Daily Fintech

Eight startups aiming to transform the Life Insurance business #Insurtech

 

Photo Credit: https://www.flickr.com/photos/thomashawk/

This is part two of research by guest author Amy Radin on the Life Insurance business. In Part 1 last week, Amy outlined the fundamental business issues behind the decline in Life Insurance and the white space opportunities this opens up for entrepreneurs. In today’s research note, Amy looks at 8 startups aiming at the white spaces.

The life insurance industry is suffering from a dying (literally) distribution model, complex products and a flawed purchase funnel.

New entrants can transform the industry by bringing a clean-sheet approach to:

As much as startups are emerging and being funded aiming at health, home and auto, much less attention is being paid to either life insurance or its sibling, long term care.

One Founder/CEO with whom I spoke this week had two possible explanations: (1) life insurance is the stepchild of the sector, and (2) the “sold not bought” orthodoxy is embedded, even among startups, who are typically seen as better not only at casting aside such self-imposed obstacles, but seizing upon them as open doors for disruption. These factors may be deflecting entrepreneurial energy and attention in other directions.

 

Long-term care has been a challenging product for traditional carriers, with players either abandoning the product or re-pricing and reconfiguring their products as flaws in earlier underwriting have become clear. According to Consumer Reports, between 2007 and 2012 ten of the 20 top long-term care providers stopped selling the product, and those in the business began raising rates, some reportedly as high as 90%, to address high claims projections.

That said, there are new ventures worth watching, and the good news about the relatively low level of attention being paid to life insurance, for those who see ignored space as white space, is that there could be more opportunity to succeed for those who engage.

Here are a few startups focused on the valuable white spaces:

In stealth mode are three companies worth keeping an eye on:

 

A number of startups are building capabilities to solve carrier problems improving on the traditional distribution and product models. An investor might ask if these are businesses or features:

The opportunity for insurtech to expand efforts in the life insurance category is not simply the commercial potential of disrupting a model that has proven its limitations. It is also the prospect of addressing a societal need that has been neglected for decades. These are two compelling reasons to encourage more participation by investors and entrepreneurs, stimulating a bigger pipeline of entrants to take on the reinvention of the category.

Amy Radin connects customers to companies to create growth. She brings an unexpected combination of insight, reinvention and pragmatism to companies in transformation. Amy serves on Advisory Boards, is an angel investor, keynote speaker, and workshop facilitator. She consults with companies from startups to Fortune 500 applying her Framework for New Growth (c) to help companies attract new clients and expand client relationships.

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