INSURTECH DISRUPTORS: Here's exactly what full-stack insurtechs are doing to beat incumbents on customer acquisition, personalization, and claims processing

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Insurtechs globally are challenging the status quo of the insurance industry. By using new technologies, including machine learning (ML) and AI, they’re overhauling conventional processes of the insurance value chain to increase efficiency and enhance the customer experience.

There are two types of customer-facing insurtechs: managing general agents (MGAs) that team up with licensed insurers and leverage their authorization to sell policies, and full-stack insurtechs that operate using their own insurance license. The latter are competing head on with incumbent insurers as they own the whole value chain, including claims management and underwriting, and don’t have to share their revenue with an insurance partner. 

Full-stack insurtechs were able to secure large funding rounds in the past few years and made up over half of the overall insurtech funding total in the US during the first nine months of 2018, per S&P Global. With the help of big capital injections, these companies have been able to grow their businesses and dip into the market share of incumbent insurers. Over time, they will further develop their underwriting abilities and personalize their policies — making them even bigger threats to incumbents.

In the Insurtech Disruptor report, Business Insider Intelligence examines why full-stack insurtechs pose the biggest threat to incumbent insurers and how this threat will grow over time. Additionally, we profile five full-stack insurtechs — Metromile, Root, Oscar Health, Lemonade, and Next Insurance — and evaluate their offerings in terms of the onboarding process, underwriting and pricing, and claims management, as well as provide insights into what the future will hold for the insurance industry.

The companies mentioned in this report are: Clover Health, Kin Insurance, Lemonade, Metromile, Neos, Next Insurance, Oscar Health, Root, UnitedHealthcare.

Here are some of the key takeaways from the report:

  • Full-stack insurtechs are fully licensed insurance companies that are regulated by supervisory authorities such as the Financial Conduct Authority in the UK, making them fully responsible for meeting regulatory requirements, including holding capital reserves.
  • While incumbent insurers have been slow to adopt new technologies and are behind other financial institutions when it comes to digital transformation, full-stack insurtechs offer personalized insurance policies and a smooth customer experience with the help of emerging technology.
  • And even though full-stack insurtechs are still in the early stages of development, they’re now looking to scale their businesses, threatening incumbent insurers’ market share across geographies.
  • Over time, and as full-stack insurtechs continue to scoop up large funding rounds, we’ll likely see more players that previously operated as MGAs turn toward this business model.

 In full, the report:

  • Explains how full-stack insurtechs are a threat to incumbent insurers, and how this threat will grow over time.
  • Details the business models of five prominent full-stack insurtechs.
  • Outlines how full-stack insurtechs will help shape the insurance industry.

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