Oliver Wyman’s Prashanth Gangu sat down with OW alum Karn Saroya at ITC 2018 to get the CEO of property insurer Cover’s take on insurtech startups.
Cover is a mobile app that allows its customers to take a photograph of an item (e.g., a car, their home, a pet, jewelry, appliances, even an iPhone), and then the app searches for the best coverage from 30 different companies in the US. On the backend, Cover simplifies the application process by capturing underwriting information about its customers and prefilling insurance applications. The whole process is very user-friendly - besides taking a picture, customers may have to answer a question or two and provide proof of insurability. But that’s it.
Karn’s consulting background gives him a unique vantage point from which to survey the startup world. He believes that young insurtech companies need to acquire good risks at reasonable costs and eventually underwrite at a profit. The problem? Most insurtech startups do neither task particularly well and are often subsidized by reinsurance, money that Saroya believes will eventually disappear.
Still, many insurtech companies are delivering exceptional products in areas where incumbents typically trip up. Incumbent insurers would do well to acquire these businesses and treat them as independent brands – with access to their balance sheets, but operating separately from existing business lines. But this may be easier said than done. As Karn sees it, many innovation teams within larger companies aren’t empowered to make decisions, especially when other people within the company expect to weigh in about certain business lines.
“There needs to be some sort of power ceded to these folks,” said Saroya, adding that there are a lot of untapped opportunities in insurtech, especially in areas that have received less investment, like underwriting, pricing, claims, and servicing.