Insurtech NY: Unlocking Opportunities for Early-Stage Tech Startups
In other industries outside of insurance, competitions have been a mainstay for creating a environment where companies can gain notoriety, venture investors can discover companies and companies can compete to win. But in the insurance industry, it's only recently that competitions have become a way to highlight startups, said David Gritz co-founder of InsurTech NY.
According to Gritz, Insurtech NY's competition was created to bring lessons learned from other industries and create those same opportunities for insurtech startups.
He said: "We created the competition so startups were able to compete to win and raise their profile. But we are not the only one, ACORD run the Innovation Challenge, Accenture run the Efma–Accenture Innovation in Insurance Awards and Insurtech Hartford also run an innovation challenge."
Investors are increasingly using competitions as a way to discover tech startups.
Gritz said: “The most common way is that they go to demo days, accelerator programs. Whether it's accelerators that are across multiple industries or its accelerators that are specific to insurance like Insurtech NY’s accelerator and the Global Insurance Accelerator (GIA)."
Distribution is ageing, and it's ageing fast. We need to reach the customer, especially in the life and annuity segment.
The GIA's equity-based 100-day accelerator program usually runs mid-January through the end of April each year and the BrokerTech Ventures Accelerator is a five-week accelerator program that usually starts in March or April each year.
Gritz said: “The accelerator program is a great environment to accelerate learnings and to test your hypotheses with other experts."
He added: "Investors also discover startups from some of the traditional means. If you're a Series A investor, often you have contracts with seed stage or pre-seed stage investors, and you get referrals. It is from other entrepreneurs that are either advisors to startups, for startups in your portfolio, and generally networking — a lot of investors go to conferences, all over the globe to connect with startup founders.”
Lloyd's has a 10-week accelerator program, the Lloyd's Lab, which aims to help innovative ideas gain traction and success in the 330-year-old market. Located in the heart of London, the Lloyd’s Lab gives insurtechs access to a coworking space in the iconic building and the chance to develop their ideas alongside their target audience.
InsurTech NY's annual Global InsurTech Competition, which was held on 7 March at the InsurTech Spring Conference at the Marriott Marquis in New York saw 11 insurtech finalists present in front of a carrier, broker, and angel investor judging panel.
Two winners were chosen: Healthee was the carrier and broker and OneClick Code was the angel investor choice.
Josh Curry, head of distribution at SiriusPoint and judge in this year's competion said: “It's amazing to see the transformation of the insurance technology segment compared to where it was five years ago.
"I was grateful that I had the opportunity to be a judge. The ability to get a pipeline like that, or a submissions was incredible. It has given me a nice pipeline of opportunities of highly talented individuals who have great ideas that we haven't thought of yet.”
Insurtech NY's competition was also a positive experience for 2020 winner Itai Ben Zaken co-founder and CEO of Honeycomb (then Agilius), which specializes in landlord insurance and condo association insurance.
He said: “The competition was a great opportunity for us to share our vision with insurtech professionals and investors. I believe that our focus on deep technology with the ability to immediately take the technological advantage to market is what set us apart.”
The Path to Success
Gritz explains the success behind a lot of early-stage startups are determined by two factors. The first is having early customers and the second is having enough notoriety to be able to attract capital.
It's amazing to see the transformation of the insurance technology segment compared to where it was five years ago.
Gritz said: "We felt a lot of the attention and interest has been going towards the big investment to establish startups — the Hippos, the Lemonade and the Marshmallows of the world. But what really needs to happen is you need to have a full ecosystem. There has to be support for the biggest most popular companies and also the smaller ones.”
Curry highlighted the benefits for start-ups taking part in competitions.
He said: “There are two things that are positive — whether or not the start-up does well in the competition, they get in front of judges who have to think about how they give good feedback and help collectively think about where the industry is going and who could be a market leader. That gives direction when you actually have a winner, where we think the markets are headed. It’s good insight for founders on how to think about things.
“Another positive is that a competition really forces a startup to think about their elevator pitch in a thoughtful way that effectively makes it concise, helps them focus their message and gives them pitch practice that they can focus on.”
Bill Goddard, principal, Semnos Partners, noted some of the elements that make a good insurtech start-up:
“As an investor you are looking for people who are fundable and you try to get a feel for the team. Do they have a wonderful mix of sales, tech, and good leadership and industry knowledge? There are many insurance regulators in the US so you have to be aware of the environment in which you are operating in.
“Two key elements for me are good distribution and good sales talent. There are people who understand the right environment and people that understand the technology.”
A Changing Insurance Landscape
Goddard highlighted insurers need to look at their distribution channels.
He said: “Distribution is ageing, and it's ageing fast. We need to reach the customer, especially in the life and annuity segment. We have to think about new ways to build distribution to get a wider spectrum of products to the insurance consumer, and a wider selection of price to the commercial insured.
Startups and insurtechs are enabling insurance carriers to transform their business faster, and to take advantage of the cost of software that can be spread across multiple insurance carriers.
He added: “If you look back 10 years ago, no one would ever have suggested we would be using quantitative models to underwrite life insurance. And yet now accelerated underwriting is here. Medical records used to be impossible to go through now we have suggestion engines for those.
“On the property casualty side, there's an explosion in Internet of Things that makes property casualty so much more accurate and underwriting so much more scientific. We will move to a point where we are not discriminating on something that is correlated when we have the data to underwrite on what has caused it.”
Gritz explains while the insurance landscape is continually changing, the largest carriers in the world are often not equipped to build technology in the same way a startup may be.
He said: “It’s better to have a startup that has less legacy costs to be able to build that technology. Startups and insurtechs are enabling insurance carriers to transform their business faster, and to take advantage of the cost of software that can be spread across multiple insurance carriers."
Zaken highlighted insurtechs are going after new markets. "They are saying ‘what if we started from scratch, we didn't have any of the legacy of a traditional carrier, what could be done? What is possible?'," he said.
According to Goddard competitions might be a way to attract tech talent but he believes it entirely depends on the audience a startup is speaking to.
"If it's part of a funding round you should have the targeted investor in mind when you go into those pitches. They're great for exposure to the right people.
"I don't think you should just say broadly going to competition is a good thing, especially if it's not the audience that you need. As you can do all the competitions you want and investors can be wowed but then you discover you can't cut new regulatory grounds of insurance. It's too highly regulated," he said.
He added: “It has to be strategic and not the size of the purse that determines whether you're going to go to those things. You have to ask are you talking to the right people?”
Insurtechs are a driver of change in the insurance industry, Zaken said. "They are bringing in new enabling technologies that have matured elsewhere, for example, computer vision which works en masse for automotive for at least a decade, but hasn’t really been applied for risk evaluation within insurance companies until very recently.”
“We are coming in to a numbers driven industry aiming to improve on many aspects in a relatively short time, the only way we are able to do this is by having significantly better talent than the traditional insurance companies,” he said.
Business profitability is increasingly becoming a challenge for insurtechs, Zaken said.
“The ever-changing climate patterns make it more difficult than ever to grow profitably. The balance between growth and profitability is key for an insurance company and being able to do this while growing two to three times year-over-year is a unique challenge that traditional insurers never face," Zaken said.
Despite the range of opportunities on offer across the insurtech industry, it’s facing a talent shortage, Gritz said. “There are a lot of new startups that have developed and there are carriers that are creating cool and innovative products and solutions. So you have to have something interesting enough to attract people.
"The intel that the industry can attract more people from broader finance and other industries is always going to be a challenge because we're not minting enough insurance people at college level right now,” Gritz said.
The Future of Competitions
While the Covid-19 pandemic has accelerated the shift towards remote working, Curry believes that there is still a need for in-person meetings, especially when seeking companies to investing in.
Curry said: “The work from home trend is now irreversible. I think doing things over Teams, Zoom or Webex looks like the future. It still creates interconnectivity.
“There is an element of competitions where you are judging and having to say 'I think this is the winner and I would like there to be an element of can we meet with them?'"
Goddard explained that there is a rush to move back to in-person events but there is still uncertainty around whether to pitch competitions will continue to be virtual, hybrid or in person.
He said: "Are we going to go back to a world where people travel to small gatherings and think that's a good idea? Or are we going to make a giant leap forward to too far more immersive virtual conferencing.
"A big angel group that I used to belong to have moved all pitches online and they have moved events and seminars to being in person. It dramatically expands the number of participants, it allows geographic diversity all around the world. With the pitches they can just sit there and watch them one after another and get what they need."
"My big question about competitions is whether we are on the verge of a fundamental shift in how we do business, especially in the insurance space, where it's so critical to know regulators and they have very limited travel budgets."
He added: “Over time we will involve regulators in competitions and that will help them but you have to question whether or not you shouldn't be reaching out to your local regulator instead of spending your time doing pitches, unless it is part of a broader comprehensive funding strategy.”
“The GIA has moved to a hybrid format where you meet together in person, then you do it virtually and meet together in person again. It will be even better when we can move towards talking to somebody else as though you were there. When you're talking with their avatar through a headset.”