The accepted wisdom in InsurTech is that it is all about partnerships rather than disruption. New ventures offering a new digital experience work on top of a platform provided by a Reinsurance company that provides the data and models for underwriting risk. This is what we call Reinsurance As A Service and we have reported on it many times.
Some companies are bucking this trend. They still believe that they can offer a full stack solution and compete head on with the incumbents.
In recent news, both Lemonade and Slice started offering products in California.
Root is also going State by State, starting in Arizona.
Doing this in America is tough as it is a replacement market with tough incumbent competitors. This is only for deep-pocketed startups and all these have raised significant rounds. It remains to be seen whether it is enough to compete head on in multiple states let alone multiple countries. The cost of both regulation and marketing is very steep. We may see a lot of M&A action soon as incumbents buy the ventures that get traction.
It is easier to do this in Asia, as it is more of a greenfield market. This is where we see action from companies such as PolicyPal and Inzsure as reported here. In Singapore, we see action from Singapore Life and CXA Group (who we profiled here). In China there is Zhong An.
The battle will all be about data. It is similar to banking (where the front lines of the data battle are around PSD2). If Insurance incumbents control the data, they will add digital user experience (buy or build). If that data can be aggregated online, the startups will win. This is where the data rich behemoths we calll GAFAM (Google Amazon Facebook Apple Microsoft) may hold the best cards.