At the Tip of the Insurtech Revolution
Robert Regis Hyle | November 10, 2016
The insurance world has not been turned upside down by innovation just yet, but it’s beginning to tilt a bit. There are venture capital and private equity firms on the prowl with money to invest in new technology to advance the insurance industry and even new insurance products.
There are smart people with insurance technology experience—both from the carrier standpoint and as technology solution providers—with new ideas that are finding a niche. There are even traditional insurance companies that are spinning off start-ups to find a market that in previous years was easy for them to ignore.
It was only a year ago that the insurance industry feared a revolution was at hand and it would be led by technology giants such as Google, Amazon, Apple and others. But so far nothing has come to rock the industry foundation. Still, the revolution has started without them. The spirit of change that those technology companies brought to their customers has caught on, whether Google or Amazon or Apple are involved or not.
Two new players are just now making their names known and were selected to be part of this month’s cover story because what they are doing is both exciting and fresh—two words rarely used in insurance before.
Slice Labs is looking to change the ride-share and home-share market by offering on-demand insurance for customers that have not been served well by traditional personal auto and homeowners’ carriers. Their company is working to solve a difficult issue: the conversion of personal coverage to commercial coverage in the drop of a hat. And then back again to personal coverage.
Figo Pet Insurance saw a severely underserved market for pet lovers who want to take care of their pets with quality coverage that doesn’t cost a leg and a paw. And while they were at it, they went about creating an online community of pet lovers who want to share their love for their pets and help others just like themselves.
Their stories may not harken back to the days of Lloyds of London and the start of the insurance industry, but in 2016 they are significant in ways we are only just discovering. These are just two of the stories that are taking place. There are likely dozens more.
The number will increase as 2016 becomes 2017, which is why we want to keep you focused with what is going on as well as announce the start of a new feature that follows our cover story, Launchpad, which this month examines the world of insurtech, what that word means, and why we should all care about it.
The revolution may not be televised, but there’s likely an app for it.
On Demand Economy is Slice Lab’s Focus
The theory around building a better mousetrap remains solid. Find a problem, and create a solution. Slice Labs saw gaps in the insurance needs for those operating in the on-demand, peer-to-peer economy. Now they plan to serve that market for the second to second changes that mark the world of on-demand
Companies such as Airbnb and Uber developed a platform that allows people to make money being a taxi or renting out a home. Slice Labs plans to fill in the insurance part of the equation. CEO Tim Attia and partners Ernest Hursh and Stuart Baserman saw a need for insurance coverage because it is difficult to find insurance for such a business model.
“If we wanted to reimagine and improve the insurance process, what better place to do it than the new economy where there is some open ground and we don't have to compete with companies with billion dollar ad spend, and where some of the friction has already been removed,” says Attia, CEO of Slice Labs.
Platforms have improved efficiency for someone offering a service to buyers. Slice Labs set out to find a way to provide the insurance because, as Attia explains, “you can't re-introduce friction into a frictionless process.”
Need for Speed
It takes longer for an Uber driver to get insurance than it takes to sign up to actually be an Uber driver. With that knowledge, Attia knew it would be a challenge for Slice from a technology perspective to develop a solution to the problem. But Slice has met that challenge by developing a fully functional insurance platform that will take all the friction out of the process of buying a per use on-demand insurance policy; nothing like it has existed prior to this.
Slice also believed they needed to develop their own product, with the capability to issue the policy, manage the bills, and pay the claims.
“We wanted to go after what we felt was a growing need with a gap,” says Attia. “Last October we had three guys and a PowerPoint presentation. We raised our seed money and our focus now is to get our first product into our first jurisdiction and to continue to work on our platform.”
Venture capital companies behind Slice Labs, Horizon Ventures and XL Innovate, were secured. Attia says he has never seen the VC market so excited about insurance.
“That’s a good thing, but it still comes down to execution,” he says. “You can talk, but we need to execute. More people are going to come out with innovative models for insurance. This model works so we can innovate on product and technology. There also are ways to partner with incumbents. We have a better chance to innovate, and the opportunity to innovate with partners will mean even greater capacity, but we don't have the capacity for two million properties or a million cars.”
Slice Labs is already licensed to sell insurance in 45 states and is headed to all 50 in the near future, according to Attia. Slice is working with insurance commissioners in those states on approval of the new product, which the company plans to introduce within the next few months.
“In this on-demand world you can be a person one second and a business the next and then back to being a person again,” says Attia. “That doesn't fit within either the commercial lines or personal lines towers. We had to build our own product to meet the ride share and the home-share environment. We're providing primary coverage for their property and liability for their business.”
Slice Labs jumped on the on-demand economy because they felt the market was underserved. One of the few options individuals currently have is to get an annual commercial policy, but what was offered in the insurance market didn’t make much sense.
Research shows the average annual Airbnb revenue in California is $4,000 and that a commercial lines policy for such a business could cost up to $4,000.
“It’s not practical to buy those policies. We definitely are going after what we see as the underserved,” says Attia. “The on-demand economy is growing and that's another angle to our benefit. Lastly, people working in the on-demand economy are innovative. They remove friction. It is a great place to innovate.”
Ticking time bomb
Attia has described the on-demand economy as a ticking time bomb because people who rush into the Airbnb or Uber business don’t always realize there are some real gaps in their risk. Beyond that, they find insurance to be confusing and opaque.
“There is a perception of coverage, which is dangerous because policyholders don't find out how their insurance works until something bad happens,” he says.
Insurance is in the world of probability, according to Attia, but even more worrisome is for the first time in his experience with the insurance industry the name of the insurance coverage is actually what is not covered.
“When people say they have a rideshare policy, and there are a few carriers out there with them, rideshare means the insurer does not cover them for the ridesharing, which is confusing even for experts in our industry,” says Attia. “Insurers exclude coverage for ridesharing, but it is called a rideshare policy. The industry left a gap and in order to respond we needed literally a new product that understands you are a business one second and a person the next second.”
One day there will be multiple events and bad things will happen with the host and the guest and the only recourse is if the host is insured. The old insurance platform will say they are independent contractors. Attia says observers are just waiting for something bad to happen and then people will discover the gaps in coverage.
“There are bad things happening to good people,” says Attia. “The insurance platforms are saying that's not their issue.”
With Airbnb, a homeowner could be taking on $6 million in liability. A $3,000 property loss for an Uber driver could be catastrophic and, worst-case scenario, an accident could wipe out any wealth the individual has.
“That's why we’re changing the insurance model,” says Attia. “We want to protect the worker, the guest, and the passenger.”
Slice Labs built its platform to remove friction and change the process with the simple goal to make it as easy as possible to purchase a policy. Because of the background of the Slice principals, they built the system from the ground up, understanding some insurers have trouble issuing an annual policy, much less one that is per-use and lasts for a short time.
“You can't buy an off-the-shelf system to do what we are doing,” says Attia.
So Slice Labs has its own policy, billing, and claims system and designed the product using their own actuarial and operations skills.
“We’ve been around technology for a while and even technology from three years ago wouldn't have allowed us to do what we are doing today,” says Attia. “Any technology we would have looked at or started building three years ago would be out of date today. There has been a real shift.”
The New Economy
The on-demand economy got ahead of traditional restraints—regulation, the legal system, insurance—so now companies like Slice Labs are filling the gaps. Attia believes things will begin to normalize as regulators catch up to the demands of new customers. As well as the insurance industry as a whole.
“The nature of work is changing,” he says. “We think the infrastructure, regulatory demands, and legal issues will catch up and those operating in the new economy will need new infrastructure.”
That is why Slice Labs is going to jump into all the segments of the on-demand economy, not just Airbnb and Uber. It doesn’t hurt that this also is a global issue.
“It's not a U.S.-only phenomenon,” says Attia.
With the new economy that Attia speaks of, five years is two lifetimes, so predicting the future remains dicey.
“We have to move fast—that's a requirement,” says Attia. “We are cautious because we don't want to get into any regulatory issues or challenges, but if we come up with a new way to do insurance with a new economy and do a good job with it, can we move it to other areas? That's not on our immediate roadmap, but it may be in our future.”
So where did the name Slice Labs come from? According to Attia, people were throwing out names and Slice Labs just stuck with Hursh, Baserman and Attia because the company was going to be on-demand for a “slice” or a period of time.
As for the Labs portion, many insurers have used labs, but Slice doesn’t think of it as an afterthought; rather it is a core concept.
“Technology is going to be different in three years so for us the lab will always be about building new technology,” says Attia. “Slice will never stop building new technology.”
Pet Insurance—and More—Make Figo Stand Out
The insurance world is changing and one of the change-makers is a gentleman who sells a specialty line product that heretofore captured only two percent of the market. Rusty Sproat is the man behind Figo Pet Insurance and he is taking advantage of the market, but not in any ordinary way.
Figo sells policies to protect your pets, but the company also projects itself as a clearinghouse for pet information with a platform designed to attract the attention of pet owners who might not have much interest in dealing with a Fortune 500 brand-name insurer.
“People are looking for products they can use and the value is in the use, not just in the exchange of money,” says Sproat. “People are looking for cool apps that can help them in their lives. There are all sorts of examples of companies putting value in their product outside the insurance product to engage with Millennials. That's where we're trying to fit in.”
So, why pet insurance? Sproat explains there aren’t many untapped markets left in insurance, but this is one of them. Pet insurance has a two percent market penetration in the U.S., but it's growing—up 12 to 18 percent, year over year. The market today is between $700 and $800 million in annual written premium, according to Sproat, and when it reaches just five percent market penetration, that figure will be more than $4 billion in premium.
“I have a pet and I love pets. I saw a huge opportunity to come into a space and change it with something innovative,” he says.
Figo offers an insurance package for pets, but where Sproat seeks to differentiate the company is with Pet Cloud, a lifestyle app to make things easier for people and their pets.
“We took all the pet insurance policies in the industry and we fixed what we thought was wrong with them,” says Sproat. “Competitors had age restrictions and breed restrictions. They had deductibles that were per incident instead of annual. They weren't covering office visits.”
These were all points Figo felt were either upsetting to potential policyholders or didn't make sense. So the Figo team fixed what they could and created a policy that Sproat describes as the broadest coverage in the industry.
Figo wrapped the policy side with what Sproat views as the value add for the company—proprietary technology that was developed out of 1871, a Google Tech Hub in Chicago. Sproat spent 18 months in the tech hub working on the Pet Cloud architecture.
Google for Entrepreneurs has nine tech hubs across the country to sponsor and help technology and digital startups, according to Sproat. Unlike an incubator, which becomes an equity partner, 1871 simply provides services. Sproat had access to mentors from a financial and investment perspective, coders, and heads of various departments.
“1871 gave us access to unbelievable services and people to refine and develop our own technology product,” he says. From there, Figo was able to raise capital and began to work with a carrier. The company went live in April of 2015.
Sproat describes Figo as having a dynamic insurance architecture integrated with the Diamond system from Insuresoft. The company uses Salesforce as a central hub for everything.
“We have been able to sync (Diamond and Salesforce) together and do some implementations and integrations with other apps and APIs that work within the Salesforce environment,” he says. “Our customers can text us, tweet us, Facebook us.”
Sproat is most proud of the analytics. Customers can call Figo and because their mobile number is in Figo’s Salesforce system, with one ring the account pops up on the screen of the Figo CSR.
“It's got everything. Your name, your bill, your claims, your premium, your pets. Every text you've had with Figo, every email you've had with Figo, and every chat you've had with Figo,” he says.
Even Salesforce has been impressed with Figo’s success. They are working on a case study that will focus on the integration and interactions with customers and have asked Figo to present at Dreamforce, one of the largest technology conferences in the world, in San Francisco from Oct. 4-8.
What is striking to Sproat about the reviews Figo has received online is people aren’t writing about policies, such as whether Figo has great hereditary and congenital coverage. They are writing about how they love texting Figo on the mobile app and the ability to file a claim on their phone.
“They are focused on the technology and the interaction with us, not the actual policy,” says Sproat.
Startups are under pressure to become profitable within defined timeframes in order to survive. The supplemental employee benefit channel and brokers with large affinity groups are critical for growth. These brokers will not enter into partnerships unless an insurer can provide policies to all their clients on a national level. Fortune 500 companies and large employers also have that requirement. Four months after going live in all 50 states, Figo had signed with some of the largest brokers in the country.
The technology will be amped up even more with Version 2 of the Pet Cloud website.
“We’re doing a significant overhaul,” says Sproat. “Version 1 was primarily to ensure we were working correctly with endorsements and policy issuance and all the ancillary products were functional. Hopefully, in the fourth quarter we will add significant developments so you can rate businesses as pet friendly, see photos from other members, and an Instagram-style feed for all the pets. We will be socially connecting pet parents and make the app absolutely free. You don't have to buy a pet insurance policy; you can just download the app and use all the services. We're really excited about it.”
Sproat explains Figo’s partnership with Insuresoft has been critical to the company’s success. Insuresoft had a test environment up and running in 90 days and Figo was able to launch in less than six months.
“They like our vision of our technology and how we wanted to do this differently,” says Sproat. “Everything we've brought to Insuresoft has been met with great reception. They recognized the Salesforce implementation we wanted to do. They've been incredible partners for us from group enrollments to payroll deductions, to our broker portal.”
Sproat hopes to educate agents to the value of pet insurance. Coverage is low cost, which is not a huge money maker for agents, but agents who are focused on attracting new customers or returning old customers to their business can use pet insurance to win them back.
“It's a great way to engage customers,” he says. “It deepens relations with them and helps with retention. There are so many ways they can use pet insurance to improve their business.”
Because of the Figo technology and the ease of enrollment, Sproat believes his company can succeed in any distribution channel, including the agency channel, the supplemental employee benefit channel, and the affinity group market.
The direction the industry will take also makes what Figo is doing a strong indicator for the future.
“Baby boomers are shrinking and carriers are going to shrink with the boomers,” he says. “People sit on their couch and read email and buy things on their smartphone. The mobile engagement and interaction is where insurance is going. We designed Figo to resonate with the socially connected user.”
Sproat claims Figo’s first policyholder actually tweeted about Figo after he purchased his policy and the tweet was automatically logged into Pet Cloud. The tweet appeared instantly on Figo’s social media board.
“Millennials are also focused on value-in-use, rather than the traditional value-in-exchange models. They want a cool and useful mobile experience, and the insurance product pricing can often be secondary,” says Sproat.
Sproat sees what other new players are doing and is excited. Metromile, he maintains, is a perfect example of value-in-use. Their app has incredible functionality—gas mileage, GPS location, text alerts when parked in a street sweeping zone, digital ID card, pay-per-mile, mobile payments and claims, and much more.
“I purchased their insurance because of how useful the app was, and the actual insurance product became a secondary consideration,” says Sproat. “Disruptors in the insurance industry are technology companies that want to make insurance simple and easy to purchase. Millennials demand the best user experience and user interface. Adding other value services—such as mobile claims, shot reminders, pet GPS location services, texting and much more—is the expectation, not the exception. Insurers who aren’t willing to make the transformation to cloud or digital technology will shrink.”
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ITA LIVE 2019 will present real-life examples of true startup technologies that are helping insurers gain real advantage -- and a competitive edge -- in the marketplace. We’ll highlight the more successful InsurTech partnerships, while offering case studies that demonstrate exciting innovation and cutting-edge techniques impacting all aspects of the insurance ecosystem.
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