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Insurable Interests - Insights on Insurance Law

Insurtech: Insurers driving innovation through investment

LightbulbLike other sectors of our economy, the insurance industry is under increasing pressure to find new customers, new markets, and to be more strategic in how it markets its products. Shrinking margins and other challenges, such as those presented by autonomous vehicles, are a continuing threat to business as usual, particularly among personal lines carriers. 

As a response, many carriers are turning to new products and technologies to help them meet their strategic goals, obtain talent, and better understand their customers and the marketplace.  And, in many situations, insurers are showing their commitment by forming venture capital funds to invest directly in startup companies that are developing products that can complement the insurers’ core business. Indeed, carriers hope these investments will ultimately drive increased insurance premium and, of course, result in a handsome return on their investment.

Investing in other companies is hardly a new idea – carriers commonly use their reserves to take equity stakes in companies as part of their larger, typically conservative, investment strategy.  What’s new is the focus on startups, and the dynamic and innovative way those companies are helping insurers grow their core business.

A few general examples can help illustrate the synergies for which carriers are looking. For example, carriers may invest in new technologies that help them understand the demographic changes within its customer base and predict life events – such as purchasing a home – to allow them to pitch new products at just the right time. It also might invest in products specific to the consumer auto and real estate markets, not only for access to potential new customers, but also to gain insight into buyers’ insurance preferences. 

Carriers are also interested in investing in companies without an obvious synergy with the insurance business, but are attractive because they may improve customer experience, help them hire and retain employees, or assist the insurer glean insight from large amounts of data.  Sometimes, of course, the insurer may just see the opportunity for a sizeable return. 

Godfrey & Kahn’s insurance team is proud to support innovation in this space. Among other things, we assist our insurance carrier clients with venture capital acquisitions and other strategic transactions. Our firm is also a multi-year sponsor of the OnRamp Insurance conference, which brings together the insurance industry’s leading venture capital groups, investors and selected startups. 

If you are interested in hearing how we may be able to assist your company in the venture capital space, please feel free to contact the author at tsmith@gklaw.com.

 

 

 

February 23, 2018

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