Growing up in Australia, where surfing is part of the culture, I have a healthy respect for waves. They're a part of something powerful, cohesive and much larger than the individual.
As an insurtech CEO since mid-2020, I've been getting asked about waves a lot--specifically, the first, second and third waves of insurtech. On the heels of our recent Series B raise, fintech reporters want to know: Is insurtech still perceived as a bubble or a blip?
Depending on your definition of the advent of insurtech, we're about a decade in. Yet there are still tens of thousands of lines of insurance, some of which haven't been innovated in 30 or more years.
With so much opportunity to offer better delivery, service and risk innovation, it's time to think about insurtech as a permanent fixture in the larger insurance ecosystem--and about how we evolve together, for the sake of our customers, our industry and the economy.
Investor Interest is Increasing
Market speculators and media headlines always make a great deal of noise around any adverse activity in our industry, but insurtech itself has been a steam engine since its inception. In Q3 of 2021, insurtech funding reached $5.3 billion (compared with $1.87 billion in Q3 of 2020), and topped $15 billion for the first nine months.
2021 was a landmark year for VCs as a whole, most of whom need to deploy their capital within the next five years. Any hesitancy in early 2022 is largely a byproduct of general economic uncertainty as global markets adjust to a third Q1 of pandemic conditions. The most forward-thinking venture capitalists are allocating specific funding toward insurtech to expand and add sustainable growth to their fintech portfolios.
Mutual Respect Between Incumbents and Insurtechs is Growing
Initially, incumbents were hesitant to acknowledge insurtechs as competitors, and vice versa. Many "1.0" insurtechs sought to disintermediate or automate fundamental insurance functions such as underwriting, broking and relationship management. Many incumbents believed they could beat insurtechs by rushing tech upgrades to antiquated quote-rate-issue platforms, only to be met with myriad challenges in adoption, training and cost.
Today, most of the longest-tenured global carriers have incubators and accelerators within their headquarters dedicated to insurtech. While true insurtechs have a bit of a leg up when it comes to agility and deployment because we are able to build from scratch rather than convert or upgrade legacy systems, it's a net positive for customers and the industry that incumbents are now constantly challenging and innovating. And early insurtechs learned a lesson in that you can't build an insurance company without serious insurance talent. Which brings me to my next point.
See also: 2022 Resolutions to Foster Innovation
Diversification of Opportunity Enriches Industry Talent
Not every insurance professional is a fit for the pace at an insurtech, and not everyone who thrives at an insurtech would succeed at a legacy company. Many will succeed in both arenas. But what the "great resignation," pandemic and "aging out" of talent in our industry have laid bare is that nurturing a talent pipeline for insurance is a responsibility we all must take seriously. There is a substantial benefit to having a breadth of career options industry-wide that draw from the traditional insurance paths--underwriting, claims, actuarial, risk management, safety--as well as innovators of technology, engineering, marketing and product development.
Younger generations in the workforce prefer to view careers as a jungle gym over a ladder, and the ability to move among legacy, insurtech or hybrid workplaces can offer the kind of development and enrichment critical talent thrives on. A stronger talent pool and happier, healthier workforce makes our industry better--and makes us better at serving our customers.
We Serve a Common Purpose
In the business of insurance, at the end of the day, someone is looking to us when things have gone wrong. They don't care whether we call ourselves an insurtech, a mutual or state fund or a global carrier.
You can call what's happening with insurtech a bubble, or 2.0 or third wave. But if we're each solving for one of those 10,000 lines of business that haven't been innovated in the last 30 years, I call that a win.
