The American insurtech landscape has entered a “second wave” that’s all about collaboration and partnerships with traditional insurers and big-name corporations, according to Angus McDonald, Cover Genius CEO.
He spoke with InsuranceNewsNet on the eve of the company’s 10-year anniversary, reflecting on past developments and his projections for the future of insurtech.
While insurtechs were originally poised as “disruptors” to traditional insurance carriers, McDonald said the way forward calls for mutually beneficial partnerships.
“It is a development that we’ve seen partly because the first wave of a lot of insurtechs focused on underwriting problems. They probably saw insurers as competitors for the products that they were building, and I think that was kind of ‘insurtech 1.0,’” he said.
However, he noted that once those insurtechs went public, many failed to perform well, making them shift strategies.
“When you look at the new wave, they’re usually a lot more partnered and joined up with risk capital providers, either as an MGA structure or through really strong reinsurance agreements. So, we are seeing the second wave being much more collaborative and much more partner-focused with insurers,” he said.
Multi-pronged partnerships
McDonald believes a “real acceleration” in the adoption of embedded insurance platforms such as Cover Genius is one of the factors driving mutually beneficial partnerships between insurtechs and traditional insurers.
“What we’re seeing is a lot of combined partnerships with a third-party distribution platform, and these things are often not two-party partnerships. Often, they’re three or four-party partnerships, and all that takes a real skill set around how do you create win-win situations for all those parties. That’s something we’re really focused on,” he said.
For instance, an insurtech may function as an MGA, have distribution partners and also partner with traditional insurers. At the same time, they may seek out flexible underwriters who can help them build customized solutions for consumers.
Insurtech future of mutual benefits
These and future insurtech partnerships will allow both insurers and traditional providers to expand their client base and tap into underserved markets, while also providing customized solutions that will drive sales, McDonald suggested.
He noted that Cover Genius benefits from partnering with big-name platforms like Amazon, Wayfair, eBay, Booking.com and even Uber to tap into their well-established client base and offer personalized solutions to consumers who may not usually seek to buy insurance.
“They just have really large numbers of consumers and they know really interesting things about them, and we can infer the risk that those consumers are being exposed to — whether they’re jumping into an Uber themselves or whether they’re an Uber driver, whether they’re taking a flight or whether they’re booking a vacation rental,” McDonald said.
Many customers may not be familiar with insurance brands or inclined to interact with them directly, he noted. However, they will be more likely to buy insurance coverage through an embedded platform when big-name brands are used.
Traditional insurers are ‘leaning in’
At the same time, McDonald also said there’s an increasing trend of traditional insurers embracing working with insurtechs. Rather than viewing them as competition, traditional insurers leverage insurtech partnerships to upgrade their technology platforms and tap into underinsured markets that may not be seeking insurance coverage through traditional means.
“These people aren’t walking into brokers on the street [or] going directly to these insurance companies’ websites. So, because they’re missing out effectively on a whole audience, we’re seeing insurers trying to partner with insurtechs to be able to access that audience,” he said.
While he expects this trend to continue, he also noted that in the future, it will hinge on the ability of insurtechs to adapt to and invest in changing technology.
Agility must drive evolution
To illustrate his point, McDonald used the example of the popular social media platform’s migration from MySpace to Facebook and now TikTok. However, in actuality, he said digital bank applications are quickly becoming the next key platform for insurtechs in the United States.
“As consumers move into different kinds of digital platforms, you’ve seen the need for insurtechs to be able to also integrate into those platforms,” he said. “We see a lot of it around bank platforms; I think there’s been a big wave of banking platform upgrades in particular in the U.S. over the last few years, and there’s a lot of neobanks and fintechs associated with that.”
This is where investments in AI and other tools will be crucial for insurtechs to ensure they can quickly adapt to new technologies heading into the future, he added.
“I think with the adoption of AI and large language models and data platforms that know a lot about the end consumer and are really trusted by the end consumer, that we’re about to have a whole wave of convenience wash over the whole insurance sector. It means that consumers will be able to transact and buy products a lot more seamlessly and easily than they probably ever could before, and so what we’re investing in is our platform so that we can facilitate that,” McDonald said.
Cover Genius, founded in 2014, is a global insurtech provider offering tech-powered insurance solutions and software. It has more than 600 employees around the world and reported 107% year-on-year growth in 2023.
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