Innovative Insurance Accelerator Takes On the Challenges of Today and Tomorrow

By Cory Mangum, Course Associate, Insurance Management, Columbia University School of Professional Studies; Director of Risk Management, Primoris Services Corporation

During the 2023 Insurance Management Residency, Harold Watkins, former head of the Lloyd’s Lab North America, spoke to students and faculty on how the Lloyd’s of London–backed start-up accelerator supports needed change and innovation in the insurance industry, providing solutions to the challenges consumers face today and in the near term. The presentation captivated the audience with insight into how the partnership of insurance and technology is creating a powerful vehicle for solving some of the globe’s top challenges, from products addressing geographically specific issues to data processes helping insurers improve the customer value chain. But what exactly is Lloyd’s Lab, and what purpose does it serve?

Lloyd’s Lab is an insurance innovation accelerator with a “fail fast, succeed faster” mantra where start-ups are matched with industry experts to create products and services addressing the risk of today and tomorrow. The Lab has been quite successful since its launch in 2018, with more than 100 start-ups from 16 countries going through its accelerator program while also raising $1 billion in capital to fund these innovative projects. The Lab is now on its 13th cohort, taking in 10 total candidates from hundreds of applicants. Applicants fit into one of three themes: new products, data processes and models, and geographically specific impact. These three themes encompass the entire ecosystem of insurance innovation, from optimizing insurer performance to creating the new wave of products to address real-time challenges. This article will highlight Lloyd’s Lab alumni that embody innovation within these distinct themes.

New Products

In this chaotic world, innovative insurance solutions are needed to provide relief for consumers who are already battling increased costs in other aspects of their lives. Lloyd’s Lab participants focus on developing new products addressing underinsurance or bolstering traditional coverages existing in the market. In underinsured markets, products that focus on unknown risks (those with little historical data) truly show the technologically driven transformation occurring in the insurance industry, finding solutions to problems that are impacting society right now. This topic was covered in a recent panel hosted by the Insurance Management program featuring captive leaders discussing how unknown risks make great candidates for risk transfer solutions in today’s market (a recording of the discussion can be accessed here).

One Lloyd’s Lab alumni, Gaia Family, is taking on one of these unknown risks in today’s market, providing financial support for fertility treatments, most notably in vitro fertilization (IVF). The use of IVF procedures has risen significantly over the past 20 years, with a reported 42% of Americans stating they have used fertility treatments or know someone who has. The founders of Gaia had a personal connection to fertility treatments and wanted to do something about the risk of IVF failure. The impact of fertility treatments on participants comes in many forms, whether physical, emotional, social, or financial. With all of these potential stress factors, Gaia has found a way to provide peace of mind around the financial commitment, which can exceed $20,000, according to FertilityIQ.

Gaya’s innovative insurance solution offers protection for IVF customers through their first three cycles; if no child is conceived through the third cycle, then Gaya’s product takes care of any payments. Also, if a couple chooses not to go through with the process, a discount is provided on services rendered. This financial solution is a great example of how the insurance market is addressing real-time problems; not only the ability of individuals to create families but also the declining birth rates within the United States—the general fertility rate has decreased 2% since 2020, according to the CDC. Several different conditions affect fertility rates, including socioeconomic factors, lifestyle choices, and even governmental policies, but even in the face of these unknown risk conditions, Gaia has found a path to offering a safety net for those looking to take the journey of fertility treatments.

Data Processes & Models

With the increase in data being collected by insurers, technology is creating new opportunities for underwriting and claims groups to improve process efficiencies, control costs, and make intelligence-driven decisions that positively impact consumers. If underwriters possess valuable data to assess and price risks more accurately, this provides better-priced solutions for consumers, while claims departments can process claims more quickly, leading to faster payouts. The insurance industry is still shaking the stigma of using legacy technology systems that hinder the ability to properly service consumers in today’s rapidly changing risk environment, but those days are more and more a thing of the past as insurers embrace technology and innovation. With the emergence of AI and other digital technologies, the insurance market is poised for a major shift that should result in better internal processes that add value to both insurers and insureds.

Sixfold is one of the companies using technology to improve insurer operations. It declares its AI product to be the first purpose-built for insurance underwriters serving the life, disability, and property/casualty markets. The platform aligns with an insurer’s underwriting guidelines to assess submissions, quickly determining whether the data inputs from the prospect are within a set risk appetite, leading to a simple go/no-go recommendation based on the supplied data. Sixfold helps address a major concern in the insurance industry regarding individual workload and time in underwriting. A Risk & Insurance study of close to 300 insurance executives found that underwriters spend an average of 42% of their time on administrative tasks and an estimated 33% on core underwriting tasks, not leaving much of the pie left for business-development activities. With Sixfold’s simplistic user interface and shallow learning curve, underwriters are armed with AI-powered technology to assist in reviewing submissions more accurately and efficiently. This can result in better risk transfer options for consumers and more intelligent risk-taking for insurers.

Geographical Specific Impact

The explosive intersection of innovation and insurance allows for the introduction of new ways to solve geographically specific risks to vulnerable socioeconomic conditions. Developing countries lack the financial resiliency to support sustainable development when catastrophes wreak havoc on their ability to provide for their communities. This offers many opportunities to leverage advanced technologies for product development serving dual purposes, creating a market through proven profitability models and providing financial protections for vulnerable communities. Climate risk events are a current challenge for vulnerable communities in developing countries, as they can cause considerable damage to agriculture and infrastructure needed for survival. The introduction of smart insurance solutions gives access to risk transfer solutions that weren’t previously possible, along with a level of protection that fosters risk-taking and resilience at the community level.

Suyana has a mission to utilize AI and other digital technologies to make climate insurance more accurate, accessible, and affordable for underserved populations impacted by climate-related perils. Suyuna provides parametric and hybrid-parametric insurance products for urban environments and agricultural areas within developing countries, such as in Latin America. Suyana offers its product through partners that include governments and financial institutions. One significant accomplishment of Suyuna’s products is closing the basis risk gap, which is a constant issue with parametric-based insurance. When basis risk is close to flat, it means fewer uninsured losses that adversely impact the surrounding economy, providing not only an individual safety net but one that insulates local communities as well. AI and other digital technologies will continue to be a way that insurance markets can be accessed to protect developing countries from catastrophic losses, resulting in opportunities for communal and economic growth.

Conclusion

News headlines on insurance focus primarily on the negative. Rising premium costs, shrinking capacity, higher forced retentions—the list goes on. However, this article looks to shift attention to another, more positive narrative, one that highlights how start-ups are risking their futures to solve current and emerging insurance market challenges. Whether it’s coming up with better tools for insurers to accurately forecast and price risks or providing products for vulnerable populations seeking to avoid catastrophic losses, the future looks bright with regard to how technology and human innovation are taking insurance to a new level of financial protection for individuals and businesses.