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​​Hi everyone, Charley here.

I’ve recently been spending more time trying to get a better understanding of the insurance value chain, and thought it’d be interesting to share some of my learnings for critique :)

Did you know that insurance premiums actually make up 7.2% of global GDP? A huge part of our economy is directly dependent upon insurance products, but for most people the first thing that comes to mind are Geckos and Super Bowl commercials. I actually think we’re in early innings when it comes to next generation insurance, but the first key part that still needs to be built is the infrastructure.

Infrastructure Is Key

Maybe I’m biased from my time at Plaid, but using the fintech infrastructure landscape as a barometer, it took at least 3-4 years for the likes of Stripe, Plaid, Marqeta, Lithic, Alloy, etc to create 10x better infrastructure products. Consequently, we also saw the dramatic rise of consumer and business fintech built on top of these providers. We’re now seeing the likes of Unit, Treasury Prime, Sila, Apto, etc start to emerge as another generation of fintech infrastructure and corresponding clients built on top are also starting to emerge and gain scale rapidly. The Cambrian explosion of fintech that we’ve seen over the last years was enabled by years of fintech infrastructure investment previously - and I believe we’ll see something occur in the insurance market.

Mistakes of the First Insurtech Companies

The first wave of insurance tech companies tried to capture consumer + business owners in a D2C fashion - the likes of Coverwallet, Hippo, Lemonade, Root, Metromile, Next, and many more. While there have been some successes, the public markets haven’t been kind to insurtech companies (Lemonade trading at around a $2.54B market cap, Hippo now holding steady at around $1.5B, and Metromile getting acquired by Lemonade at ~$500M after a disappointing SPAC).

Most realized that going direct wasn’t sufficient enough to drive growth. It turns out the captive agents that your common Super Bowl commercial spending insurance players (All State, Geico, Farmers, Progressive, etc) broker through (as well as the brand equity they’ve built up) is quite a moat! As a result, the first wave of fintech companies either then needed to work with existing agents to capture more demand (lower CAC) or expand their policies to other lines of businesses (increase LTV).

Looking Ahead

Insurance has historically been a hard product to unbundle though. There’s a lot of jobs to be done including…

• Producer licensing
• Quote, bind (purchase), and policy issue
• Payments and premium financing
• Verification of insurance
• Underwriting data + analysis
• Much much more…

But we’re now starting to see the first way of infrastructure providers in insurtech being built!

• Producer licensing - Agent Sync​
• Quote, bind (purchase), and policy issuance - Herald (I’m an investor here!)
• Payments and premium financing - Ascend (Also an investor here!)
• Verification of insurance - TrustLayer, EvidentID​
• Underwriting data + analysis - Planck​
• And much much more…

We’re still in early days around insurtech infrastructure, but that also means that we’re still in early days of insurance tech in general and I’m excited to see what the next wave entails :)

Charley Ma is currently GM of Fintech at Alloy, where he focuses on the go-to-market strategy for the fintech vertical. Prior to Alloy, he was head of growth at Ramp. Previously, he was the first growth hire at Plaid, where he started its fintech sales team and opened the NYC office prior to the announced exit to Visa for $5.3B. Charley is also an active angel investor in fintech + developer infrastructure and enjoys a good tweet.