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August 5, 2022


Digitization began later for insurance than other industries and is still not widespread or equally distributed. Insurers small to large are working to get up to speed with other industries, because in a world where Amazon and Lemonade exist, it’s increasingly difficult to sell policies when cumbersome processes are in place. There’s a new baseline for insurers, with good customer experience and digitally bindable quotes forming the foundation. However, some companies are going beyond that baseline to create what is next. Here are a few of the ideas that we believe will play a role in the next generation of innovation: 

Usage-based for everyone
Right now there are some great usage-based coverages out there, but eligibility is often limited to personal lines or small commercial. Usage-based coverages already extend into the middle market, and the next wave should see availability expand. 

Exposures have gotten lumpier over the past few years with shutdowns, inflation, and large- scale disasters making risk harder to price for both sides. Imagine a variable BOP coverage that uses a proxy to determine how busy a business is, with the premium adjusting accordingly. This type of coverage will help policyholders keep down costs in uncertain times. 

Data-centric customer experience
Most applications used on a daily basis track how we move through them and the actions we’re taking. This data is then used to analyze usage and improve the customer experience. Some innovative insurers are doing the same for policyholders – analyzing usage trends and working to improve the customer experience. 

Personalized Insurance
The next step in the evolution of usage-based coverages is the introduction of personalized coverages. It may sound like the opposite of automation, but with the improvements we’re seeing in data collection and data management, the adoption of IoT technology, and improvements to insurance capabilities, the ability to automatically create personalized coverages is developing fast.


What: Lemonade has become one of the permanent insurtech companies, having raised $500 million in venture capital and $308 million through their IPO. Almost every interaction a customer has with Lemonade is digital, and Lemonade is using the resulting data to improve its customer experience and risk analysis. 

Quote: “At Lemonade specifically, data and machine learning are deeply integrated into our product and internal processes,” said Erez Dickman, senior vice president of R&D at Lemonade. “The challenge the insurance industry has faced until today was not collecting or storing necessary data but analyzing and producing insight that will enable companies to give their customers a much more effective and overall better service.”

Read: Insurtech Funding Levels Hold Steady in Q2 vs. Q1: CB Insights


What: Digitization began later for insurance than other industries and is still not widespread or distributed equally. Those who are ahead of the curve are gaining advantages in risk analysis, customer experience, and proactive customer support. These advantages are helping digitized insurers improve loss-ratios and invest even more in their tech, which means lagging insurers are falling even further behind. 

Why it matters: Market volatility is the highest it’s been in recent memory, creating challenges for insurers with both rating and servicing – claims are harder to price, which makes the risk harder to predict. Being slow to react to the changing environment increases the possible losses an insurer will experience. 

Read: Digital Transformation and the Digital Divide in Insurance


What: Large insurance companies like The Hartford are investing heavily into technology to create customized and IoT-powered insurance products. These products have limited availability now, but they’re continuing to expand into more and more markets. This tech investment brings a significant competitive advantage for the giant insurers. 

Quote: “How does a small or regional company keep up with the scale of investments that a handful of the larger carriers can make?” asked Mo Tooker, head of Middle Market and Large Commercial business at The Hartford. “It’s an interesting topic because I do think you get to a place of scale that really allows you to outperform—to take advantage of data and data science and help your underwriters and claims adjusters in a way that changes the game altogether in the future.”

Why it matters: It is true that smaller insurers will not be able to invest as much in tech as their larger counterparts. However, just as it is with established players vs. startups, the smaller company has some advantages that the established company tends to ignore: flexibility and speed. Small carriers can shift much more quickly and can change much more easily. This means that small insurers are better positioned to take advantage of partnerships with insurtechs, thereby more quickly expanding their technical capabilities. Insurtechs, such as Dais Technology, are working to enable this advantage to have its full effect. 

Read: Tech Arms Race Favors Giant Commercial Carriers

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