Insurtech: Where’s the Beef?

In 1984, Wendy’s introduced an ad campaign with the tag line “Where’s the beef?” The campaign was so successful that the phrase “Where’s the beef” made it into the vernacular as a way to question whether there was any substance or any tangible result from an activity. The insurtech movement is enjoying enormous success in terms of new startups, venture capital, partnerships, and pilot projects. But it is fair at this stage to ask, Where’s the beef?

Let me be clear that this is not a putdown or dismissal of insurtech. In fact, I am somewhat of a cheerleader for the movement. There is a great deal of innovation generated by insurtech, in the form of new business models, new products, new distribution platforms, new ways to revolutionize the customer experience and many new options for leveraging emerging technologies. Insurers, venture capitalists and others are enthusiastic about the potential of insurtech to transform the insurance industry. And 2017 was a banner year for insurtech, with the number of startups around the world roughly doubling to more than 1,300 (by SMA’s count), with a raft of insurers setting up venture arms and allocating billions to invest and with new partnerships and projects being announced daily.

However, if insurtech is to truly transform insurance, it must ultimately affect the key financial metrics of the industry. Premium volumes and policy counts should rise. Expense and loss ratios should decrease. Life/annuity companies should finally gain traction in the middle market. Overall industry profitability should increase.

There are individual projects at specific insurers where insurtech partnerships have begun to move the needle. There are also some individual insurtech companies that have been quite successful, securing large investments, multiple insurance customers and positive results. But in the context of the roughly $5 trillion global insurance industry, insurtech has not perceptibly changed any metrics.

So, what is likely to happen in 2018 (and beyond)? My prediction is that we will start to see “the beef.” This is not exactly a prediction that is going out on a limb. Investors and insurers have a sense that there is a lot of “beef” coming in the future. And not just as a junior hamburger but a double or triple cheeseburger. The hundreds of partnerships, POCS and pilot projects that were begun in 2017 and prior years are likely to begin paying off.

To be sure, there are many insurtechs that will probably fail. It will not be a surprise to see quite a few shut down in 2018. But with 1,300-plus and growing, there is a lot of room for market rationalization and for hundreds of winners to emerge. The proof in the pudding will be if many more use cases start to become visible and have quantitative results associated with their success (sorry for mixing the food metaphors).

But any way you slice it, 2018 is likely to be an eventful year for insurtech. The momentum should continue and begin to translate into solid business results.