Startups Can Sell Anything Online: What Does This Mean for Commodification?

If an insurer can sell it, a startup can sell it directly online. This reality was initially true for low-complexity, high-transaction coverages like homeowners, renters, and auto (think renters insurer Lemonade or homeowner’s startup Hippo). Online distribution eventually made its way to individual life insurance; many startups—Ethos, Fabric, and Ladder—now offer fluid-less term life insurance online.

Startups are now beginning to sell more complex lines of business directly online, like dental startup Beam Dental, workers’ comp insurer Huckleberry, or cyber insurance distributor At-Bay.

The growth of online sales will likely lead to commodification. We’ve seen this reality in personal lines, and it’s beginning to take shape in term life insurance, where direct online sales were only an abstract pipe dream even a few years ago. We even see this in commercial insurance, a sector that resisted commodification in the past.

So, what does this mean for the industry?

For InsureTech startups, it means that selling a product online is no longer a novel iteration on customer experience. Many startups are looking beyond direct online distribution; embedding a product at the point of sale is a growing trend. Bunker, for example, offers small business insurance embedded directly into the contracting process, and Zillions offers jewelry insurance at the point of sale. Others realize that customer experience doesn’t stop with the purchasing experience. They are building AI-based claims capabilities or including value-added products like smart home devices in their products.

For established insurers, InsureTech startups aren’t going to recalibrate consumers overnight. Even larger InsureTech startups are relatively unknown outside the industry. Consumers are growing comfortable with direct online purchasing, yet many are still going to want to talk to a human agent. Insurers can partner with new distribution channels with relatively low financial risk or even build capabilities on their own. Commodification also means that insurers might rethink the value they add to consumers, which may come in the form of a repair network for claims or a vulnerability assessment for cyber insurance.

Insurance has been under pressure to deliver direct online sales thanks to retail and tech companies like Amazon. Yet the front end is not where customer experience stops. It’s still possible for the industry to differentiate on service; this may just look a little different in the digital age.

You’ll find more information on startup carriers and distributors in our InsureTech industry report, InsureTech for Insurers: 200 Startup Profiles. Novarica will also be releasing an update in September that contains 250 profiles.

As always, feel free to get in touch with me ([email protected]) or Novarica EVP Jeff Goldberg ([email protected]) if you’re interested in discussing InsureTech trends, the current landscape, and what it all means for insurers.

Add new comment

CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
5 + 1 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.

How can we help?

If you have a question specific to your industry, speak with an expert.  Call us today to learn about the benefits of becoming a client.

Talk to an Expert

Receive email updates relevant to you.  Subscribe to entire practices or to selected topics within
practices.

Get Email Updates