Unlocking the insurance distribution marketplace

Insurance is a peculiar industry. No one has ever lined up to buy insurance, but it is a key component of protecting our goods, interests, and lives. Insurance carriers spend billions of dollars per year on marketing but turn down nearly 40% of the customers who come looking to buy a policy. Unlocking the distribution opportunity and enabling insurers to always say yes requires connection. It requires building new infrastructure. And we believe it requires a solution like bolttech.

What Insurers Want

Insurers really want to do two things: 1) write as large a book of business as possible and 2) minimize the overall risk associated with their insurance policies.

While the former prompts the insurance carrier to get in front of as many people as they can, the later results in the carrier being selective with whom they choose to underwrite and offer insurance to, as ultimately insurance carriers function as major asset managers, managing risk and deploying capital.

For example, a large insurance carrier would love to service the ~40mn people in California but a single insurer cannot responsibly take on all the concentrated risk in one state prone to natural disasters.

This tension between wanting to write as many policies as possible and needing to minimize risk is the crux of why insurers turn away so many potential customers. No carrier has the appetite to underwrite every consumer’s risk profile, so for the last 50+ years the industry has been forced to accept that if you could not underwrite the consumer yourself, there was no way to monetize or retain that relationship.

The Distribution Game

Owning the customer relationship has always been crucial in the insurance market. As the industry moves towards more digital distribution, the problems of unserviceable customers and poor experiences become more pronounced, and it has never been more important for insurers to offer more efficient, accessible, and bindable policies online.

Early attempts at digitizing insurance have been hamstrung by a lack of core technology infrastructure, and merely being online is not enough to satisfy the two incentive constraints facing insurance carriers that we outlined above.

The inability to service all the customers that a carrier acquires is especially relevant when we look at the customer acquisition costs and lifetime value of a customer.

In 2018, P&C insurers spent $6.7bn on advertisements, accounting for about 3% of all U.S. advertising expenditure. These insurance carriers are willing to spend so much money on marketing because insurance is a low frequency purchase with high retention rates. Insurance is one of few products nearly everyone owns (and in many cases is legally required), resulting in high revenues and massive advertising budgets.

Additionally, insurance customers tend to have a high lifetime value, so it is vital for carriers to be top of mind when the purchase decision comes up. Yet, despite this emphasis on winning infrequent customer purchases, the great irony is that insurance carriers turn away 30-40% of the customers who come to them looking to buy insurance.

These customers are turned away because the insurer is either unable or unwilling to underwrite those specific customers’ risk. In the end, the customer leaves unsatisfied, having wasted a bunch of time on the phone and filling out forms, and the carrier has spent money acquiring the customer only to lose the relationship and any potential revenues.

In an increasingly competitive and digital insurance market, monetizing and maintaining relationships with all the customers you acquire is a competitive advantage and significant value unlock.

How bolttech Changes Distribution

bolttech is building the piping that allows distributing carriers, brokers, and independent agents to quote and bind insurance products underwritten by other carriers seamlessly.

In building these connections between insurance carriers, bolttech enables insurers to offer products that they do not carry, allowing them to keep the customer in their ecosystem and earn broker fees for binding the customer.

This is a fundamental shift in insurance distribution as it allows carriers to always say yes to the customers they acquire, while intelligently addressing the incentive constraints facing carriers.

By joining bolttech’s insurance marketplace, carriers tap into the largest insurance exchange in world, granting them access to the millions of customers they would like to underwrite, but failed to acquire themselves. Additionally, by using a policy underwritten by another carrier, distributing carriers can own the customer relationship, bundle their own policies, and collect commissions on the products they place.

Moreover, bolttech integrates directly into the carrier’s underwriting engine, allowing them to surface bindable quotes instantly. This is a huge unlock in the industry as it greatly streamlines the process of getting insurance from a few days to a few minutes.

These gains in distribution efficiency are a key enabler for embedded insurance, as the distribution model continues to evolve beyond traditional online sales. We have seen the power of embedded insurance with our portfolio company Better and believe embedded will be a core distribution channel over the next decade. However, to have a truly seamless customer experience, embedded insurance will need a full-stack solution like bolttech to find, quote, and bind insurance for every customer every time.

The Future of Insurance

Building a successful marketplace in insurance is no short order – significant inertia exists in the market, and it requires reaching a critical scale before the network becomes valuable to all participants. bolttech has quietly built the largest exchange on the planet, amassing over $5bn in annual premiums from over 150 carriers across 5,000+ product and market combinations.

The Company combines this with a truly turn-key insurance solution, enabling any market participant, from carriers to fintechs, to access the insurance markets and engage their customers at their point of need.

In so doing, bolttech is unlocking the next generation of embedded insurance, setting up the platform on which future insurance products can be built, and importantly, scaled. We believe bolttech is the platform to bring fully enabled embedded insurance to the broader fintech market.

Under the hood, embedded insurance is risk-based, complicated, and requires massive scale. bolttech has built that scale to tap into the world’s largest insurance carriers and is packaging it up in a developer friendly way. As the Company continues to streamline the insurance distribution model, we believe the platform is well on its way to becoming the critical infrastructure layer for the insurance industry.

We are incredibly excited to partner with Rob Schimek and the entire bolttech team on their journey to connect and improve the accessibility and efficiency of insurance around the world.