As of Q1, the total amount of global InsurTech funding was USD 1.63 billion. Of this total, 95% was allocated to projects utilizing artificial intelligence.
Despite the flood of investment into InsurTech, insurance purchasers continue to face significant difficulty differentiating between proven software solutions and unproven digital experiments.
This guide outlines the structure of the InsurTech marketplace, and provides an overview of the various operational tools used by the industry, independent performance metrics for these tools, and the main criteria for selecting the right technology partner among the top insurance tech companies.
Classifying Insurance Tech Companies by Buyer Needs
The marketplace is currently grouping completely disparate business models as part of the InsurTech umbrella. As an example, digital carriers, agency software providers, and artificial intelligence providers may appear to be competitors in the same market.
However, they each provide entirely different offerings to the marketplace. By treating these three vendor categories as being equal, the result will be multiple failed technology implementations. As such, buyers must classify vendors based upon their core position in the insurance value chain.
Defining Market Categories
It is important to understand that a basic market map of InsurTech is not sufficient, as it will provide little value to a buyer if it incorrectly classifies all InsurTech software providers in the same group as traditional carriers. Digital insurers are in the business of creating and selling real insurance coverage directly to consumers and/or businesses, and they are responsible for taking on the risk associated with the policies they sell.
Conversely, traditional core InsurTech platform vendors (Agility, etc.) create the necessary underlying technology (infrastructure) for traditional carriers to manage their policy, billing, and distribution processes.
Niche providers (e.g., managing general agents (MGA)) offer a unique capacity for conducting underwriting and handling niche risk coverage for brokers. Point solution providers concentrate on providing a single type of technological function (e.g., optical character recognition (OCR) for intake; fraud detection).
Lastly, external data providers provide information that is necessary to conduct accurate underwriting (telematics; cyber scanning; property mapping). For instance, if a buyer wishes to enhance their speed of digital underwriting, purchasing software from a digital carrier will not suffice. They will need to acquire technology and services from either a core platform vendor or a point solution provider.
How Buyers Evaluate Insurance Tech Companies
Market research indicates that technology purchases are made primarily with reality-based operational scenarios, rather than purely based on feature lists. According to the Insurance Business survey of active brokers, the nature of the questions pertaining to causes of purchasing decisions is not based on anticipated performance, but rather on how well something can be used in the real world.
When looking at these systems, buyers focus on the following key decision factors:
Usability in daily operations and compatibility with workflow; highest average rating in broker survey - 4.89 out of possible 5 points.
Reliability of customer service support; highest average rating in broker survey - 4.89 out of possible 5 points; currently a critical need for customers to access immediate assistance if API contact breaks.
Customization options within platform; 4.59 out of 5; this shows the need to adapt software tools for a commercial risk profile.
Integration burden associated with vendor systems; i.e., the ease of connection of vendor products with existing broker management systems (BMS) and legacy database systems.
Vendor Profiles and Real-World Evidence
This assessment provides details of 18 insurance tech companies who are actively competing within the insurance technology sector.
The vendor profiles will provide an overview of each vendor's main focus, their service offerings, information regarding their price offerings, and whether or not independent production information is available.
1. Guidewire
Guidewire provides a comprehensive operational platform for mid-size, large, and very large commercial property and casualty insurers.
Guidewire's focus is on enterprise policy administration, billing, claim processing, and digital engagement. The total Guidewire Corporate Solutions product represents a complete insurance core modernization solution as opposed to a standalone software package.
Guidewire has been named to the Global 5-Star Technology and Software Suppliers List. However, buyers should be extremely cautious when considering migrating to this solution.
When comparing solutions in the future of commercial insurance, it's crucial to differentiate between software features and a long-term (10 to 20 years) commitment that requires complete transformation of internal operating models, a massive data conversion effort, and heavy reliance on third-party implementation partners.
2. Lemonade
Lemonade has an AI native operating model that provides home, renters, pet, life, and auto coverage insurance products directly to consumers through digital channels and claims automation.
That's why, as an insurer, Lemonade's premium rates vary greatly from one location to another, based on their unique risk profile and coverage product. There are no universal enterprise software pricing models available from Lemonade.
In an independent case study conducted to illustrate the time it takes to purchase a Lemonade policy, it was documented that it takes approximately 90 seconds to complete the purchase process and only 3 seconds to have a claim paid out. The primary limitation for Lemonade is that they are a digital insurer and not a software platform that is available for traditional commercial carriers to license or install to operate their businesses.
3. Coalition
Coalition blends actual cybersecurity insurance with current cyber-risk intelligence, incident response, and business insurance products.
Coalition is targeting businesses and commercial brokers looking to manage their digital risk. Coalition's pricing is heavily dependent on the client's business profile, current security measures in place, available limits, and underwriting data.
CB Insights has listed Coalition on its Insurtech 50 list with a Mosaic score of 875. The primary concern for Coalition buyers is to independently verify the quality of the claims response, policy exclusions, and depth of the ongoing risk-scanning services.
4. Akur8
Akur8 offers a machine learning pricing software specifically developed for property and casualty actuaries.
The technology is designed to be transparent and produce explainable models that provide support to actuaries’ governance roles, and not to replace the role of the actuary altogether. The vendor only offers custom enterprise contracts for pricing.
In the Insurtech 50’s pricing category, the vendor scored 856 on the Mosaic scale. Insurers who evaluate Akur8 will need to conduct thorough testing for model governance, as well as regulatory compliance for explainability. An actuary must be able to explain which variables influenced the price changes to regulators, therefore black box ML technology is not an acceptable solution for production deployment.
5. Hyperexponential
Hyperexponential is focused on providing pricing and risk management solutions for commercial and specialty insurance markets.
Underwriters in these markets will utilize structured analytics and gain visibility across their entire portfolio to help make more informed decisions. Like the majority of enterprise core software tools, there are no published pricing levels.
CB Insights awarded Hyperexponential a Mosaic score of 773. The primary area of caution relates directly to the line of business, as the buyers must validate that their software can support the complexities associated with highly specialized commercial risks and can accommodate multiple datasets. Buyers should not assume the software works in the same manner as high-volume personal lines software.
6. Federato
Federato leverages AI technology to provide underwriting and policy management functions for their clients.
This platform consolidates risk data, underwriting appetite, and portfolio tracking into one place for commercial insurers and managing general agents. Like the other vendors, Federato only offers custom pricing for their clients.
Federato received a Mosaic score of 829 for underwriting operations, and for buyers, the core question is regarding process controls. In addition to ensuring that Federato improves the speed at which a digital underwriting decision can be made, they must also ensure that it does not eliminate the required audit trail and maintain the internal governance rules required to protect insurers from adverse risks.
7. Upstage
Upstage aims to develop an end-to-end document automation and AI solution in the insurance space.
Upstage goes beyond just extracting text from a document; it automates the full scale of work through document intake, classification, auto-generating content, along with routing the information within company departments such as underwriting, claims, and risk management. The method of determining Upstage pricing is based on the size of the enterprise.
Upstage achieved a score of 937 on the Insurtech 50, which indicates high technical credibility.
However, insurance buyers will need to run rigorous tests using complicated and difficult real-world documents. Insurers will also need to test the accuracy of the system by measuring it against handwritten notes, bad faxes (including poor quality sent via fax), multilingual documentation, and the system's ability to automatically generate and escalate human reviews when it is unable to read or interpret a document.
8. Reserv
Reserv aims to enhance the way that claims are processed, via automated data intake, data processing, and data management workflows. They provide their services to insurance companies, managing general agents (MGAs), as well as claims management teams. Prices offered are customized.
Reserv completed a USD 125 million Series C financing round, following their inclusion in the Insurtech 50 list. Insurance buyers should be reminded that although funding by venture capital firms can indicate that a company has potential value to be derived from investors, it does not necessarily mean that the company has accuracy of claims processing. Buyers of the Reserv product need to demand clear production metrics broken down by individual claim type, claim severity, geographic jurisdiction, and human escalation rate.
9. Tractable
Tractable provides a computer vision-based solution to assess damage to vehicles and property in connection with touchless claims processing.
Tractable's customers are primarily auto insurers and auto repair networks and use Tractable's visual estimation of repair costs. Pricing is established through custom contracts based on a customer's volume of claims and as well the amount of deployment of Tractable solutions.
Using an Admiral Seguros deployment, independent data showed it has the highest efficiency level of processing claims. 12,000 touchless claims were processed, and 90% of estimates were generated and completed automatically, without a human appraiser. 98% of all eligible claims were completed in less than 15 minutes, and compared with human staff 96% accuracy was achieved from the processing capability alone. This provided a reported three times return on investment. However, buyers must verify for themselves that the use of artificial intelligence is suitable for their particular combination of vehicle models, local repair costs, and image quality.
10. Cotality
Cotality has an entire end-to-end claims platform with an extensive database of property information.
Property insurers are able to access Cotality's database to enable dispatching intelligently and assessing structural damages, as well as inserting property information into their existing claims files. The enterprise pricing model applies.
Insurance Business reviewed Cotality's system, identifying that it helps increase efficiencies in both review and dispatch of supplement field claims. Importantly, Cotality states the limitations of its products; certain types of coverage disputes, such as complicated claims and disputes regarding structural damage, and claim processing of ambiguous property data requires human judgment to determine the value of the coverage dispute. As such, when investigating Cotality's system, the agency buyer should focus on how the system determines when to default back to human judgment.
11. Vertafore
Vertafore is an agency management system provider for independent insurance brokers, as well as providing automated workflow solutions for brokers.
Vertafore's systems connect various data sources to eliminate manual data input when quoting, providing service, and renewing policies. Agency system pricing is based on which modules are chosen by the agency, the number of users, and the depth of implementation.
Reported benefits from the Vertafore system have been the reduction of time taken to gather and input employee benefits data from 45 minutes or longer to only a few minutes, as well as increasing quoting speed for personal lines by 50%. However, for agency buyers, it should be noted that the savings in time and efficiencies will only be realized if Vertafore is able to connect with the various carrier portals used by the agency on a daily basis.
12. 3Tree
The Unite Insurance Exchange Platform is owned by 3Tree, and is a direct link between Canadian brokers and their carrier systems.
This means that when a broker uses the platform, they remain within their existing broker management system/CRM, while also pulling information from various different carriers. Brokers that use the platform cannot access standard public pricing.
Through real-world evidence, it has been proven that 3Tree has greatly reduced the burdens of connecting to carriers.
Prior to using the platform, brokers would establish and maintain five separate connections to five different carrier technologies. Now with 3Tree, a broker can connect to all five with just one hub. Also, brokers will complete onboarding with 3Tree in just weeks instead of years. It is important to note, however, that a broker will still have to determine what the actual coverage is in the marketplace. A connection tool for a broker that does not support the exact carriers, quote types, and types of transaction services that the broker needs in order to sell is worthless.
13. Cognition+
Cognition+ provides insurance core systems modernization by blending software delivery with consulting services, data migration, user education, and testing. It serves property and casualty insurers who are in the process of transitioning from a legacy system to a new insurance system. Both implementation and pricing of the software are fully custom.
According to market reports published, the impact of implementing a new core insurance systems technology will be felt for the next ten to twenty years in terms of how carriers operate. Therefore, when evaluating a vendor, buyers are selecting a transformation partner, not merely purchasing software. Buyers must pay close attention to the vendor's data migration methodology, as well as their support structure once the core insurance systems technology has been implemented.
14. ColumnZero
ColumnZero develops proprietary portal technology for complicated underwriting operations. This software is designed for edge cases and specialized types of commercial risks that commercially available software cannot handle. They offer either custom agreements or white-label vehicles for pricing.
ColumnZero provides proof of their speed by completing the development of highly requested features, for example, custom document export tools, in just two to three weeks. This will result in reduced need for manual data management and allow their customers to eliminate a significant amount of manual processes. The most significant risk associated with ColumnZero is potential vendor lock-in.
The use of proprietary builds provides an agile way for an organization to use the build process, but at a cost. Once an organization has gone down the path of building its systems with a single vendor, it will continue to rely on that vendor for any changes to the roadmap of products and services that will be created as a result of using those systems and any additional integration that might be needed between systems or servers.
15. CompScience
CompScience is a digital tool that analyzes images of work environments using machine learning technology to monitor and mitigate workplace injury.
CompScience is used by large employers and commercial insurance companies to analyze images and data to identify problems within a work environment that could result in injuries and claims. CB Insights gave CompScience an 841 Mosaic score for its focus on reducing the likelihood of workplace injuries. Companies that are considering CompScience must know how the company deals with false positives. If CompScience's digital tool relies too heavily on false positives, the company may not get the intended results from the tool, as safety professionals will have to ignore most alerts, effectively negating the value of the tool.
16. Delos
Delos is the leading insurance marketplace for homeowners living in wildland-urban environments in California.
Delos uses a model that is focused primarily on fire risk today and has moved away from relying on historical loss data to predict fire risk behavior. Homeowners can purchase fire insurance directly from Delos, while capital providers will fund the fire insurance risks; Delos does not currently provide a technology platform for the public or for other enterprises.
Delos has been recognized as one of the Insurtech 50 companies because of its unique in-depth modeling capabilities for homeowners insurance in California.
Companies that are considering using Delos as a commercial partner or purchasing fire insurance from Delos will need to understand how geographically constrained the modeling capabilities are, the type of regulatory environment in which dynamic insurance premiums are accepted, and whether the modeling takes into account the actual steps taken by a homeowner to mitigate fire risk, such as clearing brush.
17. Faye
Faye is a company that provides travel insurance products online and via travel distribution channels. Faye sells its products directly to its customers and via travel distribution partners.
Each product includes trip protection and is sold via a mobile application. Pricing is based on the length of the trip, destination, and age of the traveler.
Faye possesses an 840 Mosaic score in travel which indicates that it is one of the top performers in its category. Buyers need to ensure that the advantage of having a clean-looking mobile setup does not obscure their evaluation of travel insurance. The evaluation of travel insurance is determined by how well medical coverage is incorporated into the policy, the ease of understanding policy exclusions, and how quickly the company can process claims when travelers are abroad.
18. Further AI
Further AI helps insurance companies create and evaluate insurance policies through a uniform approach that unites different channels of distribution to improve their effectiveness.
Further AI primarily develops artificial intelligence tools for distribution teams that want to improve their sales process through speed and efficiency. The company's pricing model is based on their sales strategy and can be tailored to meet the individual needs of a customer.
Further AI successfully raised USD 25 million in Series A funding.
For agencies to use Further AI effectively, they should conduct extensive testing on the extraction accuracy of their software. Agencies need to ensure that when using this software that it is capable of accurately identifying conflicting terms within the policy, identifying missing language within the policy, and ensuring strict version control when a carrier issues multiple revisions of a quote.
Integration Barriers for Insurance Tech Companies
There is no doubt that the majority of the insurance market has access to the latest technology; however, successfully integrating that technology into their business processes is often disappointing. The greatest impediment is the difference between a controlled environment in which an agency conducts a controlled pilot of the software and a live production environment.
Since 2012, the insurance industry has raised over USD 5.77 billion for companies focused on digital transformation and cybersecurity. However, even with such a significant level of investment, many brokers continue to complain about their inability to transfer accurate data effectively.
Data Governance and Pilot Failures
While vendors may conduct demonstrations of their software using clean, structured data, it is important to remember that an insurer's data is not clean, complete, or structured, and is often located on multiple systems that are often much older than the vendors' software.
According to analysis of CB Insights data, 60+ percent of the largest companies are still in the startup phase. As a result, the tools used by these companies do not yet have comprehensive data governance and security protocols in place for the large commercial insurers.
When evaluating execution, buyers often overlook the critical deployment metrics required to prove success or failure of technology deployments. For example, the secondary market reports that a solution produced a 30 percent reduction in claim costs; however, if the sample size supporting that claim is never disclosed, it is invalidated. High-performing technology deployments possess the following attributes:
Deep API connectivity that allows for the discovery and use of data from older, less flexible databases without a timeout.
Clear rules of engagement for human intervention when a machine learning model experiences new and unique risks.
Thorough model validation processes that comply with state insurance department regulations.
Reliable optical character recognition that performs well on low-resolution field images rather than only high-quality PDFs.
The Truth About Modernization
Legacy technologies remain the biggest hurdle for the insurance industry looking to scale advanced digital claims intake. Because of this, the primary policy admin system within an insurer will be supported by a mainframe computer running the green screen interface.
In fact, Gallagher Re reports show an increase of 23.3 percent in average deal size over a short period of time. This indicates that as a result of increased investment into heavy core modernization, the professional carriers are abandoning their low-cost and experimental solutions.
Transitioning away from legacy systems will require tremendous operational pain; i.e., data from the 1990s must be remapped, cleaned, and migrated to cloud-based platforms while the insurer continues to quote new and sell policies every day.
If a carrier chooses a vendor that does not have a strong testing strategy, the project will fail and cause the insurer to spend money without delivering a return on investment; thus delaying delivery of their expected speed to market via digital underwriting.
Why Execution Matters More Than Funding
The greatest indication of value associated with any type of insurtech company is not in their secured funding or their utilization of the phrase "artificial intelligence."
In fact, the data shows that, in Q1, 1.63 billion dollars were invested into insurtech companies, yet technology that solves immediate workflow and pain value will be rewarded; thus supporting a greater likelihood of companies adopting that solution.
Choosing the appropriate technology partner among insurance tech companies will ultimately depend on the specific segment of the insurance value chain targeted; e.g., a tool that creates touchless auto claims in 15 minutes will hold no value to a commercial broker that is implementing 5 carrier portals into one management system.
Companies should not utilize generic market maps or sample products when selecting technology; instead they should evaluate based on the speed of implementation, proven production metrics, and their ability to provide continued high-level customer support when data integrations inevitably fail.