A summary of COVID-19’s impact on the insurance industry was recently published by Financialnewsmedia.com. Drawn from a variety of sources the article highlights the almost universal response by large businesses to the pandemic—they leaned on their technology to get by.
Not only did COVID-19 accelerate the adoption of technology, it prompted others to embrace it that otherwise would not have. As the crisis lengthened insurance company executives began to realize that their decisions about technology today were of strategic importance for the future as well. They needed to respond to what the pandemic was triggering in the industries they served and stay abreast of their competition. It became apparent to them that their decisions were shaping the company’s long term future.
In contrast people’s lives were being directly impacted by COVID-19 when lockdowns were enacted, affecting where they worked, how they shopped and how they accessed entertainment. While this was unfolding, IT departments were mobilizing, deploying technology that permitted employees to work productively at home and families to shop remotely. Consumers en masse moved to ecommerce sites stressing retailers to quickly move to the technology that would enhance and expand their virtual stores. Competition was all about adaptability and innovation.
The societal transformation underway forced insurance industry leaders to focus on how technology was being demanded and how it was being valued during the crisis. They began to actively seek out insurtech startups to be the first to have the latest innovation to meet these needs.
The industry as a whole completed 407 mergers and acquisitions (M&A) worldwide in 2020, a slight decline from the 419 of the previous year despite a pandemic being underway. It indicated that M&A was having a role in the industry’s response to COVID-19—that became more evident in the last quarter when deals spiked, according to a report published by global law firm Clyde & Co.
The recent summary included highlights of insurance firms that sought out technology and then later reported a very positive earnings performance such as Reliance Global Group (RGG) a holding company that invests in real estate, insurance brokerage, and other financial service sectors through its subsidiaries. RGG’s CEO Ezra Beyman shared their approach and the opportunities that arose to the company’s benefit.
“2020 was a transformative year for the Company. First, we continued our acquisition strategy with the purchase and successful integration of UIS Agency, LLC, a regional insurance agency serving the commercial transportation industry. We now operate through seven wholly owned agencies with plans to continue our M&A strategy. Specifically, we are targeting growing and profitable businesses that we can buy at attractive multiples and with the ability to leverage both technology and economies of scale to gain significant efficiencies,” he said.
The company also made an investment in Nsure.com and then created their own similar platform, 5minuteinsure.com, tapping into the growing number of online shoppers. Through the use of artificial intelligence they touted how they are able to provide competitive insurance quotes within minutes and with minimal data input by the customer. But RGG sees this as only the beginning and it only captures what the company accomplished over the span of the pandemic in just one year.
“We believe this state-of-the-art Insurtech platform has the potential to truly disrupt the industry,” Beyman explained.
RGG combined the technology of 5minuteinsure.com with their traditional insurance agency practices. They were able to expand 5MinuteInsure.com quickly and through their affiliated Reliance Insurtech division they gained access to sales capabilities through licenses granted to Reliance Insurtech. They are now selling home and auto insurance in 43 states with the goal of adding more and expanding into additional types of insurance.
Joyce Chan, Hong Kong-based corporate insurance partner in an article in the Insurance Journal, describes the COVID-19 phenomenon in the industry saying, “The fallout from COVID-19 has intensified the focus on innovation. When growing your business face-to-face is restricted, you have little choice but to fall back on technology to maintain existing relationships but also to access new markets and grow your customer base. At the same time, in the face of balance sheet pressure, any innovation that can generate efficiencies and bring down the cost base is welcome.”
Technology is now seen as key to the insurance industry’s growth over the next year, specifically as a key factor for gaining a competitive edge for those who are able to identify innovations quickly—eating up what emerges through acquisition, investment or partnership.
Shai Wininger, Lemonade co-founder and COO offers his company’s take on innovation, as its platform powered by artificial intelligence and behavioral economics brought in more than one million customers, just 1,500 days after its initial launch. This significantly outpaced industry leaders such as State Farm, Allstate and others.
“With every new customer, our system grows smarter, our underwriting gets better, and our prices become more accurate and fair. At Lemonade, one million customers translates into billions of data points, which feed our AI at an ever-growing speed. Quantity generates quality. We’re proud to hit the one million customer mark so early in the life of the company,” said Wininger.
One can imagine Lemonade’s competition took notice.
