In 2021, we continued to see certain focus areas rise to the top of conversations and strategic roadmaps for insurtechs and carriers alike. There was rising interest in not only delivering a great customer experience, but also meeting these potential buyers where they are, digitally, and engaging them with products that suit their health and wellness needs – all from a secured and private interface. As you will read below, regardless of which theme took center stage, they are integrally woven together to meet market demands and expectations. In short, no one insurtech or carrier could build success in one area without making concerted efforts in the others.
As we move into 2022, we expect the industry to continue with the trajectory in meeting customer expectations. It is evident that the focus on consumer health will continue to grow (in Q2 and Q3, 2021, health insurance was the most invested-in sector1) and carriers will find more opportunities to acquire customers in not so obvious, but relevant, places. To provide a bird’s eye view of the opportunity landscape, we sat down with two industry executives, Dennis Barnes, CEO of RGAX; EVP & CMO of RGA, and Atul Kamra, Managing Partner at SixThirty, a venture capital firm focused on the insurance and financial services industry. Together, Dennis and Atul shared their unique perspectives on five trends that they expect to have an outsized impact on the industry.
1: The intersection of health, wealth and data will drive future product development.
[Atul] There is more recognition than ever of the connection between our physical and our financial wellbeing. For example, 1 in 10 adults delay medical care due to financial constraints, over 40 million Americans have medical debt, and 3 of the top 4 concerns for Americans approaching retirement are all medical and health related: support if disabled, long term care, and medical expenses.
Our financial condition is affecting our medical health. And our medical health and behavior is dramatically affecting our financial condition. We are constantly feeling vulnerable about our financial and medical data – our information health. We see these worlds getting connected.
Dennis and I have shared mutual thoughts about how a new, more inclusive definition of health is emerging; we refer to it as the Personal Green.
As a society, we talk about investing in Green – to secure the wellbeing of our environment – the quality of our air, our food and our water – and how connected they are. Similarly, people are viewing their personal wellbeing across their financial, medical, and information health. COVID just put a giant spotlight on how connected all three are.
Incumbents, startups and other stakeholders are adjusting their focus on the consumer to take this into consideration: large employers, CEOs, and HR officers are rethinking the design and menu of employee benefits to deliver on a broader definition of personal wellbeing and address the high levels of stress their team members walk in with every day. Leading hospital systems are waking up to the scale of medical debt and delayed medical care and turning their attention to the appropriateness of care, the financial resilience and resources of their plan participants and patients, and the stress on their families and caregivers. And financial advisors and social workers are no longer looking at their roles in silos. They are actively incorporating health behavior, genetics, and health conditions in financial planning and investment advice.
[Dennis] As consumer expectations continue to be shaped by the pandemic, I agree with Atul that this concept of the Personal Green, having one’s physical, financial, and technical life in order, is gaining traction. It’s that peace of mind that stems from having life on the right track with trusted partners.
Think about what it takes for the value exchange to happen between a consumer and a brand. There must be trust. Trust that personal data is secure and will be used to provide relevant solutions and an improved experience. With confidence that one’s financial and physical health will improve and one’s identity is secure, an individual can find comfort, i.e., their Personal Green.
Future product development will consider these Green factors and meet consumers where they are, both financially and in terms of health. Products need to be built on insights from data that the consumer elects to share because the benefits of doing so are clear, and they should evolve with the consumer as their life does.
2: Insurance products will be increasingly embedded into experiences to simplify the consumer buying journey.
[Dennis] The desire to meet individual customer needs and to reach increasingly targeted audiences has given rise to ‘embedded insurance’ – delivering insurance products during unexpected but relevant customer touchpoints. Advancements in data mining and underwriting will allow for a more turnkey, less restrictive process to help speed up approvals.
There are inherent risks associated with underwriting shortcuts, so not every organization will embrace this trend to the same degree. But why not rely more on fewer customer touchpoints, the ones that data or other sources of information can’t predict or determine, to better engage with the consumer and deliver a product that is meaningful to them? From there, organizations will build trust and a more lasting, mutually beneficial relationship.
Our team in the UK is working with a client partner to better understand how to reach an often overlooked and underserved customer target segment - millennial females born between 1981 and 1996. A recent survey of this segment indicated that 72% of them didn’t own insurance and felt uneducated and ashamed of their lack of understanding2. Recognizing that women at the age of 25 have different interests and needs than those at age 40, the avenue to reach them requires lifestyle insights. Where and how to engage in a way that is meaningful and trustworthy is the secret sauce.
[Atul] The point here is meeting customers where they are. Consumer and fintech companies have seized the opportunity to embed payments, lending, and savings to drive up retention and margins. And intuitively, it makes all the sense in the world to embed insurance at the point of purchase of the asset – the car, the gadget or equipment, the home. The carrier/insurtech leverages first-party data available at the point of purchase. The unit economics are obvious, allowing you to bend the cost curve and expand the market to serve segments that might otherwise be more challenging. This will only accelerate. The key will be simplifying the product and risk process, making coverage and quotes less confusing and maintaining consistency across service channels.
Are life and health insurance around the corner? Embedded in existing financial planning or banking applications, diet or fitness applications or gym memberships? We believe the market opportunity is significant. Specifically, the workplace channel, females, and caregiver segments.
From a product standpoint, the progress made in embedded investing – with micro savings and fractional trading – might be instructive. From the perspective of the customer’s journey, I would underscore Dennis’ point: Can we leverage lifestyle and life-event data to understand needs, personalize and build trust? Because once trust is built, we know clients are much more open to both receiving an insurance offer and to virtual interactions. We will make progress here, but it will be slow.
3: Investment in and collaboration with insurtechs will continue to rise as carriers seek new capabilities, diversified talent, and speed to market.
[Atul] We expect to see continued collaboration between insurtechs and carriers, as well as increasing M&A and CVC activity. In fact, 24% of insurtech/fintech fundraising rounds now involve a corporate VC and 22% of VC funding goes to insurtech/fintech investment (that’s $1 for every 5).3 The centrality of speed-to-market means that incumbents need to make intentional choices of what they build and own; and where they buy, partner and co-create. The mantra to ‘buy for parity and build for differentiation’ is increasingly recited in executive ‘zoom’ hallways and resource allocation sessions. We expect this volume to amplify.
However, we don’t want to underestimate the natural pull to build internally. It is a matter of incentives, which are still heavily weighted in favor of the status quo. This falls squarely in the purview of CEOs. There is no better way for a CEO to signal incentives than through resource allocation. Progress on this will be mixed, and we expect risk taking on the part of internal change agents to pick up and bridge some of the gap.
We view the question of collaboration across three segments of the insurance value chain: growth and distribution, new internal capabilities, and risk management. Interest is highest in the first segment. However, we have yet to see material collaboration in risk management and expect it to evolve with lower interest rates, improved data on life events and mortality/morbidity, and for specific segments.
We also see an immense and growing need for collaboration between incumbents across the ecosystem: life insurance, banking, wealth managers, health care providers, and record keepers. The collision of health and wealth sets the stage, and insurtech and digital health companies will play an active role in intermediating these partnerships. Specifically, in accelerating data interoperability, ensuring privacy, and powering the use cases for customers and their advisors to make considered choices across their financial and medical wellbeing.
[Dennis] Innovation can be costly, and the regulatory landscape alone can deter even the most ambitious. Investing and partnering with nimble organizations that have a singular focus will gain in popularity as large institutions continue to struggle with the war for talent, digital transformation, and embracing emerging technologies.
Let’s not let the insurtechs off the hook, however. Raising funds, building teams, landing customers, and validating business models is no small feat. Insurtechs will continue to seek out carrier investment and partnership to validate themselves. Large institutions may be comparatively bureaucratic and slow, but they help substantiate the entrepreneurial vision, provide credibility when seeking other potential investors, and provide access to customers.
Sounds like a win-win, doesn’t it?!
4: The insurance industry will develop infrastructure to enable the next wave of innovation.
[Atul] At the heart of the next wave of innovation and change is data. Data is the kingmaker. It is the key to personalization, privacy, and people.
As an example, life insurance executives often moan about not having the richness and persistency of data to actively engage their customers, stay relevant, and personalize the interaction. Closing this gap will mean connecting and collaborating with sources of transactional/life event, wealth, and health data. The good news is that there are multiple, well-funded insurtechs and AI players that are fighting to win over this territory and make the data interoperable.
It is the same data sets that will power the industry’s collaborative and AI-driven approaches to predict and manage risk and fraud. And the better we get at leveraging data, the expectations to respect privacy will rise. We could also do with better direction and consistent polices from regulators here.
Winning (or losing) on personalization, risk, and privacy requires the technology infrastructure and information-security apparatus for a connected world. As an industry, insurers are making progress in modernizing for a digital, cloud-first, mobile-first, API-first, hyper-connected, converging world. There is a lot of headroom here.
Lastly, the talent war goes unabated. Add to this the challenge of building a digital and data-driven culture, which is, by far, the largest opportunity and the long pole in the tent for continued competitiveness.
5: The great resignation will have a lasting impact on the insurance workforce and insurance innovation.
[Dennis] As Atul just mentioned, the talent war is at a critical point. By now you have probably heard of the Great Resignation and are feeling the effects of the current talent shortage. On the other hand, maybe you were part of the movement and don’t see it as an issue as much as an opportunity. If so, congratulations on your retirement or your hobby-turned-career.
For the rest of us, we know the insurance sector has not been spared, and when coupled with an aging workforce, our industry might be more strained than most. I was recently talking with a colleague who had the privilege of sitting down with CEOs from some of the top global life and health insurance companies. Across the board, the number one thing keeping them up at night is this ongoing fight for talent.
How to better attract, retain, and engage people… that is the question. But it runs deeper. How about virtual versus on-site work demands, effective onboarding and training, diversification, and culture? Consider the impact on culture when 20% or more staff joined your organization during the pandemic.
According to Gartner, “more than 4.5 million people in the U.S. voluntarily left their jobs in November alone.4 Nearly a quarter of workers in Singapore reportedly intend to quit their jobs in the first half of 2022.” Much of the workforce is choosing to leave the more traditional, legacy-type businesses to join tech start-ups and mission-based organizations that the younger demographic sees as more fast-paced and personally fulfilling. This shift and ongoing fight for talent is going to drive long term impacts for the life insurance industry, and more so, is going to negatively impact the pace of insurance innovation.
Companies will be challenged to staff appropriately and make space for innovation when they are struggling to meet the demands of current business. Additionally, people with innovative ideas are not bumping into their co-workers on the daily, instead required to schedule a zoom session to present their ideas. That, combined with 50% of Gen Z aspiring to start their own business, much of the innovation will walk out the door and start the fund-raising process.
Be a part of this evolution
Atul and Dennis have certainly provided some thought-provoking insights. Regardless of their commentary, one thing we can be sure: the pandemic has led to an increased awareness and importance of health (physical and mental) and financial protection. This is shifting the pendulum of the century-old 'sold versus bought' model for insurance products. Isn’t this an exciting and transformative journey to be on?
Do you have what it takes to thrive in this new era? Has your team secured the best partners to help you achieve success? In partnership with SixThirty, RGAX works with carriers to uncover strategic opportunities to meet their innovation needs. Feel free to set up a time to discuss with us.
And if you’d like to have a healthy debate about the predictions above, don’t hesitate to reach out to me directly on LinkedIn.
 Sønr Insurtech Briefing – Q3 2021
 RGAX – WOOM Survey, Q1 2021. Based on data collected from 1,043 responses
 CB Insights Research – State Of Fintech Q3’21 Report
 U.S. Bureau of Labor Statistics – Job Openings and Labor Turnover Summary