Insurance: The Next Frontier

insurance chalckboard


While the golden age of Fintech is upon us, insurance has been relatively untouched – one of the largest industries yet to embrace the digital age.

Yet insurance presents an enormous opportunity for entrepreneurs. In fact, the fact that Prudential recently formed Gibraltar Ventures – following the model of Citi with its Citi Ventures unit – shows the that incumbents are recognizing the potential for startups in the insurance sector.

Last year, the U.S. insurance industry’s net premiums written totaled to $1.1 trillion, a 25% increase from 2009 (net premiums written are defined as premiums that will be collected over the life of a contract less cost of reinsurance).

Insurance carriers and their related activities in the United States accounts for nearly 2.5% of the US GDP and employs 2.5 million people.


Despite being such a large industry, insurance remains one of the highest cost areas of financial services.

According to CoreVC, a VC firm focused on FinTech, $.60-$.65 of each dollar is paid in claims, with the rest covering costs of admin, marketing and reinsurance.

This presents a significant opportunity for disruption. With improvements in technology, we should see reduction in each of these cost items.

Examples include automating policy administration, improving distribution via marketplaces, reducing underwriting risk using big data and machine learning.

Recently, more and more entrepreneurs have launched startups to disrupt this massive and antiquated industry. Here are a few startups going after interesting consumer problems.



Ovid is a life insurance exchange. Ovid offers consumers the option to sell their life insurance for an upfront cash payout if they no longer need or can no longer afford their policy.

A policyholder with a $1,000,000 policy could sell the policy for up to $300,000 and would no longer be responsible for paying annual premiums.

Ovid was founded because over 80% of U.S. life insurance policies never mature into a claim1 – the insured generally lapses or surrenders their policy. This results in high profit for insurance companies at the expense of consumers – turning years of paid premiums into a sunken and irretrievable cost.

Ovid attacks $100 billion of annual household financial waste by building a liquid secondary market where institutional investors can bid on consumers’ policies.



guevaraNormal car insurance works like this: you pay an annual premium which your insurance carrier pools with all their other auto insurance premiums in order to diversify their risk of a single accident. However, this means that safe drivers are essentially subsidizing risky drivers.

Guevara is piloting a new approach: instead of lumping your premium with all drivers, your premiums are pooled with roughly 30 drivers who have similar driving habits and records to you. Your pool is then used to pay for the group’s claims.

If there is money left in the pool at the end of the year, the leftover money is returned to the insured. This way safe drivers will have significantly lower insurance costs and are not subsidizing reckless individuals.

Guevara says after an average year with five claims, everyone in your group still saves 30% each over your competitive insurance premium. Furthermore, even if you’re in a group where everyone gets into accidents, there’s a cap on premiums – so all else equal, you never pay more than you did in the first year.



Oscaroscar was founded after Josh Kushner received an explanation of his health benefits that he was unable to understand. Oscar is a new health insurance company that sells simple-to-understand health insurance plans to consumers both directly and through health exchanges.

Unlike traditional health insurance where consumers typically have no idea how much they will be paying, Oscar attempts to bring transparency to its customers using technology.

A user can visit the Oscar website or mobile app, enter in his or her conditions and symptoms, and receive a list of primary care physicians or specialists along with estimated costs. Furthermore, customers can even call in for unlimited free consultations with physicians who can prescribe medications.

While Oscar is still not profitable, it will be interesting to see if its business model can disrupt the traditional players and reform one of the largest and most complicated industries in the U.S.


thezebraFounded out of Austin, TheZebra is an auto insurance comparison engine, which compares estimated quotes from different car insurers for users – kind of like for car insurance.

Users are served estimated quotes with as little as two pieces of information and can try different combinations of inputs to see what factors most affect their rates. All results are anonymous and instant – making it easy for consumers to get real quotes.

The company now compares over 200 insurance carrier’s rates and is a licensed insurance agent in almost all U.S. states. With big names like Mark Cuban and Floodgate as investors, there are high hopes TheZebra will change how people buy car insurance.

This guest post was written by Lingke Wang, currently an MBA student at Stanford’s Graduate School of Business, and co-founder of Ovid. 

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