EXCLUSIVE: “Stars in their Eyes” – Ron Rock, JobsOhio, Tomaso Mansutti, wefox; Greg Murphy, INSTANDA and Sam Fromson, YuLife in ‘The Insurtech Magazine’
What’s the business landscape like in the US for intrepid insurtechs heading West?
The US has the largest proportion (56.1 per cent) of the global insurance market, far exceeding densely populated Japan (7.4 per cent) and the UK (7.3 per cent), making it a honeypot for providers and their investors. Duck Creek Technologies from Chicago and Ethos Life from Texas are among the biggest success stories, having racked up mega-rounds in the last year, shooting their valuations to unicorn status.
Fellow unicorn, Palo Alto-based Next Insurance, can boast the backing of industry giant Munich Re, which owns just over 25 per cent. According to Dealroom.io, four out of the five top global insurtech funding rounds last year were successful sought by companies in the States. And there is no shortage of European firms looking to take a slice of that great American pie. UK-based insurance software provider Instanda is pursuing a $45million venture to expand its offering into North America.
London-based life and health (L&H) startup YuLife, which recently secured $120million in its Series C funding round, is also planning to enter the US next year with the backing of prominent European VCs Creandum and Target Global. European digital insurance platform wefox, now valued at $4.5billion, plans to expand into the US by 2024.
“The US represents a huge opportunity for wefox to deploy our indirect distribution model, backed by our technology,” says Tomaso Mansutti, its head of international partnerships. “Given the significant growth wefox has enjoyed in Europe with more than 100 per cent year-on-year growth, we feel we can achieve similar results in the US.”
But, as a federation of 50 states, the US isn’t like any other market and new entrants need to be aware of that, says Greg Murphy, executive vice president for North America at Instanda: “As an insurer, it can be incredibly difficult to expand your offering into a new state. Some are stricter than others, and rating requirements, billing and dunning timeline rules, policy forms and documents, and data protection rules can all vary. Insurers must know the differences and ensure they have flexible technology that can support these requirements.”
That’s precisely what Instanda seeks to provide, of course. But it’s not just about compliance. Business risk is a key factor when weighing up which states are the most cost-efficient to service.
Startups might be attracted to California and New York by the proximity of VC investors and abundant funding – VC investment is currently worth around $157billion in California alone – but it’s incredibly competitive and, for some, the battering they take from weather-related claims, makes launching there costly. The States suffered US$145billion of losses caused by climate events in 2021, of which around US$85billion were insured. Most events were on the coast.“There are hurricanes in Florida, and wildfires in California.
“There is a strong broker infrastructure in the US, meaning that new players in the market can benefit from a soft landing if they identify the right partners”
Businesses are moving away because of the cost of insuring people there. Many would have to pursue reinsurance to make sure that they’re covered,” says Ron Rock, senior director of insurance/insurtech at investment organisation JobsOhio, which has seen its state benefit from the exodus.
“If you think about the Midwest, from the northern part of the US, right down through New York, weather-related catastrophes rarely occur there. So, it makes sense for them to launch in the Midwest. And Ohioans make for a great test market!”
Beam Dental, Root Insurance and Bold Penguin, digital companies that have all found their homes in and around Columbus, would attest to that.Forty-one per cent of consumers were likely to switch from providers which lacked such digital capabilities, according to a 2020 PwC survey in the US – and a similar number favour digital delivery in Europe. So, beyond natural disasters and America’s infamously expensive healthcare, is there much to distinguish the two markets? No, says Sam Fromson, COO and co-founder of YuLife.
It still has the same pain points, such as low levels of engagement and trust, that YuLife set out to resolve in the UK.
“Additionally, there is a strong broker infrastructure in the US, meaning that new players in the US insurance market can benefit from a soft landing if they identify the right partners,” he says. Rock agrees that solutions can travel well across the Atlantic.
Every insurance customer is looking for the same thing these days, after all: “A great customer experience from a low-cost provider. I see that as both a European and American goal,” he says.
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