The insurtech phenomenon is currently plowing through the industry, introducing new ways of doing business and upending the status quo. But while the movement promises a renaissance of novel ideas related to the insurance industry, there is a notable absence in the faces behind the revolution: women.
The overwhelming majority of insurtech entrepreneurs are men. In 2016, Eva Genzmer of the German insurtech Friendsurance researched a group of 535 companies identified as insurtechs by Venture Scanner, a technology research firm. Only 4% of those companies, she discovered, were founded by women. A gap of the same size also manifests in the amount of funding that goes to women-founded startups: According to data from Pitchbook, a VC database, startups led by women receive 2.2% of all venture funding across industries.
The funding gap can’t be accounted for by a simple lack of women founders. The Harvard Business Review notes that 38% of all entrepreneurs are women. Further, the insurance industry specifically is comprised of 60% women, according to “Women in Insurance: Leading to Action,” a report from MillionWomenMentors’ Women in Insurance Initiative.
Women founders who spoke with Digital Insurance say that the problem isn’t so much that women can’t raise any money ever – clearly, some are breaking through. However, women founders face some, likely unconscious, biases from the male-dominated venture capital industry—including questions about raising a family, inquiries that indicate a lack of faith in their skills and a lack of visibility in key networks—that are discouraging at best and discriminatory at worst.
(The Harvard Business Review estimates that 93% of all venture-capitalists are male.)
“It stands out that there is such a low percentage of women-founded insurtechs,” says Julie Sherlock, head of insurance strategy for Boost Insurance, which provides a platform to help new entrants to the industry scale up. “Women come from a place of being on the defensive rather than the offensive. More female founders need to be taken seriously.”
The Women in Insurance Initiative coalesced in 2017 and includes several insurance carriers, vendors and associations, including State Farm, Aetna, ACORD, TCS and Accenture. Its research found that women’s representation falls off precipitously at the higher echelons of insurance companies: women occupy 19% of board seats, 11% of named inside officer positions, and 12% of top officer positions such as CEO, COO and CFO, according to the publication, which cited research from St. Joseph’s University.
That gender gap on the carrier side is stark, but even that is not as low as the 4% number yielded from Genzmer’s study, or the 2% of venture capital investment in women-founded companies. Sabine VanderLinden, CEO of insurtech at accelerator Startupbootcamp, says that the proportion of female-founded startups that apply to her company’s programs has been as high as 25%.
“What we hear from female founders on the startup side is that they seem to have a number of issues when it comes to securing venture capital,” says Jenn Byrne, CEO and co-founder of the innovation consultancy Quesnay, which ran an insurtech accelerator specifically geared toward women-founded or co-founded companies this year, following a more horizontal fintech version in 2017. (For more on this year’s event, see page 44.)
“For example, the folks that invest tend to invest in people and things that they know and can relate to. If a woman presents to a set of executives at a VC firm, they likely don’t have an innate ability to relate automatically,” she adds.
Associate professor Laura Huang, who spearheaded much of the research that Harvard Business School has done into the funding gap, has noticed that phenomenon crop up when observing interactions between startups and venture capitalists. She and her colleagues observed question-and-answer sessions between 140 VCs and 189 entrepreneurs (12% of whom were female) at TechCrunch Disrupt New York between 2010 and 2016. She and her team, which included Dana Kanze, Mark A. Conley and E. Tory Higgens of Columbia, codified their findings in the paper “We Ask Men to Win & Women Not to Lose: Closing the Gender Gap in Startup Funding.”
The meetings were analyzed by linguistic software and separated the kinds of questions asked of entrepreneurs into promotion-focused, defined by the paper as emphasizing “growth-oriented gains that are facilitated by capital (e.g., How do you intend to acquire customers? What does your revenue forecast look like?);” and prevention focused, which “emphasize maintaining non-losses and not losing capital (e.g., What does customer retention look like? Are you operating at breakeven?)”
The observers found that two-thirds of the questions posed to male entrepreneurs were promotion-type inquiries. For women, the ratio was reversed: Two-thirds were prevention-oriented. And, whether male- or female-founded, startups that faced more prevention than promotion questions raised one-seventh of the capital of those companies that were asked promotion-based questions. It didn’t matter who was asking from the VC side, either: 40% of the observed VC representatives were women (way higher than the industry average).
“More work is needed on how to do more in terms of mitigating these biases,” Huang says in an email to Digital Insurance. “I’ve walked investors [through] how they interact with entrepreneurs and worked with them to understand and identify when they might be engaging with different entrepreneurs in different ways based on characteristics like an entrepreneur’s gender or race.”
The types of questions asked in a VC conversation have an impact on the answer, Huang adds. Discouraging questions yield discouraging answers and discouragement overall, which dissuades women from taking the leap into continuing down the path of advancing their insurtech idea.
Many founders who Digital Insurance spoke with said that in particular, questions that revolve around women’s traditional role as the primary caregiver in a family make for the most frequent uncomfortable exchanges with VC representatives.
“The questions that are being asked of female founders are things like, ‘When are you going to have children?’ Well, what does that have to do with acquiring investment for a business?” says Startupbootcamp’s VanderLinden, recalling debriefing sessions she had with women founders. “You have these questions no one would ask men. They come out of the meeting and say, ‘You wouldn’t believe what happened.’”
In a 2016 report by EY, “Women in Industry: Disruption and Gender Diversity,” cited by the Women in Insurance Initiative, the accounting firm found that 44% of men who responded to a survey said that a top barrier to women in leadership positions was “conflicts with raising a family.” Only a quarter of women agreed with the statement. That finding illustrates the gulf between how men view a family’s impact on a business owner and how women do.
Industry observers say that since there are so few women in business at higher levels, these kinds of non-malicious, but unconscious biases are easily formed. The EY report also found that 43% of men who responded to a survey said that a top barrier to women in leadership positions was a shortage of female candidates. Only 7% of women agreed, indicating that as the networks that feed deals are built, women aren’t visible enough.
“There is a lot of networking that goes on to get into VCs,” says Martha Notaras, partner at XL Innovate. “I thought that [insurtech] accelerators would be generating more female-owned companies, and I haven’t seen that yet.”
But Notaras believes that VCs that aren’t more open to women and other under-represented founders are missing the boat. She says that as the barriers to forming networks across gender lines dissolve thanks to social media and increased calls for equity across industries, the VCs who think outside their comfort zone will find greater success. For example, the Peterson Institute for International Economics, which surveyed more than 20,000 companies earlier this year, found that having women at the top level increases net margins.
“Money that’s being run by women tends to have a higher return, and the financial return for companies where the board has women on the board tends to be higher,” Notaras says. “Some of that numbers-driven thinking hasn’t penetrated into a numbers-driven world.”
With unconscious biases somewhat of an open secret in the insurtech world, women who are trying to raise money find themselves having to try different approaches. “As the male CEO, my partner is best positioned to take the lead on fundraising right now,” says one insurtech co-founder. Quesnay’s Byrne says that crowdfunding is another avenue that women take, eschewing the VC route completely and cutting out the potential for fraught interactions. However, for the ability to raise a lot of money, nothing beats the venture capital channel — and companies need money to get off the ground.
“To get revenue and reocurring revenue is not something you can get just raising a few thousand. We’re talking about millions,” says Janthana Kaenprakhamroy, founder of Tapoly, an insurtech for freelance insurance. “Women may only ask for half of the journey.”
One tactic that has worked for women, according to Harvard’s Huang, is appealing to their social mission in starting a company. In a second paper, “Gender Bias, Social Impact Framing, and Evaluation of Entrepreneurial Ventures,” co-authored with Matthew Lee, Huang notes that “entrepreneurship is often seen as a ‘male-typed’ endeavor, one that rewards people who portray stereotypically male traits.”
“Women, on the other hand, are assumed — and even expected — to embody stereotypically female traits like warmth and communality,” she adds. “So when they present themselves as caring about communality and social impact, it is more of a ‘fit’ in the mind of outside observers.”
Huang said in a follow-up conversation that this isn’t a “value judgment,” just an observation from the research. “We’ve seen this framing be successful for women founders, but we’re not trying to discourage founders who don’t have a social impact mission, but think they have a great idea,” she cautions. “Women should be evaluated fairly by venture capitalists regardless of how they frame their ideas.”
And, just because a founder believes her company to have strong social impact potential doesn’t mean she takes it any less seriously as a business. One female founder said that she was happy to “wear [her] heart on [her] sleeve” and that she wanted to communicate the importance of her company’s mission in her meetings with potential funders in order to get them on board. But, she added, “this is still a for-profit business, and we do want to make money, and make money for our investors.”
But while founders develop workarounds, a general trend toward increasing representation of under-represented populations in the corporate world is having an incremental impact on beginning to mitigate the biases. Industry observers tend to agree that increasing the number of women in insurance and tech leadership roles overall will provide needed role models and examples of success.
“Organizations like Quesnay who are shining a spotlight on female founders in insurtech are helping bring more focus to women in this space,” says Boost’s Sherlock. “Encouraging women to join early in their careers, recruiting for women, and showing women there are opportunities to be CEOs is vital to help bridge the gap.”
XL Innovate’s Notaras says that though there is a dearth of female founders, “at insurtechs, we see women in serious and important positions, if not necessarily co-founders.”
“More than half of college students are female, and that’s true at the MBA level – which was definitely lower when I was an MBA,” she adds. “Millennials have a much more open view. They went to college with a diverse set of people; they expect to create a company with a diverse set of people.”
Jennifer Fitzgerald, co-founder of insurtech Policygenius, says that she has generally not faced too many uncomfortable situations in her fundraising efforts, other than “one experience early on during our Series A fundraising, where a VC asked questions directly to my male co-founder, and essentially ignored me, which was so out of the ordinary.”
But she agrees that as the corporate world gets younger and representation of women at high levels increases, some of these unconscious biases will fade away.
“You have to start somewhere,” she says. “If any sector can increase the percentage of women as company founders, that helps.”
