Digital Marketplaces Rewrite Insurance Rules as AI Drives Industry Shake-Up

At its core, the insurance industry has a business model that’s been around for decades, at least on the service side of the equation. Essentially there are two sides of the market, as thousands of independent agents are on one side, and carriers are on the other.

While the conventional wisdom might hold that the insurance industry is huge and slow-moving, the reality is that dynamic forces are reshaping the vertical.

Changes are afoot that have not been seen in decades, including natural disasters, inflation and high interest rates, which have made it more expensive to replace homes, automobiles and personal property, Aviad Pinkovezky, CEO of InsurTech platform First Connect told PYMNTS in an interview.

The Perfect Storm

“All of these circumstances have created an almost perfect storm that is changing many habits and commonly used practices that have been part of this industry for a long time,” Pinkovezky said.

Carriers are changing the way they do business, focusing less on the top line than profitability, he said. They’ve been pulling out of markets (the seismic shifts in California in the wake of last year’s wildfires are an example), and they’ve started to apply “non-renewals” on policyholders. The shock to the system has been affecting agents.

Agents have been left scrambling, as the carriers that had long been business partners changed their models and markets, which in turn has meant that the agents could not habitually service policyholders, Pinkovezky said.

“It’s a bigger problem that goes into data and modeling and regulatory aspects,” Pinkovezky said, adding that for agents, there are new challenges in keeping track of carriers’ changes, availability, changes in policies, and even new entrants into a market. Conversely, carriers need different tools to identify and source the right agents that will bring them profitable business.

The Platform Model

With technology and advanced analytics, First Connect’s platform matches carriers with agents in a streamlined fashion, which then translates into a benefit for policyholders, who can find insurance that fits their needs and is not prohibitively expensive. First Connect was spun out of Hippo Insurance last year, following a $60 million growth investment from Centana Growth Partners.

Through the tech-driven machinations of the platform, with artificial intelligence and APIs in the mix, the company has evolved from a monoline general agency into a digital marketplace that connects agents to 120 insurance carriers across home, auto, commercial and life insurance lines. The workflows — from agent onboarding to policy binding — are cut down from weeks to minutes.

By way of example, the company’s “Appetite Finder” tool helps agents access real-time carrier “appetites” for specific risk profiles (in terms of policyholders) and gets those carriers in front of the agents that are linked to the clients the carrier may be seeking, Pinkovezky said.

“The technology creates more liquidity in the marketplace, as we connect both sides of the [insurance] marketplace at the right time,” he said.

The eventuality is that AI will impact all aspects of the industry once the regulatory frameworks are hammered out, touching everything from pricing to claims construction, Pinkovezky said. First Connect’s efforts involving AI have expedited the process of analyzing and approving, or rejecting, errors and omissions policies that agents need to upload to First Connect as part of their onboarding experience.

“There is some manual, human validation here, but at the end of the day, AI has proven to be a game changer,” he said.

For First Connect, the capital from the Centana Growth Partners investment will underpin growth.

“This is only the beginning,” Pinkovezky said. “It’s such a huge market … we have the means of building more partnerships, getting more carriers and building more tools to allow the utilization of those carriers by the agents in a more efficient and profitable way for all parties involved.”

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