Who will be the Stripe for insurance?

By boris, November 07, 2017

A few years ago, we began to see SaaS companies integrate payment processing into their software.

This push to integrate payments was due to a couple of factors. First, it offers a better user experience – why send somebody off-platform to pay for a product or settle an invoice? Next, adding payments to a platform is very profitable, since the SaaS company gets a cut of the payment revenue. And lastly, products like Stripe and Braintree make it so much easier to add payments to your service.

Shopify is probably the best example of this trend. This year, Shopify’s merchant solutions (which are largely driven by payments revenue) overtook its “core” business (subscription services). But beyond Shopify, virtually any transactional SaaS product out there has added payments – from horizontal solutions like FreshBooks to vertical SaaS products like Clio and Jobber (both V1 portfolio companies).

Software has become the wrapper for a commoditized product and as such, it has turned payments into a much more differentiated product. This fact should scare every undifferentiated payment processor out there.

Now, we’re seeing a second category where software can provide a wrapper for a mostly commoditized product…. and that’s insurance.

Insurance will integrate payments for exactly the same reasons as SaaS: a better user experience and additional revenue stream. I believe this trend will happen first in those (marketplace) settings where standard insurance products aren’t addressing the specific needs of marketplace participants. For example, this could be marketplaces with limited insurance offerings (like rentals). Another potential is short-term insurance needs in a category where insurance is typically much longer term, like car insurance.

So, who will become the Stripe for insurance? Scale is a real advantage for insurance companies, so there’s a strong case to be made for an incumbent. And, some incumbents, like Munich Re, are extremely innovative in this space. However, there’s always the possibility that a start-up will be faster and grab the opportunity.

  • Nicely done and agreed, insurance is long overdue for innovation on several levels. It will be interesting to see how it gets disrupted.

  • Michael Serbinis

    I know a company that is playing in this space 🙂 You should check out League.com!

  • Ali Nawab

    haha. i was going to write League.com in the comments but Michael Serbinis beat me to it

  • bwertz

    I love League as you know but the positioning in the market is not Stripe for insurance (=API to power insurance for other marketplaces / SaaS products). Having said that, you are definitely using Software as a wrapper for a commoditized product.

  • Sultan

    I love League and Michael Serbinis – they are doing great things for insurtech and how insurance is delivered. I would also throw Zensurance into the mix. Our early pitch deck even had a stack of legos, a favourite for illustrating API platforms. Working our way towards that goal we have architected our technology to be completely API based. Stay tuned for more in the near future 🙂

  • Easy, it will be Lemonade.com
    They are building a US property insurance company from the ground up, state-by-state and they already have an API that is raising the eyebrows of state insurance regulators:
    They want to know who is selling the insurance when it is sold via an API since only state licensed insurance agents can sell insurance.

  • bwertz

    Looking forward to hearing more whenever you’re ready to share your products / thoughts!

  • bwertz

    Interesting, I didn’t realize they launched an API (always looked at them as a consumer product) – definitely well-financed company!

  • Kevin kliman

    On the P&C side Trov is the furthest along. Amazon is starting to roll them on for some purchases.

    Life and health is another story. The number of different regulatory bodies and crappy distribution channels that have to be navigated make it extremely unsexy.

  • Kevin kliman

    What do you like about League?

    They get a lot of pr but their product and tech seem underwhelming. Not sure if I’m missing something.

  • bwertz

    yes, P&C seems like the much easier vertical to go after, at least initially…

  • kkliman

    Right, everything seems complex until it isn’t.

    The US has 50 independent licensing bodies x who knows how many carriers. At the carrier level there is no standardization around collection and storing of information. In Canada today there isn’t a single carrier who will accept digital signatures on a beneficiary form.

    On top of that Life/Health is traditionally one of the toughest and most personal sales in the insurance world. Understanding and communicating someones life risks effectively is difficult because it feels so personal to the customer.

    In my opinion, the platforms likely to build the piping are the ones that have the most data pertaining to the sale. Today that stuff lives inside of HRIS systems or spreadsheets. Zenefits/Gusto/Namely are best positioned to be our financial institutions of the future. Not only will they be able to do predictive analysis w the data, but they’ll also be gatekeepers for $$’s that employers pass to employees.

    Every Insurance carrier Ive talked to has been talking about building this type API for a while. The chances that they’ll ceed this opportunity to an independent body is low. Perhaps it’ll be more of a Hulu structure where the carriers share ownership.

  • bwertz

    Great insights!

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