5 ways startups can survive insurtech’s ‘second wave’

As the insurtech industry enters what’s being called its “second wave,” industry executives are suggesting companies target five key areas to scale their businesses and sustain growth.

“If you think about what’s necessary for a fully disruptive company, insurtech or otherwise, to be successful in insurance, I think it is extremely difficult and requires huge scale,” Robert Sargent, co-founder, the InsurTech Association, said.

To achieve the scale needed to grow their business, experts said insurtechs should focus on:

• Strategic partnerships
• Technology solutions
• Innovation
• Customer-centric focus
• Sector-specific strategies

“In the second wave, where it’s more enabling technology and startups can be more integrated into the insurance ecosystem, including traditional insurance organizations, it means that those startups can be significantly more focused and can probably achieve success much faster,” Sargent said.

Strategic partnerships

One of the defining features of insurtech’s second wave has been newer, more technologically advanced companies partnering with traditional carriers. Both Sargent and David Embry, CEO and founder, Mylo, suggested this is less of a shift in direction and more of a “natural” progression that will benefit both sides.

“Insurtechs benefit from the deep expertise and proven products of carriers, and carriers benefit from reaching today’s customers who are looking for efficient, personalized experiences in new distribution channels such as embedded insurance platforms,” Embry said.

However, Sargent emphasized that partnerships do not have to be limited to just traditional carriers but can also extend to risk management, MGAs, reinsurers, distributors and others.

Technology solutions

Adam Adamson, head of business development at Nayms, believes it’s essential for insurtechs to continue their digital-first approach and offer technological solutions that “transform current processes and enhance transactional functionality.”

For instance, he noted that embedded insurance solutions are rapidly becoming widespread.

“Moving forward, the opportunities for embedded insurance offerings are substantial. Similar to how the fintech industry adopted the ‘embedded finance’ trend, integrating financial services into existing operational frameworks, embedded insurance offers a seamless and efficient method for delivering insurance as a natural part of the customer journey,” Adamson said.

Innovation

Naturally, the use of artificial intelligence and big data is expected to play a significant role in the technological advancements insurtechs leverage going forward.

“AI is going to have incredibly significant impacts on the business. But it will be, again, an evolutionary change… It will take some time for them to be fully integrated into our ecosystem,” Sargent said.

However, innovation does not stop at AI. Adamson also suggested there are “huge growth opportunities for providers to capitalize on untapped markets and underserved sectors” such as cryptocurrency or blockchain.

“Several emerging verticals, like crypto, lack sufficient historical data for effective risk profiling, which has made traditional insurers cautious about offering policies for new risk categories. However, this presents significant opportunities for insurtech companies to develop tailored solutions for these emerging risks, and in doing so, drive sales,” he said.

Customer-centric focus

Multiple experts also said insurtechs can create personalized products and a personalized experience for customers to drive conversion and retention. This is a strategy Darcy Rittinger, CRO of award-winning insurtech Cover Genius, previously emphasized as a key method for insurtechs to “win.”

Ben Jennings, CEO, Embroker, described it as a non-negotiable for companies that want to be successful in this second wave.

“The future of insurtech, ‘Insurtech 2.0,’ embodies the integration of AI-driven, human-supported and digital-first solutions that permeate every aspect of the business. The real opportunity for the industry will come from the evolution of both insurtechs and traditional carriers – uncovering new and better ways and bringing the best of both for the betterment of the customer,” he said.

Sector-specific strategies

Success will also be determined by strategies that vary based on the many different sectors of insurance, Sargent noted. He mentioned partnerships specific to renewable energy, risk management, cyber insurance and wildfire risk mitigation as just some he had recently heard about.

For instance, Joel Pepera, director, core telematics, Arity said auto insurtech companies must be able to adapt to changing driving patterns, which intensified post-pandemic.

“Driving sales and overall success in this phase will hinge on insurtechs’ ability to supply actionable, data-driven insights that keep pace with the dynamic driving landscape, fostering long-term, profitable growth for both partners and insurers,” he said.

It’s different for health insurtech companies, which Kelvin Chan, president and CPO, Nirvana, said should focus on transparency and building trust.

“Tech companies should prioritize partnerships with providers, insurers and health systems that share a commitment to putting patient experience first,” he said.

“Insurance is complex. While ‘disruptors’ may have thought they could bring change with just technical expertise, they are now seeing that change requires knowledge and experience in insurance, as well as relationships within the industry… In order to gain awareness and drive sales and adoption, insurtechs need to become part of this ecosystem of industry associations, broker groups and user groups,” Reid Holzworth, CEO, Ivans Insurance Solutions, added.

The InsurTech Association is a non-profit organization dedicated to providing support and resources to the insurtech community. It was founded in 2023 and is based in New York. Membership is currently open to insurtech companies, community groups and other stakeholders.

Mylo is an insurtech broker founded in 2015 and based out of Kansas City, Missouri.

Nayms is a global blockchain-based insurance marketplace founded in 2019 and based out of London, England.

Embroker is a digital insurance brokerage founded in 2015 and based out of San Francisco, California.

Arity is a data and analytics company founded by Allstate in 2016. Its headquarters is in Chicago, Illinois.

Nirvana Health is a health technology company founded in 2013 and based out of New York.

Ivans Insurance Solutions is a digital insurance platform connecting insurance carriers, MGAs and independent agents. Founded in 1983, its headquarters is in Tampa, Florida.

Rayne Morgan is a journalist, copywriter, and editor with over 10 years' combined experience in digital content and print media. You can reach her at [email protected].