Interview
a16z Podcast | Reinventing Insurance
- A surge of new startups is anticipated to enter the insurance sector, driven by positive industry analysis, expected to lead the reinvention of customer acquisition, product types, pricing, and claims processing through mobile-first technology, data, and software.
- The industry is projected to shift from passive risk pooling to active partnerships where insurers use data to help policyholders prevent claims, such as preventing house break-ins or extending longevity, potentially distributing wearables like Jawbone devices to align interests.
- Historical carrier data is expected to diminish in value as real-time data streams from mobile devices and emerging risks like cyber threats become primary drivers for instant premium adjustments based on actual behavior.
- Insurance is predicted to become available at the precise point of insurable events, covering scenarios like booking private planes, entering taxis, or ride-share driving, with the sharing economy transforming commercial and personal driving lines.
- Traditional homeowner's insurance will likely be modified to cover Airbnb scenarios, while new products are expected to emerge for drone liability and Bitcoin/digital wallet protection against high loss rates of approximately one-third of mined coins.
- Cyber insurance is forecasted to be a rapidly growing category driven by retailer fears of hacking and identity theft, with startups filling the void by providing tools for intelligent risk assessment and policy writing.
- A convergence of cyber risk and traditional property and casualty is expected, where physical shutdowns in connected factories may result from hackers as frequently as weather, while self-driving car insurance is predicted to supersede traditional auto coverage.
- Security standards for cyber risk are likely to emerge as commercial categorizations of business risk levels (one to six) with corresponding pricing, prompting insurers to take a more active role in collaborating with clients to reduce risk rather than solely collecting premiums.
- Future market leaders are expected to be those that insure the least and pay the fewest claims by being most preventive, with self-driving car liability initially favoring manufacturers (e.g., Google, Volvo) and service providers (e.g., Lyft, Uber) during autonomous operation.
- Personal vehicle ownership costs may rise significantly due to higher rates for human drivers compared to computer-driven safety, while self-driving services like Lyft and Uber are expected to become the primary mass-market delivery mechanism for autonomous vehicles.
- Consumer experiences are expected to improve through better price comparison, mobile claims submission, and the ability to submit claims via smartphone photos, alongside the unbundling of products into event-driven or flex-based coverage.
- The purchasing experience is predicted to disrupt traditional broker models by appearing at retail locations like Costco or Amazon, and through platforms like Facebook Messenger, potentially allowing access to previously cut-off sectors such as teen drivers and diabetics via telematics.
- Ethical decision-making algorithms in self-driving cars, such as those addressing "trolley problem" scenarios, are expected to influence insurance rates, while big tech players like Amazon or Google are anticipated to make a significant market impact similar to ZongOn in China.
- Although a "Cambrian explosion" of new insurance types is theorized as data becomes freely available, this has not yet fully materialized, with current expectations including protection against garage door hacking and real-time adjustments to life insurance based on financial situations.