Hillside Announcements
ATTN: All Founders at CT Universities—Hillside Ventures, in collaboration with Dorm Room Fund (First Round Capital), will be hosting a pitch competition for CT University students on April 5, from 6:00-8:00pm. Founders are encouraged to apply here by end of today. Those interested in attending can RSVP here.
Interested in Joining the Hillside Team? Click here to learn more information about the fund, its associated course, and recruitment for Fall 2021. Applications are due by 4/2.
InsurTech Trends
Earlier this month, Devin wrote an article overviewing insurtech. If you have not had a chance to check it out yet, I highly recommend giving that post a thorough read before tackling insurtech trends on Hillside Ventures’ radar. As a first-year analyst with the fund, it has been daunting and challenging to take on the insurtech industry (especially keeping up with all of its nuanced structures and systems in place); however, thanks to the support from other experienced analysts in the fund, mentors, and the omniscient search engine—Google—I have learned so much about Insurtech.
I also want to thank Mark Roth and Frank Sentner for taking the time to speak with us and for sharing their wisdom from decades of industry experience. Through their seasoned advice and explanations, we have a better understanding of what the current landscape holds compared to what it traditionally has in the past. As we continue becoming insurtech subject matter experts, the following trends have been identified by Hillside thus far:
Partnerships Versus Replacement
Considering the different types of insurtech companies, 91% are not seeking to replace insurance giants like MetLife or State Farm, but rather fill in gaps to improve policyholder experience and/or make data more valuable amid the shift to Industry 4.0. The sheer amount of data recorded on the clients and capital of established insurance companies is a barrier to entry for full-stack insurtechs to directly provide coverage. Regarding this upstream trend, there is a symbiotic relationship between the startup and legacy carrier in this time of digital disruption—the insurance companies must accept insurtech innovations to keep up with the modern demand. These days, consumers want easily accessible services digitally distributed right to their personal devices. Insurtechs are improving the user experience within insurance to bring it to the same high standards society holds in place for tech giants like Google and Amazon.
Internet of Things (IoT)
There is a significant push away from legacy methods that use historical data to detail off-the-peg coverage for the average consumer. There is a lot of potential for insurtechs to utilize Internet of Things (IoT) devices to cater to individual customers. As the name suggests, IoT allows the consumer to connect a device to the Internet or other devices on the same network. A classic example of a popular IoT device is Amazon’s Alexa voice control system which allows for people to integrate different smart objects in their home, such as lights, speakers, or phones, to make daily life more efficient and hands-free.
Through the insurtech lens, IoT devices equipped with sensors or software can be used to streamline user-based data to insurers who can assess risk for a given asset. In the case of auto insurance, mobile applications or other embedded technologies can be used inside of a car to gather data points on a policyholder’s driving behavior and potential risk. Directly collecting information in real-time takes the customization of insurance to new heights. Any covered asset may be integrated with IoT; it simply becomes a matter of whether a solution for that asset exists yet, and, at this point, the use is relatively new. Some of the companies driving this trend include Develco, By Miles, and ThingCo. While these developments are exciting, the ethical concern that remains surrounding this advancement is the extent to which policyholders would be willing to release their data to these companies at the expense of their privacy.
Accelerated Underwriting
Another popular vein of insurtech innovation focuses on optimizing the underwriting process. Through insurance underwriting, carriers assess the risk and terms to cover an individual or entity given the circumstances. With technologies such as machine learning and artificial intelligence, companies can provide a more intuitive and streamlined process to address potential customer needs and provide quick turnovers on quotes.
Startsure is one company that showcases how seamlessly startups and carriers can work together to offer a more user-friendly experience in insurance. At Startsure, they have partnered with Arch Insurance to cover small business owners. The underwriting process is highly simplified and comprehensive to the user who answers a few questions that their AI-Powered Digital Advisor can use to identify additional business exposures on top of a baseline quote. In turn, potential customers save their time and can better trust and identify the right insurance fit for their unique needs.
Cybersecurity
Another key trend seeks to fight the increase of cybercrime in our digital world. Since personal data is driving the customization of insurance and policyholders are prime targets to steal information from, insurance companies must prioritize protection from privacy breaches. In the past year, we have seen almost $100B poured into cybersecurity investments, but we are still up against a $2T problem with damages happening every day. Earlier this month, a startup called Tide won the Carrier/Broker Prize at InsurTech NY’s Early-Stage InsurTech Competition. In part of this decision, judges had selected companies showcasing the most commercial potential. Tide creates flexible solutions for companies to entrust cryptographic keys to protect user data in a True Zero-Trust Custody Layer. As a result, insurance companies would no longer be liable to protect this data because that’s where Tide steps in for them instead.
Final Words
Compared to insurance centuries ago, technological advancements have reimagined the traditional way insurance works. No longer are the days where you must call your insurance provider when you can instead access everything from your smartphone. Despite the degree of technological disruption in the insurtech industry, the number of agents, brokers, and service employees has been on the rise along with increased innovation and opportunities, reaching approximately 1,168,900 employees in 2018. Certainly, now is the time to be excited for the evolution of insurtech!
If anything from this article interests you, please reach out to me at faith.sporbert@uconn.edu or connect with me on LinkedIn if you would like to learn more about Hillside Ventures, insurtech, UConn, and more! We appreciate you for taking the time to read our newsletter and hope you subscribe to our mailing list to catch all of the upcoming posts!
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By Faith Sporbert, Analyst at Hillside Ventures