Why Insurtech is Uniquely Positioned for Sustainability

As the insurance industry moved through what is now generally agreed upon as a “first wave” of Insurtech, I had several conversations with carriers, founders, venture capitalists and other industry gadflies that were remarkably thoughtful about the realities of the moment. That is, there was a clear understanding that what we were experiencing was a bubble of sorts: There were a lot of companies vying to meet market niches in an opaque and distributed sector, and it was unlikely any insurance “killer app” could emerge given the unique character of our industry.

The bubble did eventually burst, but in a bizarre sequence. Funding rapidly cooled in the immediate aftermath of the COVID-19 pandemic in 2020, but then frantically ascended to new highs during the 2021 recovery. Once the Fed began interest rate actions, however, funding has been stepping down continuously since 2022 – a sequence of several quarters that is the most extended trend since before the pandemic.

But the fact remains that, while a killer app (or several) that could upend insurance in the manner that Plaid, Stripe, Mint and a few others did for banking can’t really exist in such a heterogenous sector, the insurance industry is still in need of digitalization across its value chain. The lesson learned from the first Insurtech wave should not be that there is no appetite for transformative technology in insurance, but rather that a more collaborative approach between carriers and partners is the best path to success – not the adversarial “disruptor” approach that Silicon Valley has taken to so many other areas.

With an economic “new normal” setting in after the past two years of turbulence across the business world, insurers find themselves farther down the path of digitalization than they were in, say, 2016 – the first year of insurtech’s steady ascension until the choppy descent of the COVID era. But there’s still lots of work to do. This summer, I filed both auto and life claims, and the number of baffling unforced errors from a customer experience perspective throughout both processes hammer home the need for continuing improvement in the industry’s digital infrastructure.

That means there’s an opportunity for savvy founders to launch companies that meet the material needs of insurance carriers, who still are the best equipped entities on Earth to manage risk for individuals and companies of all sizes. And the best tool the industry has to encourage the proliferation of complementary companies rather than adversarial is the venture capital system. By placing bets on the kinds of partners insurers seek, the venture world can encourage more entrepreneurs to take on similar c– ideally changing the digital character of the sector.

At Insurtech Connect on Oct. 15, I’m bringing four Insurtech leaders together to discuss what this next wave of Insurtech will look like – from a financial perspective (how much money is out there to invest?) to a practical one (what kinds of companies will VCs bet on?). It’s part of Celent’s pre-conference workshop, Celent Tech Connect: Unleashing the Future of Insurance, which also includes sessions on cloud management, digital agents, and the role of MGAs in this market. You can check out the full agenda here and register to join what should be a day of lively conversation setting the tone for the next couple days. See you there.