Lemonade? Insurtech Needs to Taste the Difference, Not Just The Fizz

In this latest piece, Andre Symes, MD, Genasys Technologies, looks at how the Lemonade IPO has concentrated minds across the Insurtech sector.

andre genasys tech ski insurance software

Lemonade’s goal to bring insurance to the mobile-first, digitally-native world and its subscription-based model targeting millennials and Gen Zers has clearly struck a chord. Having previously raised several hundred millions of dollars through several funding rounds, it successfully wooed investors to become 2020’s best IPO debut at the beginning of July. Shares more than doubled in its market debut to reach a staggering $3 billion market cap.

It’s certainly an important touch point for the insurtech sector which has attracted a huge amount of noise and money over recent years. However, while Lemonade may be the darling of the New York Stock Exchange, Covid-19 may well challenge investor confidence. Insurers who have been jumping in with both feet over the last couple of years could well pull back from insurtech investments amid the current economic uncertainty to focus on more pressing issues for their core business.

The adverse effects of the pandemic were immediately felt in the insurtech marketplace. During the first quarter of 2020, insurtech funding reached almost $760 million – no shabby number, however a marked decline from almost $1.7 billion in the same period a year ago – with the bulk of funding for US-based insurtechs.

While it’s still early days to see the true impact, I think that Covid-19 has possibly served to expose the over-saturation of digital offerings in the personal lines space in particular. Much of the headline grabbing deals have been focused on B2C client acquisition but the current crisis has pulled the carpet from under the feet of many. The good ones will survive deservedly so, however the future of others is questionable and it is inevitable that some of the current crop of insurtechs will fail.

The focus on the lubrication of the customer on-boarding process was probably a natural first-stage in the digital evolution of the insurance industry but to date, there has been little focus on their digital experience once you’ve got them and I think this is where we’re going to see a change in the post-Covid world.

It’s a step-change that the banking industry first experienced a few years ago with the emergence of the likes of Monzo, Starling and Revolut. Take the latter as an example – it takes 24 clicks to sign up to and then the entire customer experience is digital. The traditional high street players upped their game and more and more services are now available online but compared to the fully digitalised fintechs, the overall digital experience is still pretty dismal.

I think that the pandemic is going to see insurers pivot their attention away from the digital on-boarding journey and give more focus to those insurtechs who enable operational improvements such as helping to reduce paperwork, reduce fraud, issue policies more quickly or speed up the payment of claims.

So rather than flocking to partner with or invest in an insurtech who can provide a slick digital on-boarding experience, I think it’s likely that we’re going to see greater investment in B2B insurtechs that add value – for example, one of our eco-system partners such as Xtract which operates a state-of-the-art connected car incident monitoring and claims analytics platform to enable faster and more accurate claims handling.

The pandemic has shown us that having a fully digitalised infrastructure is essential for our employees, our distribution partners and our customers. Home working isn’t going to go away once a vaccine has finally been found and that means efficient remote access to all areas of an insurance business 24/7/365 will be a must. This is a positive and should be embraced.

The current crisis has shaken out the market and shifted the focus from the nice to haves and back to value, and because of this, the value of B2B SaaS is on the rise.

This article was produced in association with Genasys Technologies

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About alastair walker 6873 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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