Silicon Valley Needs to Accept That Insurance Is Boring

livemint.com:

Silicon Valley entrepreneurs hate it when the audience gets bored, but they may need to elicit more yawns if they are to transform insurance. Enthusiasm for artificial intelligence continues to power the stock market, but it isn’t giving a second wind to companies committed to revolutionizing insurance through technology, or “insurtech." Shares in listed players such as Lemonade, Root and Hippo have been trading sideways. Meanwhile, global insurtech funding fell to $4.5 billion in 2023, a 44% decrease from the previous year, according to fresh data by reinsurance broker Gallagher Re.

While the sector is coming off the free-money craze of 2021, participation in megadeals was the lowest since 2017 last year. Insurance needs innovation. Natural catastrophes are pushing up premiums and leaving households unprotected.

Personal car insurance has become prohibitive while still losing money for underwriters. Some smaller insurance lines remain an afterthought. Almost a decade since Californian innovators descended upon the industry, however, few such issues have been solved.

Indeed, most insurance success stories predate the recent venture-capital boom. Among the exceptions, Texas-based broker Goosehead Insurance listed in 2018 and has multiplied its stock-market value tenfold, though it was founded in 2003 and puts agents front and center. Perhaps a better example is Parsyl, a Lloyd’s of London syndicate specialized in perishable marine cargo insurance.

This is a data-driven firm backed by venture capitalists such as HSCM Ventures and GLP Capital Partners. They have allowed it to grow steadily while preserving a good underwriting record. More often, venture funds demand explosive rates of expansion.