Could insurtechs grab market share in the coronacrisis?

"Relationships, shaking hands, meeting over lunch, discussing proposals over coffee, none of that is going to happen for a long time.” Cowbell Cyber founder and chief executive officer Jack Kudale.

· Pandemic shines light on tech-led solutions as the way forward
· Fully-digital products and services showcase insurtech agility and innovation
· Cyber insurance via AI and ML rises up the agenda as cyber attack could spark next global crisis
· Questions raised over funding access for less robust start-ups

Insurtechs are in pole position as COVID-19 restrictions accelerate existing digital adoption and acceptance among insurers and their clients.

Digital connectivity has been a godsend for work and businesses during the pandemic lockdowns. The COVID-19 outbreak could also help insurtechs gain a greater foothold in the market, while at the same time raising the stakes on technology transformation for the whole industry.

Two insurtechs, US-based Cowbell Cyber, in partnership with Markel, and Europe-based Getsafe, have certainly seen impacts and opportunities.

Start-up mentality

Since the lockdowns began Getsafe’s workforce has been operating remotely. The insurtech, set up in 2017, has offices in Germany and the UK, with its German business launched on the back of a fully-digital product integrating property and casualty, life and health risks, and its UK operations, launched in January this year, offering contents insurance.

A digital customer interface and operations mean the firm has carried on almost as normal, says Johnny Stubbs, UK head of insurance and business development at Getsafe. This ability is key for insurance as customer need doesn’t go away, he says.

The insurtech’s process for getting a quote, buying cover or managing a claim is completely digital, going either through the website or through the Getsafe app.

“There shouldn’t be a breakdown in the customer journey when people need to claim or update their policy,” Stubbs explains.

“People might understand that things are difficult at the moment and may cut insurers using more traditional methods some slack, but you ideally need to be able to perform in all different conditions. It’s been a stress test in that respect, and we’ve had no issues from our end.”

Stubbs adds that Getsafe’s digital focus makes it agile. “It’s about how quickly you can resolve the challenges of not being in the office and, in that typical startup mentality, how quickly you can iterate and pivot on what you’re doing to create a more optimal working environment.”

Similarly pragmatic in these unusual times, insurtech Cowbell Cyber founder and chief executive officer Jack Kudale, says that “behind every crisis there is a good opportunity”.

This is very true for a firm focused on providing a new type of cyber insurance, using data and machine learning (ML) and artificial intelligence (AI), to offer more accurate, bespoke pricing as fears of cyber attacks on more vulnerable home workers rise.

Ostrich underwriting

Kudale says that since the lockdowns began he has seen the cyber crime threat level rise dramatically. Awareness of the threat has also increased which, he thinks, could drive a revolution in cyber coverage that is served by ML and AI.

“The cyber insurance market has a high growth potential. But I call the way many cyber policies are written at the moment ‘ostrich underwriting’ because many underwriters rely on large numbers,” he says.

“It’s profitable, but the small and medium businesses (SMBs) are still not getting a standalone product and the process is still cumbersome. It doesn’t offer enough insight, so 91 percent of SMBs remain under- or uninsured.”

Product innovation needs to happen, he says, which is why in April Cowbell unveiled its social engineering coverage to protect against phishing attacks and other con tricks using fake identities. The product is aimed at mid-sized businesses.

Kudale says these businesses and smaller ones that are already under pressure during the pandemic can ill afford to be hit with a cyber attack.

He emphasises that Cowbell is already innovating with its underwriting platform based on the strength of data, ML and AI which can write cyber on a very individual basis. Kudale adds that the platform is capable of “continuous underwriting”.

“We believe that cyber has to go usage-based at some point, just because of the changing risk.

“We have seen products where a lot is still done by email. I’m looking at real time, and not just the process, the insights as well,” he says.

The traditional practice for obtaining cyber insurance was to fill out a long application, he says, adding that this was “subjective and no-one wanted to check it out”. The underwriting was then based on the application, conference calls, and amendments going back and forth between underwriters.

“I’m not saying everything has to change to auto underwriting, but the market pre-COVID-19 was already gravitating towards admitted products and standalone products,” says Kudale.

“That journey is going to escalate and we’re starting to see the signs of that. We made that decision to do a standalone product, an admitted product and an individualised product from the get-go. It’s an audacious goal to get continuous underwriting operational in three years but we have proved we can do a lot in one year.”

Market share grab

Could the pandemic usher in a new landscape where insurtechs take a greater insurance market share? “Yes, certainly,” says Kudale.

“We entered the market with the goal of gaining market share. The market is there and we believe the acceleration in cyber will benefit us, certainly with our focus on the SMBs, and with the threat level going up so dramatically.

“It is up to us how we tackle that. How do we help our agents transition, how do we educate our policyholders and influence them and help them understand need, and how do we bring the most innovative product to the market?

“That’s going to be key for us. We started by saying behind every major crisis is an opportunity and that is what we’re starting to see.”

In contrast, Stubbs is more reticent on the subject of insurtechs gaining more market share, saying the short-term impact of the coronacrisis is not clear.

“The main thing for us is that it validates the approach we’ve taken. As we’ve seen initially in Germany, and now in the UK, there’s increasing digital adoption and acceptance in what was initially in the fintech space and now in the insurance space,” he explains.

He says that the continued strong performance from the company shows that its business model is sustainable even in difficult times.

Early indicators

Both firms have seen increasing interest despite having relatively new offers.

Initially, Kudale says, interest from customers in the last two weeks of March was slow. “People were still trying to figure out how to work from home, what does it mean, could this all be over by April 1?

“Once they figured out this is going to be here for a long period of time, we started to see an uptick from the agencies for submissions for cyber,” he explains.

His target is to boost cyber coverage for SMBs from its current single percent figures to 20 percent.

“Billion dollar firms already have greater cyber cover with more than a third of them taking it up,” he says. This is partly because they have a lot of contractual obligations and regulations, especially public companies.

“For the $250 million to billion dollar companies, I call it mid-market, they have a lot of regulation and they have about 22 percent cyber cover already.

“It’s the businesses under $100 million—the SMBs—who are already suffering big time because of this crisis. We believe that for cyber, the take-up rate could be 20 percent, that’s our desired goal.”

Cowbell is currently live in five US states and Kudale tells Intelligent Insurer that there are plans to roll out its products to nine more states immediately rather than waiting another month or so.

Stubbs is again more reserved but also pleased with early results.

“March was the best month we’ve had on record, so we’ve continued to operate and perform and most importantly continued to maintain our customer support and service throughout that time, and that’s the ongoing focus for us,” he says.

“I’m sure there will be insights that come out of this, which we may want to prioritise going forward.”

Access to funding

Not all insurtechs are feeling as optimistic as Getsafe and Cowbell Cyber. There is a question of long-term sustainability and this encompasses the sometimes tricky subject of funding access for insurtechs.

“There’s always a challenge when there’s this much uncertainty although obviously that differs from market to market,” says Stubbs cautiously. Until there’s further clarity, insurtechs in need of funds could be stuck in a “limbo-like state”, he says, adding that “for underfunded businesses that’s going to be a problem”.

“A lot of positive initiatives are being introduced in Germany, and being called for in the UK, to support startups that are perhaps running out of runway.

“But it raises challenges for a lot of companies. Hopefully those that are able to prove the sustainability of the business model should still be able to access support from the relevant investment community,” he explains.

Not all startups are so robust and there is the possibility that some of weaker ones will be weeded out.

Stubbs agrees: “There’s certainly an argument to suggest that that is the case. Again, the challenge for making any certain predictions is that so much is changing on a daily basis, and there’s a lot of support and opportunity to scale back in the short term.”

Wider market repercussions

When it comes to wider industry impacts of the COVID-19 crisis, some of the fallout will depend on the type of insurance that re/insurers are providing, says Stubbs.

“Some companies are going to be more affected because consumer behaviour or commercial behaviour is changing, which means that certain insurance is not needed. That is a very difficult situation to be in,” he says.

In the UK, Getsafe offers content insurance and that continues to be something people will need, he says.

“In Germany, where we have a travel proposition, that is quite clearly being dialled down in terms of customer interest,” he adds.

“But generally you would foresee that this kind of event is going to have a catalytic effect on the digital and tech space. It shines a light on the importance of being able to manage in these kinds of situations. This is not to suggest that pandemics will become the new normal but at least it shows the value of a digital-led or tech-led proposition.”

Tech-led solutions that have enabled a lot of businesses to continue operating at pace and in the same way “have to be the point to which companies are striving”, says Stubbs.

“There is a positive element in that the tech-focused element to it will be prioritised or will be pushed on as a result of this.”

Kudale also sees wider changes coming. He says the outbreak highlights that to protect vulnerable SMBs cyber cover needs to be much more detailed post-COVID-19. A broad-brush approach will no longer do, especially as people are already talking about the potential of a cyber attack to cause the next global crisis.

Cowbell’s CEO points to another shift wrought by social distancing. “The agencies who sell cyber, the retail agencies, they’ve held a high value network job for centuries. Relationships, shaking hands, meeting over lunch, discussing proposals over coffee, none of that is going to happen for a long time.”

But tech has an answer, which Kudale calls the “O2O—‘offline to online’—transition”.

“For agencies the Cowbell platform is very timely, it allows us to help them transition from offline to online. Commercial insurance is best done via relationship with agencies, so 100 percent of our policies are brokered and sold via retail agents, so we want to empower them.

“The software is free because we believe that SMBs will need more cyber information post COVID-19.

“The way we all sell and do business and offer coverage will look very different in a post-COVID-19 world.”