Insurtech MGA pioneers are using their experience to drive innovation in Insurtech 2.0 solutions

January 28, 2025February 7, 2025 EquityExplained

=====================================================================================

Just over five years ago, the insurance industry entered a transformative period as technology began to disrupt traditional business models. Entrepreneurs saw an opportunity to challenge established players and soon claimed that everything about the industry was on the cusp of change.

Table of Contents

A New Era for Insurance?

With venture capitalists investing heavily in startups, it seemed like the future of insurance would be revolutionized. The mantra "Grow first, worry about profit later" was echoed by many as they pursued ambitious plans to disrupt the $1 trillion industry.

However, five years on, and we’ve yet to see a widespread adoption of innovative insurance products or services that genuinely enhance customer experience. Despite this, it’s clear that the industry is in a state of flux, with many incumbent players struggling to keep pace with technological advancements.

The Rise and Fall of Early Challengers

Many point to public valuations of insurtech firms as evidence that the disruption narrative was overhyped. Some companies have seen their valuations decline by as much as 90% in recent years. This raises questions about the sustainability of business models based on rapid growth at any cost.

Reflecting on the First Wave

The first wave of insurtech startups focused heavily on digital distribution and streamlined underwriting processes. While these innovations have improved efficiency, they haven’t necessarily translated into a better experience for customers.

To move forward, it’s essential to re-evaluate the approach taken by early challengers and identify key lessons learned:

Focus on Creating an Underwriting Advantage

Incumbents still rely heavily on historical models that don’t accurately capture emerging risks. Insurtechs have an opportunity to leverage real-time data and advanced analytics to gain a competitive edge.

Provide Solutions, Not Insurance

Embedded insurance is a promising concept that goes beyond traditional distribution methods. Startups are now looking at hybrid products that combine offerings with coverage, providing customers with unique experiences.

It’s a Long Game

MGAs demonstrated the importance of discipline in growing a customer base. Rapid growth can be messy and often prioritizes quantity over quality. Insurtechs must adopt a more patient approach to building their businesses.

Preparing for the Next Wave

Tech challenger MGAs are stepping back and re-charting their roadmaps as they prepare for new market entrants. This pullback is an opportunity for reflection and a chance to adopt a more sustainable approach to the market.

Maybe this time around, we’ll start to "love" our insurance. By focusing on creating value for customers and adopting a patient, long-term approach, insurtechs can finally begin to make their mark on the industry.

Topics

Column
Customer experience
East coast
EC Column
EC Fintech
EC Market Analysis
Economy
Finance
Fintech
Insurance
Money
Online sales
Startups
Underwriting
United States
Venture capital

Author

Dave Wechsler leads insurtech investing for OMERS Ventures. After serving as the VP of Growth at Hippo, Dave is one of the first insurtech operators to become a full-time investor.

Newsletters

TechCrunch Daily News: Every weekday and Sunday, you can get the best of TechCrunch’s coverage.
TechCrunch AI: TechCrunch’s AI experts cover the latest news in the fast-moving field.
TechCrunch Space: Every Monday, gets you up to speed on the latest advances in aerospace.
Startups Weekly: Startups are the core of TechCrunch, so get our best coverage delivered weekly.