Insurtech
A generation of companies promising to transform insurance through technology, whose model has shifted from disruption toward infrastructure.
Lemonade listed on the New York Stock Exchange in July 2020, and Root followed in October, on Nasdaq. Both carried the insurtech story, the wave of companies that showed up in the mid-2010s promising to do to insurance what fintech had done to banking, with an app, pricing algorithms and direct sales. The financials soon told a different story. For years these companies posted combined ratios above 100: they were acquiring customers faster than they were learning to underwrite, and a slick interface did nothing for loss experience. Insurance is still the carrying of pooled risk backed by capital, and software does not make that go away. After valuations collapsed in 2022, the center of gravity moved. The survivors sell components to incumbent carriers, claims handling, data, pricing, or work as MGAs, leaving the balance sheet to a risk carrier and its reinsurers. Lemonade itself cedes a large share of its book through quota share. A few do well in niches where their data makes a measurable difference to the loss ratio, which is a different business from distribution.
Rather than replacing insurers, surviving insurtechs now sell them claims-automation building blocks or operate as underwriting agencies, leaving the risk to a fronting carrier and its reinsurers.
- Root, Inc., Form 10-K for fiscal year 2020 (SEC): initial public offering closed October 30, 2020, shares listed on Nasdaq under the symbol ROOT
insurtech, insurance technology
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