New York Life Ventures does insurtech investing differently

March 20, 2023 6:48 AM

New York Life Insurance Company's New York headquarters building.

Digital Insurance spoke with Joel Albarella, founder and head of New York Life Ventures, the investment arm of the insurance carrier. New York Life Ventures started in 2012 but stayed "under the radar" in its first two years, avoiding public communication about its efforts, Albarella said. Starting out with about $200 million in investment, the venture fund has grown to $1.2 billion today and has an internal rate of return for the past 10 years of nearly 30%. Initiatives that Albarella led for New York Life Ventures include Innovation Services, and more recently, a partnership with Empathy, a service addressing end-of-life tasks related to insurance.

What’s the philosophy of New York Life Ventures’ investments?

Joel Albarella -New York Life Ventures.jpg — Joel Albarella, founder and head of New York Life Ventures.

We are thoughtful in acknowledging the opportunity at the intersection of our industry and technology. We always had eyes wide open that the world was changing, and the way we were engaging with everything was changing. We saw that there was a big opportunity in the life insurance industry to better leverage technology. [It] was obvious to us. How it was going to get pulled off was less obvious. This was one of the ways that we went after it. In a way, we were very fortunate to predate 'insurtech' as a brand and a phrase.

What does Innovation Services do?

Building and distribution of programming around a growth mindset, and upskilling around human-centered design. With a very lean team, we created very specific programming that is tuned to New York Life, to teach a growth mindset, teach how to take smart risks, learn from them and move on. We also teach the basic concepts of human-centered design. Those three elements are what makes up New York Life Ventures.

Our Innovation Services team's human-centered design work is typically internally focused. We think about how that connects to our corporate venture capital unit. For us to create opportunities in the future, we need individuals and decision makers at New York Life to want to test new things. The Innovation Services team's work is not about any specific startup at all. They're talking about having a consumer orientation, having an ability to learn something new every single day. It's creating the conditions for the organization to be more receptive to testing new things in the future.

The business development team and our investment function are very much connected at the hip. Having the insight of our business is very valuable to startups and helps us compete to win deals. Our investments in venture funds create a lot of leverage for sourcing new opportunities on the strategic side. So it really is a nice symbiotic flywheel doing really well together.

What does the Empathy product do?

We didn't invest in Empathy, but we saw tremendous value. Ron Gura, the co-founder and CEO, is a super-talented entrepreneur and has built a killer team. They're focused on end-of-life, which has been a little bit taboo. How do you best manage all the tasks and to-dos when you lose a loved one? And while you're also dealing with your own emotional grieving? It's a real terrible experience. You've got all this stuff to do. If your loved one didn't have a proper will in place, there's a probate process, which can take months or longer.

They created a platform which puts you in control and helps you to manage all the various tasks that need to get done when you've lost somebody. There's the obvious ones, like choosing a funeral home, inviting people to the funeral. But it also gets down to canceling their Netflix subscription. There's so much that you wouldn't even think about, so they create the ability to manage all that. We thought this should be part of our beneficiaries' experience. This should be where we're literally showing up. One thing about our agents is the humanity that's embedded in New York Life runs really deep. Our agents are an embodiment of that. Often, it's our agent that is answering these questions on behalf of the beneficiary.

Often, the agent is grieving too, because they knew the policyholder. They were closest to them and they form strong relationships. We thought it could be very interesting to think about testing Empathy as being a part of a beneficiary experience. Could you bundle a product like Empathy with the delivery of the death benefit? It's not just giving them a check, you're actually giving them something that's much more powerful than a check. It's helping them to work through this difficult time and making it more efficient for them. It also potentially helps us to forge a relationship with that next generation with a beneficiary.

How does New York Life Ventures handle startups differently than other venture funds?

We have no qualms about being very transparent with our startup partners as to why something might not work. We heard time and time again from founders that they spend a lot of time with a large enterprise, feel like they're getting somewhere, and then no one returns their calls. They're burning cash and they get ghosted.

That was obvious to us. Don't ghost them. Respect their time. Respect the fact that they are burning cash. Give them honest feedback if we can't work with them. That became a powerful reputation builder for us. Startups with a technology they hadn't sold to the insurance industry yet would hear about talking to New York Life Ventures, because we can help figure out the use case and get feedback. The feedback from an insurer might be, 'We're so backward. Don't waste your time. Your technology is a seventh or eighth-inning technology, and we're in the first inning of digitization. Come back later.'

Funds investing in startups often want the right of first refusal, access to information, seats on the board, and so on. That's very founder-unfriendly terms. If they were to give us that, it must mean it's not a good investment. A founder willing to agree to that is going to limit their ability to sell and grow in the future. What does that say about that company's prospects?

How has New York Life Ventures evolved?

Simply the fact that New York Life Ventures existed, that we were launched, and we had such strong support at the top of the organization and the right leadership – that alone had a massive cultural impact on New York Life. This was at a time when New York Life was really starting to increase its focus broadly on the need to innovate.

Our group was charged with exploring startup technology and importing it back into New York Life. That had a profound impact on New York Life evolving to be more forward and to be more innovation oriented. It was a tip of the spear of innovation, the idea that we actually put resources and time and a commitment around sourcing and investing in early-stage companies.

We've done 42 implementations – proofs-of-concept that were successful and then led to a business unit actually partnering with or using that technology. These range from a technology providing student loan debt forgiveness as a benefit to New York Life, to a company called Trifacta, that is used to do data wrangling. We had disparate data across the organization, and you can't get analytics or insights unless the data is square. It drove our data science business. In cybersecurity, we had Skycure [acquired by Symantec in 2016], which protected our endpoints against cyber vulnerabilities. These are tangible examples where our business units are helped in some way.