million uninsured and underinsured Americans know they need or need more life insurance coverage and 42% would face hardship within six months of losing a wage earner. Yet the process of being insured – the paperwork, medical care, perceived complexity and high cost – is often too great a barrier.

Next-generation digital adoption can help solve all of that. It can transform the buying process from an eight-week struggle to a delightful five-minute experience. It may seek to expand access to life insurance by finding alternatives to home visits and blood draws so busy parents can get coverage on their terms even at 11pm when the kids are down after a long day at work.

It can review risk decisions in real time to immediately give customers the best possible price. Smart adoption is the foundation of sustainable growth, not only because it keeps your losses under control and your business healthy, but also because it makes for a better, cheaper and faster experience: an equally proven entrepreneurial formula.

Insurtech 2.0

A sectoral settlement is in order; we call this new movement Insurtech 2.0. There is clearly consumer demand for modern insurance brands and digital insurance products, but now insurtechs have to prove that they can handle the insurance part as well. That means focusing on fundamentals and leveraging technological innovations for adoption and risk modeling as the basis for everything.

For example, nearly 60% of our company’s employees work in some capacity on acceptance. The reality is that much of this type of work happens below the waterline and can be difficult to see and explain. It takes time, diligence and the discipline to withstand more tempting paths, especially those valued (however briefly) by the markets.

Strategies for Insurtech 2.0

So, what should companies looking to succeed in the era of Insurtech 2.0 keep in mind?

Step 1. Focus on insurance technology innovation; this starts with focusing your business on adoption targets, much like traditional startup metrics. Ask yourself whether your primary KPIs measure underwriting results alongside traditional growth metrics and whether the allocation of staff resources is appropriately weighted toward underwriting innovation. If you find these basics lacking, it may be worth re-engineering your goals and metrics to properly prioritize insurance success.

Step 2. Prove your models through smart growth before pulling out all the stops for the acquisition engine. Build confidence in your underwriting by consistently predicting proven underwriting outcomes, which can be done initially through systematic post-issuance holdouts and audits, and ultimately machine learning. This enables you to develop new ways to understand and segment risks.

Step 3. Innovate on the customer experience by building on the strong insurance foundations you built in steps one and two. Is your product wonderful to work with? When done correctly, real-time adoption makes for a quick and easy experience for customers. A nice user interface will take it to the next level. The best customers always demand the best experience.

While they may be a simplified version of how to optimize for the growing Insurtech 2.0 movement, these three steps should help organizations build from scratch or rethink their thinking for long-term success.

Back to basic

At its core, insurance is a promise between a company and a customer, with the company promising to intervene in the event of loss or damage. The amount of legacy infrastructure, overhead, paperwork and multi-layered distribution that has accumulated around this simple promise is staggering. Going back to the basics of insurtech is also about going back to the essence of the product.


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