Two recent pieces of industry news have me thinking about the role of technology – and money – in helping bring life insurance to the masses.
First, Ethos, one of the new breed, digital-native life insurers, raised another
More on Ethos in a minute, but this recent news cycle also included a highly anticipated report from Capgemini and Efma, the “
Suddenly “distribution,” the set of processes that enables customer acquisition across advisor-assisted and customer self-serve channels – which, not coincidentally, are now primarily both digital – is, to use an old newspaper term, an “above the fold” concern. Distribution matters.
Which brings me back to Ethos. What is enabling this 6-year-old startup to grow 500% year over year while nearing $100 million in annualized gross profit? A distribution value prop, delivered online, that gets life insurance policies into the hands of customers in 10 minutes. For traditional insurers, that process can take 10 weeks – or more.
Two Paths to the Waterfall: Disruptors vs. Enablers
Ethos’ funding success and the publication of the World Insurance Report underscore a few key themes in the life insurance industry that often get obscured or overlooked.
First, while a $200 million raise and $2 billion valuation are nothing to sneeze at – nor are the hundreds of billions being invested in Insurtechs overall – legacy insurers are exponentially more capitalized, currently managing trillions of dollars in assets.
Second, Insurtechs of the Ethos variety are not the only game in town. Companies like Ethos, Lemonade, and Root are disruptors. They are insurance pure-plays built from the ground up for a digital-first world and designed to replace traditional carriers. But there are also a multitude of InsurTech enablers, companies like Breathe Life, Socotra, and Qover. Enablers partner with traditional carriers in the belief that there is still room for the old guard, one with an established legacy of managing risk and protecting clients, to thrive – as long as it invests in modernizing its processes and operations.
I’m impressed that Ethos can insure someone in 10 minutes, and I expect traditional carriers are, too. But I don’t think legacy life insurers, some with hundreds of years of risk management experience, would trade all their knowledge for an AI-based, 10-minute approval process. Relying too heavily on the “rapid” part of underwriting reminds me of the recent energy situation in Texas. There, the grid operator bet against a “hundred-year weather event” ever happening, and was undone when it did, leaving customers literally in the dark, while adding insult to injury with monthly bills 10 or even hundreds of times higher than normal.
In the “glass half full” department, I’m also reminded of what Accenture has identified as a $12 trillion life insurance gap (i.e., the uninsured and under-insured) in just the U.S. alone. Ethos and like-minded disruptors may get their next million customers, which is great news for them, their investors, and those new customers alike. But remember, even if Ethos meets its goal, that still leaves hundreds of millions of policies to get filled, and I suspect that with the right adjustments, traditional carriers can still get the lion’s share of them.
How will they do it? By abandoning their old belief that every solution to every problem has to be built in house. By building on their own pandemic success stories, where life insurers got more agile and more digital to meet customer needs than at any point in their histories. And by partnering with enablers, the Insurtechs whose very reason for being is to attack the inefficiencies holding traditional carriers, and millions of potential customers, back.
