It’s an age-old conundrum: experience v. vitality. For one reason or another these two contesting forces seem to always find themselves in stark opposition rather than working together to find the power in their overlap. This conundrum has so ensued, in its own way, between legacy “incumbent” carriers and insurtech startups.

I recently gave Mark Roth, an insurtech expert and new business developer for Dig In, a ring to discuss this gap between insurtech startups and legacy carriers. I wanted to explore why, statistically, 90% of these startups are destined to fail and what the golden 10% were doing right. Calling on his 25+ years of experience in the space, Mark directed me to the heart of it all, and we landed on the importance of the implementation process following adoption, startups’ depth of respect and knowledge for what legacy carriers have and are continuing to accomplish successfully, and how education in this void will result a win-win situation. (More about the 10% in next week’s post on Shift Technology and their incredible customer success processes.)

Mark had given me game-changing insights for consideration during this conversation, but what’s interesting is that prior to our dive into insurance, we were casually discussing sports and how having played a sport in formative years may add value to business success in the future…

The analogy hit me: legacy carriers are to startups as LeBron James is to Kyrie Irving. (No, really. This is interesting if nothing else, and…fun. We’re working to make insurance more exciting and human, right?)

The first U.S. (well, not exactly U.S.) Property and Casualty insurer was founded in 1752 by Mr. Benjamin Franklin himself in Philadelphia, and was created on the premise, “whereby every man might help another without any disservice to himself,”. So, we’re looking at 267 years of constructing a well-oiled, systematic and in many cases mandatory, machine. The legacy carriers exude not only experience, but also steady success. After all these years, out of the current top 25 Fortune 500 companies in the U.S., 5 of those are insurance companies (excluding CVSHealth- though Aetna is in this top 25).

The most funded independent insurtech startup, Lemonade, has raised over $180 million, and is described as a licensed insurance carrier that offers homeowners and renters insurance powered by AI and behavioral economics. By replacing brokers and bureaucracy with bots and ML, it promises zero paperwork and instant everything. It is a Certified B-Corp, where underwriting profits go to nonprofits, and claims, “Lemonade is remaking insurance as a social good, rather than a necessary evil.”

Yikes! I can taste the sour through the computer!


Herein lies the problem.


There is no denying that the insurance industry must evolve and huge shifts in business models across every line of insurance are overdue. Insurers and their departments themselves are not denying this, either, so the contention does not seem to be stemming from the carrier side. The issue seems to be stemming from the insurtech startups boasting better, cheaper, faster, right now(!) for all current insurance processes, without fully grasping that reasons for insurance steady success and longevity is owed to its careful, slow, and calculated decision making.

So, here we are at the tortoise and the hare, though, perhaps meeting in the middle might be the sweet spot to bring success for all parties involved, down to the consumers.

LeBron James, 34, 4-time NBA All-Star MVP, 3-time Finals MVP, is often considered the best basketball player in the world right now and is, arguably, the greatest player of all time. What I really want to focus on here is his former team’s (Cleveland Cavaliers) win in the 2016 NBA finals against the Golden State Warriors, the teams first ever championship win, and the breaking of Cleveland’s 52-year professional sports title drought. One must know, as well, that LeBron is originally from Ohio, so the proof is in the pudding that there was some forethought put into this win.

Leading up to this game, younger Cavalier player, Kyrie Irving, then 23, now 27, made things very difficult for LeBron James. This just over six-year difference may not seem like a lot in normal human years, but in basketball years, it’s quite a difference. Kyrie was known for having little respect for LeBron and wanting to prove himself as the better player.

No doubt, Kyrie’s talent is immense now and was certainly immense then, but it was not the kind of talent that could carry a team to a championship win on his own. And although LeBron brought his team to the finals through his leadership and depth of experience, he could not have done this without the energy and the raw ability of Kyrie, who hit one of the biggest shots in NBA history to win this game 7. The two were neck and neck for overall stat ranking for the finals.

James and Irving hit many speed bumps and road blocks throughout the season, but eventually came together to win the championship. Some say that would not have happened without this symbiotic yin and yang presence on the court. After years have passed, Kyrie was recently reported to have reached out to LeBron to apologize for his young and rash behavior and has since experienced moments of clarity as he is the leader on his current team, the Boston Celtics. What a powerful ah-ha moment.

I must add that when the two parted ways and joined different, but very competitive teams, neither LeBron nor Kyrie has won another title since this 2016 championship win. I’m just sayin’…

No matter the level of talent coming out of the gates, nothing can match the amount of time spent on the court, or field, or industry.


So, how does the 2016 NBA championship relate to the insurance industry?


Both the legacy carrier side and the insurtech startup have their flaws and have their incredible strengths. Defining these spaces will be important to finding resolution.

Let’s start with the legacy carriers and look to Rob Galbraith and his recently released top-selling book, The End of INSURANCE AS WE KNOW IT and KPMG’s downloadable article released in March, Insurtech 10: Trends for 2019. (Expect a posting dedicated solely to #endofinsurance in the next few weeks, and, definitely go on amazon to download a copy or go to to learn more.)

“In a nutshell, if you only ever innovate to improve your existing products or create complementary offerings, generally to attract higher margin business, then you are at risk of being disrupted. Firms do not have an incentive to create a competing product that undercuts their own successful products and produces a lower profit margin. Rather, firms look to innovate by enhancing current product offerings to add bells and whistles to upsell them at higher margins in an attempt to raise the profitability of the entire product line.” (Page 147)


Need I say more?


What the legacy carriers do bring to the table, through time and experience, is not something that can be funded or bought. Rob describes these attributes as consumer and governmental trust as well as the importance of accumulating and harboring historical data.

On page 162, Rob discusses the absolute need for time to have brought the insurance industry to where it is. As we all know and hear, insurance is the business of selling a promise, and it is because of hundreds of years of promises being kept and the regulations that enforce their keeping that there is great trust in the whole system, even if a makeover is desperately needed.

“Any new paradigm of risk transfer that seeks to replace the existing order found today in the P&C insurance industry must build a similar level of trust. Without it, any new system has no hope of disrupting the industry in any meaningful way.” (Page 163)

The other thing that legacy carriers really have going for them is that they are “sitting on vast troves of data”. No matter how amazing your new technology is utilizing AI and ML, without substantial amounts of data collected over long periods of time, how the heck are computers going to be trained to learn if they have nothing to learn from?! Not to mention that regulators and reinsurers require this data in many cases.

Legacy carriers certainly have a leg up with the ability to retrospectively analyze and with a gold mine of big data. But, are they reaching into the true potential of this data?


Middle Ground


The verdict has still yet to come out: how do consumers prefer to interact with their insurance carriers? Do they want an Amazon/Netflix/Uber experience in this space? We can guess on this one, but the truth is we don’t know for sure.

Startups haven’t been around long enough to produce enough data results from their innovative and customer-centric engagement platforms, and legacy carriers haven’t had any platforms put into place to even collect this type of data until very recently.

There is one thing we know for sure, “Companies need to identify real problems faced daily by real lives who may come to adopt and value your product or service. Most importantly, people need to perceive these as real problems as much as, in fact, there are actually real problems.” (Page 166)


Thank you, startups


What the startups bring to the court is quite powerful, just like that historical NBA winning shot in game 7 of the finals. “In addition to a cultural shift, leaving behind the old mind-set, insurance needs new blood to fulfill the new roles that will be generated by this transformation.” KPMG

Most of us already know this, but in case you don’t, or need a refresher, here is what insurtech startups solve for that legacy carriers could not or have not:

  • Need for trust: blockchain, P2P technology including social media, user reviews, etc.
  • Need for real-time data & ability to make sense of it: telematics, IoT, NLP, AI, ML, Aerial imagery, and cloud storage
  • Need for customer engagement: digital marketing, chatbots, RPA, UI, and UX

You can also see here where the great divide begins. The insurtechs cannot be viewed as a side dish to dip into when there is a need to innovate. Innovation is now the whole dinner party experience and the startups are the ones in control of the stove… and the wine. But how do you get two cooks working in the same kitchen? No one has quite figured this out yet.

“Working together: as these predictions take root, there will likely be a greater need for business integration. The cynical may think: “Well, you would say that, wouldn’t you?” But this is in fact a key area that neither the insurers nor the insurtech firms can satisfy…” KPMG states, “Just as it is hard to throw off the decades of culture, so it is impossible to build business integration capabilities overnight. There has, to date, been too little consideration for the area of advisory, engineering and architecture in the debate around insurtech.”


Are traditional coverages ALL that consumers want and need?


Rob poses this question and the answer is no. There is a new kind of success in the ones finding new markets to tap into. This is the gig economy and the small business lines of insurance. These are the folks that might have by-passed insurance altogether because of the high premiums and cumbersome processes of the traditional insurance carriers.

According to a Forbes article, the gig economy has quickly become a major source of income for millions of individuals and is predicted to be the most common form of employment by 2027.

This means that something had to give, and it did not come from the legacy carriers. It came from independent startups like Verifly. ( Just a trip to their website forces you to consciously pull your jaw back in place. This company really nailed what members of the gig economy and those hustling side gigs really needed, and at an affordable price without hassle. It is a done and done deal.

“If traditional carriers are unwilling or unable to move quickly to take advantage of these market opportunities, insurtech startups and non-traditional players – move into the market void left by traditional players to seize upon this rapidly growing opportunity.” (214)


At the end of the day…


“Having a partner with a track record of achieving business integration is not only a good idea, but a business-critical function. This will likely become more apparent as insurers fully understand the size of the change and stop viewing insurtechs as potential competitors and partner with them more closely.” KPMG

If these two players can learn to develop mutual respect, strive to create seamless implementation, and work to take the amazing assets already put in place to look for ways to improve from the ground up using new technologies, then the sky really is the limit for the centuries of insurance to come.