Insurtech as an industry sector has existed for less than a decade. Although it has dramatically changed in its nature, Insurtech has not fundamentally changed the insurance industry or its business models. This will inevitably happen in time.

The first conference that we attended which even mentioned “Insurtech” took place at Olympia in 2016 – the IoT Tech Expo. I recall is that it was dominated by a debate over who owned the automotive customer. Daimler Insurance executives were adamant that insurers would dwindle away in auto insurance as the end customer belonged to the auto manufacturer, whilst the insurers were uncertain of their role in the future connected car.

Roll on to 2024 and the connected motor insurance offered by manufacturers has not materialized to any great extent (with the possible exception of Tesla), and the motor insurers are trying to adopt telematics but without sufficient success to mandate the use of telematics. The retail broker in the UK still holds the insured relationship despite the comparison site channels dominating sales.

The broker channel is still making profits and the insurers are battling for capacity, suggesting that the returns in motor insurance for insurers have not been adequate. Has Insurtech really managed to change anything in this sector? Opportunities remain.

At these early conferences there was definitely a sense of Insurtech suggesting a threat to the entire industry with unknown but certain disruption. Lemonade, one of the first all-digital insurers introduced digitally-powered end to end sales and claims processes. It also became one of the first digital insurers to migrate abroad from the USA to the UK and EU. Listed in the USA, it partnered with European insurers to deliver the digital product to consumers.

Root Insurance was another all-digital insurer in the USA. Both investor darlings have had poor share price performance since listing. Lemonade is trading at $20 off a high of $149 in January 2021 whilst Root is trading at $73 off a high of $431 in October 2020 (from Google Finance). But does this mean that Insurtechs are dead? Most certainly not.

Early investment “partnerships” by insurer incumbents seemed to frustrate the direction of innovation and disruption. Although Insurtechs were being embraced by insurers as partners, they were then being forced to embrace the insurers’ legacy technology in order to offer products using that capacity. This meant that the Insurtech was limited to using the partner insurer’s back office systems, contrary to the entire point of trying to launch innovative Insurtech companies. I recall hearing a departing executive of a well-known corporate ventures unit saying at a conference that he could no longer be at the mercy of this large insurer for the success of his investee companies – he was in his last month!

Today we see nimble MGAs (Managing General Agents) extending the capital strength of the insurer whilst staying independent of that insurer by being given access to capacity rather than systems. Insurers have also made it easier for Insurtechs to integrate into their systems. Another example of these changes is La Parisienne Assurances which changed its name to Wakam and became an Insurtech capacity provider (with easy integrations), while making a point of not competing with its customers (by not selling insurance products directly to consumers).

But perhaps the latest trend has been for domain experts to extend their knowledge to insurance, in partnership with insurers. Examples include cyber insurance, where MGA’s are using specialist knowledge to understand and measure this risk. Catastrophe insurers are using specialist modelers, or as I saw on a recent Lloyds Lab cohort, these modelers are creating MGA’s to address the risk with domain expertise.

Another cohort member is using its experience and knowledge of mass shootings to offer specific insurance to schools. This knowledge does in theory reduce the risk, meaning that traditional underwriters have to get smarter or not price correctly.

What does this mean for Technopreneurs? We believe that insurance is one of the last sectors untouched by real change and transformation. The banking and telecom sectors have changed more fundamentally and increased product flexibility and distribution. While insurers have concentrated on improving distribution through digital channels or smoother claims processes, the fundamental business models have not changed. Opportunities abound.