September 19, 2018
ILF’s Focus Forward: TECHTalk
The Council’s annual Insurance Leadership Forum (ILF) is just over a week away, and we are excited to highlight several new offerings to expose Council members to technology in action in the commercial insurance business.
Over the summer, The Council crowdsourced priority areas from broker executives attending ILF by 1) line/segment of business and 2) insurance value chain.
- Line/segment of business: Interest in small commercial, workers compensation and cyber insurance edged out construction risks, high net worth and commercial auto by a touch. This is not surprising given the proliferation of new tech-enabled managing general agencies and B2C brokers in the market serving small businesses with these coverages.
- Insurance value chain: Leveraging data analytics for brokerage performance and benchmarking for clients led the way for brokers in this category, with policy management workflow coming in third.
To showcase companies making moves in these areas, we created TECHTalk at ILF. This new session on Monday, October 1 from 8:00 a.m. – 9:20 a.m., will feature an inside look at the following five organizations and will be moderated by Nick Shalek of Ribbit Capital and Cheryl Matochik of The Council. If you are attending ILF, be sure to add it to your schedule, and if not, we will be recording this event and webcasting it after the event.
- John Swigart, Pie Insurance
- Jayant Lakshmikanthan, CLARA Analytics
- Mike Furlong, Indio Technologies, Inc.
- Andrew Robinson, Groundspeed Analytics
- Mike Cormier, RiskMatch
Click here for the entire business program agenda.
Stay in the Loop at InsureTech Connect with Leader’s Edge: On The Ground
Be on the lookout for our 3-part series Leader’s Edge: On the Ground at this year’s InsureTech Connect Conference in Las Vegas, October 2-4. We will be covering the event live, sharing event trends and themes, content from the business program, a breakdown of attendees, and exclusive Insurtech interviews, including a post-conference interview with a special guest.
Data Analytics In Insurance
The Council partnered with Travelers in a three-part series on data analytics for claims and risk management. In the first episode, Bill Rickelman and Kevin Mahoney discussed several current trends in data analytics across the risk control and claims space, including the increasing use of third party data, machine learning and artificial intelligence, and the leveraging of big data to enhance customer experience
Startups Struggle to Turn a Profit
In other news, the “golden children” of Insurtech startups, Lemonade, Root and Metromile, have reported a struggle to increase product and get a handle on their loss ratios.
After making an enormous splash in the market, what do the three unicorns, Lemonade, Root, and Metromile, have to show for themselves? As shown by their publicly available financial reports, what they have may be concerning… Let’s take a look at the loss ratios for those companies in 2017 and the first and second quarters of 2018.
Lemonade’s Loss Ratios:
Root’s Loss Ratios:
- 103 % for Q1/Q2 2018
- 156 % for 2017
Metromile’s Loss Ratios:
- 87 % for Q1/Q2 2018
- 98 % for 2017
Two other standout numbers were the combined ratio of 791 percent reported by Lemonade in 2017, and the combined ratio of 2,089 percent reported by Root for the same period. For comparative purposes, the industry average loss and combined ratios were around 73 and 100.6 percent, respectively, in 2017.
Naturally, few businesses are profitable out of the gate, and as Metromile’s age and relatively more reasonable loss ratios suggested, Lemonade and Root may simply be experiencing some growing pains. Their lackluster underwriting returns in previous quarters may also have been due to a higher frequency of claims. In a recent filing in Oregon, Lemonade reported that they had recorded higher than average frequencies in the states in which they operate, and were implementing a Loss Cost Modification Factor for renters in certain zones and vulnerable to certain perils.
Additionally, the high combined ratios could be attributed to the higher-than-normal expansionary expenses new companies need to dole out. Lemonade and Root were both founded in 2015; it is entirely possible the companies are still working to absorb the costs of onboarding new hires, tapping into established data streams, and general research and development in order to better their business.
Whatever the cause, that all three firms saw decreased loss ratios in 2018 is a sign they may be adapting to the demands peculiar to the insurance industry. But, it remains to be seen whether or not the business models these firms pioneered will be sustainable.
Q&A with Derek Lovrenich, founder and CEO, and Phil Duncan, COO, of InsurEco System.
Millennial-run businesses are more likely to use sensors and other tech at work.