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Why the largest insurance companies are pouring into Silicon Valley


NewsHubHave you ever wondered why the word “farm” appears so frequently in the names of American insurance companies? It stems from the dissatisfaction farmers felt after being charged the same insurance premiums as city dwellers, despite leading far less risky lives. This pushback led to a monumental shift in the way insurance companies viewed and protected their customers, as organizations quickly realized that people who face less risk should be entitled to preferred rates.
The world continues to change, and insurance companies realize it’s time to catch up. In just a few months, 30 of the largest insurance companies have joined Plug and Play’s Insurtech program for one-on-one access to today’s hottest insurance-focused startups, showing they are ready to innovate the industry.
But to really understand where the disruption is stemming from, we first need to remember that at its foundation, the insurance business comes down to managing risk and customer service. That is very broad, so to make things easier, we bucketed the areas ripe for disruption.
Today’s insurance companies built empires on traditional business models that have not changed in decades, and thus have become extremely inefficient. On the other hand, today’s consumers have evolved greatly, quickly adapting to new products and services being released daily. Service providers with slow response times or clunky interfaces have no place in a world where a taxi can be called within minutes of a single click. In working with today’s insurance giants, we have identified the main areas of improvement in four categories:
Improving user experience is without question a top priority among industry leaders. User experience touches nearly every facet of a company, especially within an industry as service-focused as insurance. Startups are improving user experience by leveraging technologies like video chat for instant claim processing, bundling services for streamlined policy management, using drones to make underwriting quick and painless, employing chatbots for better customer service or adding devices to cars and houses to instantly notify authorities in the case of an emergency. It can take 10 years to build a good reputation — and 10 seconds to destroy it. Insurance companies help consumers at their most vulnerable moments, so it is imperative that the customer-facing part of the business should be as seamless as possible, or a lifelong customer will be lost over a single bad experience.

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