You wouldn't take a high-risk jump without the assurance of a parachute, would you? Many of our life decisions are essentially like these jumps. Every opportunity is laced with some element of risk, and that’s the crux of the problem insurers and reinsurers have been solving—softening the landing. However, the solution is not without its own problems. Ceaseless complaints about delays in accessing insurance claims and the tedious processes such as choosing the right cover have long been heard. Therefore, today’s focus is on a newer segment in insurance—insurtech, the happy amalgamation of insurance meets technology—and a look at how three neo insurance players, defined in our coverage, are applying insurtech solutions across three main insurable areas: auto, home renters, and life.

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From antiquity to the apocalypse (?)

Originally, in the age of antiquity, the only way to insure against fateful ends and destruction was to comply with  divine will. With the age of reason and accelerated mathematical thinking, calculable risk was real and a sensible way to go about things (see Swiss Re’s A History of Insurance).

In short, insurance formulas graduated with rising social needs and wider data gathering. Fast forward to the 21st century and tech developments like Machine Learning (ML), Artificial Intelligence (AI), and data analytics seem to solve problems that “insurer ears” have endured. While insurtech may not be a legitimate word on your spellcheck, it’s a very real wave of technology that’s predicted to disrupt traditional insurance methods, much like fintech did to financial services. Hyperbolic of course, but with the tech that is leveraging data and parametric methods to assess risk, the apocalypse could probably be insured against soon.

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Insurtech and its applications

Initially, as cited in the IBS 2020 Report, insurtech was not developed with insurance know-how, but later evolved to create more nuanced solutions with a better grasp of how insurance works. Though the “disruption” threat is a commonly waved flag at the sign of any change, according to the report, insurtech will not unseat the traditional role and application of insurance, as the tech is adaptable by insurance providers, agents, and distribution channels, much like an efficiency aid. PwC’s take on it differs though, as it feels there’s good reason to believe disruption is headed with more AI involvement and an increase in a sharing economy.

Let’s take a look at three Growth Phase players from our Neo Insurance industry coverage in each subsection, what they offer, and recent activity to understand how insurtech is being enacted. 

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Root Insurance (from the Auto Insurance segment)

The first publicly-listed usage-based car insurance startup, Root Insurance is actually a full-stack insurance provider focused on usage-based automobile insurance. The company offers a mobile app that collects data on driving speeds, braking patterns, and driving times using smartphone sensors, and applies artificial intelligence (AI) and predictive models to offer a personalized premium to the customer. The app also incentivizes safe driving by providing greater insight into one’s driving patterns and issuing additional discounts for improving your driving behavior. Here’s where insurtech using neo insurers really win you over: Root allows customers to file claims directly through the mobile app!

Early this year, it strategically partnered with Tractable, a UK-based provider of AI-based solutions, to streamline its claims management process. Through the partnership, Root has plans to leverage Tractable’s AI Subro solution to optimize its end-to-end claims process, starting with subrogation, where two insurance carriers negotiate the division of expenses when multiple parties are involved in a claim.

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Hippo Insurance (from the Home Renters segment)

Hippo is an insurance provider that specializes in homeowner insurance. It offers its homeowner policies online, with each policy accompanied by a complementary smart home monitoring system that will help identify risks proactively. Hippo provides coverage using a combination of machine learning (ML), satellite imagery, and other public records and actively reviews for any changes to the property over time. The company also offers an on-demand home care and maintenance app (Hippo Homecare) which it launched in 2019 following the acquisition of Sheltr, a home maintenance platform, during the same year. The company’s homeowner offering was available in 37 states as of December 2021. 

One feature of neo insurers is their commitment to customization. As reported in Insurance Business Magazine in February this year, Hippo’s CIO stated, “We just rolled out a next-generation claims system that focuses not just on the claims or the policy but really looks at the customer, and how we benefit the customer … or an adjuster to [help them] be very productive, efficient and take away all of the minutiae – all of the tasks that could be automated and make them focus on being a great partner to a customer in need.”

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Ethos (from the Life Insurance segment)

Ethos offers personalized term life insurance of up to 30-year terms for applicants between the ages of 20 to 65 (maximum coverage of USD 2 million) and whole life insurance for applicants between the ages of 65 to 85. Ethos relies on questions asked during the onboarding process and uses data science and machine learning (ML) to analyze over 300,000 data points in order to underwrite policies. What’s interesting is that the company claims that the process does not require a medical check-up, and policies are issued in minutes for most applicants. Ethos operates under an agency model, issuing policies written by insurance giants such as Legal & General, AAA Life, and TruStage. 

In January, it made a smart move—Ethos acquired digital wills and estate-planning startup Tomorrow for an undisclosed amount. Tomorrow offers a platform that enables individuals to set up digital wills and trusts, which include legal wills, trust-based estate plans, and life insurance products. Through the acquisition, Ethos has intentions to offer its own life insurance policies via Tomorrow’s app, which the company plans to roll out around mid-2022.

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Final Footing

Younger demographics are increasingly looking for more custom solutions for their needs. While legacy insurers have been labeled slow and inefficient, insurtech used by the neo insurers featured here illustrates how using technology to underwrite, claim, cover, and choose can be made more efficient and provide custom solutions that solve the real issue. As the IBS report noted, the new wave in insurance is not changing the customer’s experience but simply meeting their demands from decades ago. 

If you want to know more about incumbents’ movements into and within the insurance space, check out our in-depth EDGE insight.