Analysts at JMP Securities have observed a “rapid improvement” in the loss ratios of several insurtech firms, who previously struggled in their earlier days.
Over the longer-term, JMP is expecting to see an increasing number of insurtech companies show loss ratios at or below industry norms.
At the same time, as these insurtech firms continue to gain scale, JMP anticipates expense ratios will improve to well below industry averages.
Analysts noted that early successes in the insurtech space have been disproportionately in the personal lines space, but added that several commercial lines companies are likely to follow.
There are several reasons for this trend, such as more easily accessible data and commoditized products in the personal lines sector.
JMP further reported that the need for technological improvements has been amplified by the COVID-19 pandemic, which has shone an uncomfortable light on the antiquated tech offerings of many of the large legacy incumbent carriers.
In response, many legacy peers have accelerated their tech and digital capabilities over the past six months, but as it stands, newer, more nimble companies may still be better placed to outpace them, JMP says.
JMP analysts also called into question the future of the insurance agent amid the insurtech revolution, concluding that personal lines agents should be worries, while commercial lines agents are more safe.
“Commercial lines are inherently more complex and each business is far more unique than in personal lines, which is in many ways heavily commoditized,” JMP said.
“Many business owners still, and will likely continue to, value the advice and guidance an agent provides. As such, we have seen an increasing number of commercial lines InsurTech carriers shift to an omni-channel approach instead of remaining solely focused on direct customer acquisition.”
Analysts also foresee that the insurtech space will make further cyber market gains if incumbent carriers fail to close the significant insurance gap that has arisen, particularly following the shift to increased remote working.
“There has been much talk about closing the insurance gap, but incumbents have struggled with how to do so, instead opting to avoid aggregation through exclusionary language and small limits,” JMP said.