Electronic Chat with Matt Perlman, Partner, IA Capital Group
Laura Mazzuca Toops | September 08, 2020
Matt Perlman is a partner at IA Capital Group, a New York-based private investment firm dedicated to partnering with innovative entrepreneurs in venture and growth capital investments in insurance technology and financial technology.
In general, how would you describe the current landscape for insurtech investment?
The investor landscape is very favorable from the perspective of insurtech companies. The capital markets are definitely open, a function of the fact that there’s a lot of capital available that’s mandated to invest in insurtech. Interest is high and there have been a number of successful IPOs, which is encouraging investors to be aggressive.
The last decade has seen lots of interest in investing in insurtech, and this still appears to be the case. Why does this market segment seem to be politics-, recession-, and COVID-proof?
You can reasonably ask this question about the market as a whole, but one aspect of it is that the insurance industry is less directly tied to the economic system than other industries – it’s in many cases a non-discretionary product that businesses and consumers need no matter what. Although some lines may be more negatively impacted than others, others have been positively impacted by COVID, such as life insurance; and auto insurance was seeing significant improvements in loss ratios because people weren’t driving as much during the lockdown.
In terms of insurtech in particular, the COVID environment has actually been actually a boon to a number of themes we’ve already been developing prior to the shutdown that have only gained momentum. Digital distribution--buying insurance products through mobile and digital channels--has significantly accelerated, as well as the idea of remote underwriting and claims adjudication, for example virtual home inspections through drone or aerial imagery, or photos or videos collected by homeowners through their smartphones using AI and image recognition to simulate or improve upon insights from on-site inspections. We’re seeing similar themes in life insurance underwriting. While there’s an increased demand for life insurance, it’s harder to underwrite policies in the traditional ways, through in-person exams and lab-based analysis, during COVID. This has spurred an interest by life insurers to underwrite more policies based on electronic medical records or other forms of real time data such as wearable devices. Insurance companies were already interested in all of these methods, and now they’ve become an imperative.
What are the key attributes of a startup that you look for when deciding to invest?
A lot of the same things that most VCs look for – a large addressable market with significant pain points acting as near term catalysts for adoption, strong product-market fit as validated by material revenue traction with paying customers, management teams with industry-leading capabilities and experience, teams with a lot of relevant industry experience and credibility. The insurance industry is not going to change overnight. Startups need some understanding about why the industry is structured as it is, as opposed to someone who’s never worked in the industry before and just thinks insurance should work differently. We look for that insider’s perspective.
We also look for strategic relevance for our limited partners, so in addition to being a good financial investment, companies we invest in need to be operating in an area that aligns with areas that our investors are focused on. Our clients look to us not only as stewards of their capital, but also a source of strategic insight and referrals to potential partners, vendors, or acquisition targets down the line.
How many investments do you typically make in a year?
We don’t want to spread ourselves too thin, so our annual investments are in the single digits. Our philosophy is that we’re industry specialists, we bring a lot of understanding to the table so we want to leverage that as effectively as we can and do everything we can to help our portfolio companies succeed.
Although we have raised multiple funds in insurtech across all lines of business because of the high level of activity in insurtech investment, we’re very busy; but we really try to make sure we’re appropriately resourced for the size of the portfolio we have.
We try to be selective about investments because of our two-sided strategy: startups on one side, insurance investors on the other. To make sure our business model works for both, we make sure we’re spending adequate time helping portfolio companies succeed, which also means making connections with incumbents in the industry, including our clients, whenever possible. They get strategic value from our seeing every relevant opportunity, and because we have strategic relationship with incumbents, it makes us more attractive to startups. It creates a flywheel effect.
What do you see as some of the outstanding investment moves in insurtech over the past 6 months?
Some high-profile examples include last fall’s acquisition of Assurance IQ by Prudential, which was emblematic of a change in the role of the agents, making it easier for them to work flexibly and be more time efficient and successful with sales by using big data. Some have analogized it to the Uberization of the agent force. It was a great outcome for Assurance IQ and an important deal for the industry.
The general areas we’re excited about investing in include companies that embed insurance offerings into other industries, such as partnering with someone in the mortgage industry to market homeowners insurance since it’s a natural opportunity to talk about insurance to someone who’s buying a home. These partnerships use technology to find the customer at highly relevant moments and using somebody else’s customer base to distribute products rather than the traditional agent-based distribution or expensive direct-to-consumer marketing. E-commerce is another great example of the opportunities in embedded insurance plays, for example our portfolio company Protecht.
We’re also interested in companies that are using computer vision and AI for remote underwriting and risk management solutions across various lines; the interoperability of medical records for life insurance underwriting; data analytics for claims management; customer service and other process automation, innovative solutions for guaranteed income in retirement, tech platforms that augment the capabilities of human agents to help them stay competitive in the digital world, and climate and weather risk solutions such as our recent investment in The Demex Group. Lastly, we are proud to be supporting Marble as they build the insurance industry’s first loyalty and rewards platform, which is a white space we’ve been thinking about for some time. These are just a few of the many insurtech themes we are paying attention to.
Where do you see the market heading into 2021?
Insurtech will continue to be a very active space. A lot of capital has been raised from both financial and strategic investors, earmarked to be deployed into insurtech, so that’s a lot of capital supporting high valuations. This will probably continue into 2021, but there will come a point where the more high-profile insurtech deals become the less viable business models will be exposed and that could lead to a little thinning of the herd and more selectivity on the part of investors. But when that happens is anybody’s guess.
Much of the innovation in insurtech has focused on “disruption.” Does this attitude overstate the need for change in the P&C insurance industry, and what role does “traditional” insurance play in insurtech innovation?
Looking at a paradigm of complete disruption overstates the need for change. Insurance as we know it has been around a long time; the notion of using data to underwrite insurance is not new, and insurers are looking to serve their policyholders and pay claims. They’re not evil, monolithic entities that are too incompetent or stubborn to change. There is a strong interest in innovation. There are key technical barriers to changing the way they do business, but the industry will adapt. Any new insurtech entrants are going to need to grapple with the role of the incumbents and intermediaries like agents, which we don’t see going away any time soon. They have a trusted relationship with customers. Yes, there are important areas where things should evolve, but not this across-the-board change that will sweep away everything as we know it.
The way traditional products are distributed is likely to change. New paradigms are emerging for distribution, whether it’s digital direct to consumer brands, embedded strategies where you partner with a company in another industry to offer insurance products at relevant moments, bringing the traditional insurance agency into the digital world, or new tech-enabled models for human agents. All these concepts have legs, but they’re still rooted in traditional insurance.
Product innovation is going on, too. Obvious examples are usage-based auto insurance, telematics-based underwriting or other models that pull data from connected devices, and emerging risk categories like cyber risk, pandemic coverage, or climate change. But by and large, it’s mostly evolution. We expect the insurtech world and the traditional insurance industry to continue to converge as we have observed with fintech and traditional banking.
Are we reaching a tipping point in the insurtech investment arena – do you predict a decline in investments in the near future?
Yes and no. The market has gotten crowded in a lot of areas and it’s possible there will be some sort of pullback from that. A lot of companies are trying to imitate Lemonade’s success for IPO, and that could have a cascading effect throughout the industry and make it a little harder to get funding if there are high profile failures; that in turn will make it harder for some insurtech companies that are not truly differentiated to survive. But the best companies in any given area will be successful no matter what point of the cycle we’re in.
- Getting Creative to Hit COVID Curveballs Out of the Park
- Electronic Chat with Eugenio Gonzalez, Plug and Play
- New Report Projects Global Insurtech to Grow by $21 Billion During 2020-2024
- The 2020 Virtual Event Wasteland
- Insurtechs, Investors Optimistic About Post-COVID Future, New DIA/McKinsey Study Finds
- Finding Grandmas
- No Code / Low Code: The New “Shortest Route” In Insurance Delivery
- Are You Addicted to Copy-and-Paste?
- Electronic Chat with Nino Tarantino, CEO- Americas, Insurance and Mobility Solutions (IMS)
- Driving Life Insurance:Tech Alone Won’t Solve Business Problems
- Electronic Chat with Robin Roberson, Managing Director, North America, Claim Central Consolidated
- How Do You Make It Happen?
- Electronic Chat with Jason Liu, CEO, Zywave
- New Partnership Models Take Program Business to the Next Level
- New Study Finds Less than Half of Consumers Trust Insurers to Respond to Their Needs
- Electronic Chat with Andrew Mauritzen, CFO and Head of Insurance Industry, Exactuals
- You Want Us To Do WHAT For Free?
- Electronic Chat with Evgeny Aleksandrov, Co-founder and CEO, Pilotbird
- Electronic Chat with Chris Cheatham, CEO, RiskGenius
- New MIT Sloan Study Finds Few Companies Gain Big Benefits from AI
- The September/October ITA Pro magazine is here!
- “Being Right” is Just the Start of the Battle
- Electronic Chat with Amit Ranjan, Executive VP and CAO, Xceedance
- Planning for Your Business and Tech Future: Strategies, Plans and Budgets for Rapid Transformation
- Electronic Chat with Jimmy Padia, Founder and CEO, Floatbot
- Gelato with Dots and Sprinkles
- COVID-19 and the Insurtech “Junk Drawer”
- Even “Change” is Different Now. Your Strategic Planning Needs to Be Too.
- The Road Ahead for P&C Insurers: How to Understand Customers Better and Navigate the Post-COVID Insurance Market
- Electronic Chat with Jake Tamarkin, Co-founder and CEO, Everyday Life
- Strategic Planning in the “New Normal” Digital Era of Insurance – Your Next Move
- Insurer Tech Investment Priorities See Major Shift in a Post-COVID World
- Plug and Play Selects 25 Insurtech Startups for Winter Batches
- Digital Transformation – A Top Strategic Priority and New Reality
- Four Steps to Successful Migration of Insurance CCM Applications
- COVID-19 Accelerates Insurance Digitalization to Meet Customer Demand: World InsurTech Report 2020
- Electronic Chat with Greg Williams, Co-Founder, President & CEO, Acrisure
- Electronic Chat with Matt Perlman, Partner, IA Capital Group
- Insurer Digitalization: Are you a Competitor or a Laggard?
- Leaders are Leading and Creating the Future of Insurance Distribution
- 3 Things You Need to Know About No-Code
- Electronic Chat with Adam Kiefer, CEO, Talage
- Underwriting in 3D: Using Data to Adapt and Improve Life Insurance Sales
- Getting Past the "Gelato Syndrome"
- Insurers Know CX/UX is Important, but Don't Agree on Execution, Study Finds
- Electronic Chat with Steve Lekas, Branch Insurance
- How AI Can Attract Millennial Talent to the Insurance Industry
- Preventing Data Breaches
- A New Boom for Life Insurance: Shifting Away from the 250-Year-Old Policy Transaction
- Electronic Chat with Ty Harris, Founder and CEO, Openly
- A Digital Wildfire Creates a Burning Platform for Digital Insurance Business Transformation
- Digitalization, COVID-19 Spurring More IT Investment in Cybersecurity
- Electronic Chat with Michael DeGusta, CEO, ClarionDoor
- U.S. Consumers Significantly Underestimate Flood Risk, New Survey Finds
- The Future of Insurance: Opportunities in Ecosystems
- Electronic Chat with Todd Greenbaum, CEO, Input 1
- Majesco to be Acquired by Thoma Bravo
- The Evolving Role of Managing General Agencies
- Electronic Chat with Char Hu
- Electronic Chat with Allan L. Egbert, Jr.
- Electronic Chat with Christopher Tramontano and Zbigniew Gawienczuk
- Data Science is Gelato
- Insurance Innovation: Alive and Kicking
- Independent Agents Divided on Digital Experience, New Survey Finds
- Electronic Chat with Michael Jones
- Electronic Chat with Paul VanderMarck
- As Auto Insurance Premiums Shrink, Insurers Need Mobility Ecosystem, New Study Finds
- Property & Casualty Insurers Raise Digital Games as COVID-19 Elevates Customer Expectations, J.D. Power Finds
- Electronic Chat with Bobbie Shrivastav
- Meet the Board: Marissa Buckley
- Big Data and Insurtech: A Carrier Perspective
- Traditional Insurers Need Open Ecosystems, Partnerships to Remain Competitive, CapGemini Report Finds
- Electronic Chat with John C. Siegman
- 4 Ways AI is Empowering Insurers During COVID-19
- 6 Big Changes to Insurance from the COVID-19 Crisis
- Electronic Chat with Christopher Ewing
- Independent Agency Staff Morale High During COVID-19, New Survey Finds
- Electronic Chat with Brad Epker
- Tapping AI to Improve Policyholder Experience
- Electronic Chat with Manisha Bhargava
- ITA Pro Magazine, March/April 2020
- COVID-19 a Game Changer for Workers’ Comp
- Electronic Chat with Steve Comer
- COVID-19 Pandemic Forces Cancellation of ITA LIVE 2020
- Leveraging Digital Resources in the Time of COVID-19
- Electronic Chat with Robert Hartwig on COVID-19 and Insurance
- Celent Study: Most Small Businesses Still Unclear on Importance of Cyber Insurance
- The January/February 2020 ITA Pro is here!
- Deloitte: New C-Suite Roles Mean More Opportunities for Women
- Electronic Chat with Pankaj Parashar
- Electronic Chat with Tara Kelly
- Electronic Chat with Chuck Wilson
- ITA, InsNerds Collaborate to Enhance ITA LIVE 2020 Content and Coverage
- How SMBs Can Compete in Digital Ecosystems in the 2020s
- 4 Ways Insurance Can Prepare for New Data Privacy Laws
- Brewer Lane Ventures Launches and Hires Insurtech Vet Martha Notaras as Managing Partner
- 2020 GIA Cohort Launches on January 14
- The November/December 2019 ITA Pro is here!
- Electronic Chat with Joshua Snead
- Electronic Chat with Wendy Aarons-Corman
- Simplifying the Move to a Third-party Print Provider
- Take a Business-Driven Approach to Continuous Improvement for Core Systems and Processes
- Electronic Chat with Ron Glozman
- Guidewire’s Data Guru Mike Byam on How Insurers are Using Internal and Third-Party Data
- Electronic Chat with Russ Bostick
- Electronic Chat with Rock Schindler
- Electronic Chat with John Siegman
- Electronic Chat with Martin Burlingame
- Insurtech Landscape 2019: Top 5 Takeaways
- Grinnell Mutual Tackles Massive Transformation -- in Stride
- A Candid Conversation with Paul Mang
- SageSure Insurance Managers Improved Competitiveness by Consolidating Payments to a Single Digital Platform
- Digital Does Matter in Insurance-- And Insurers are Missing the Mark
- The 22nd-Century Insurer: Taking a Cloud-First IT Approach
- The September/October 2019 issue of ITA PRO magazine is now available in digital format here:
- ITA Pro Magazine May/June 2019
- Spotlight on the 2019 IASA Conference
- ValueMomentum Selects Erie as Site of Regional Development Center
- Capgemini and Majesco Become Alliance Partners
- Electronic Chat with Dr. Dan Shoham
- Electronic Chat with Todd Greenbaum
- Martha Notaras: The “Outsider” with an Amazing Inside View
- Electronic Chat with Larissa Tosch
- Martha Notaras Will Join ITA LIVE 2019 as a Keynote Speaker
- Five Things to Consider When Evaluating Your Cyber Risk
- ITA Pro Magazine, January/February 2019
- Synergy Between Insurers' IT and Analytics Teams Key to Operationalizing Insights, Says Novarica
- Major Ransomware Attack Could Hit U.S. with $89B In Economic Damages
- ITA Announces 1st of Three Keynote Speakers at ITA LIVE 2019
- Electronic Chat with Jeroen Morrenhof
- Legacy Systems Are Dead. Really? Don't Count On It.
- Now Accepting Nominations for the 2019 ITA Bridge Awards
- It's time to register for ITA LIVE!
- Registration is Now Open for ITA LIVE 2019!
- What to Expect from a Digital Experience Platform Implementation
- ITA Pro Magazine September Edition is Now Available
- It's National IT Professionals Day
- Save the Date for ITA-LIVE 2019
- OneShield Software and UrbanStat Work Together to Improve Real-Time Analytics and Risk Decision-Making
- ITA LIVE 2019 - SAVE THE DATE!
- Insurance Technology Association Announces New Editor-in-Chief
- August 2018 Edition ITA Pro Magazine is Now Available
- Enterprise Architecture in an Agile World
- Top 10 Tips for Securing Your Mobile Devices and Sensitive Client Data
- Industry Insight: 4 Global Insurance Trends in Digital, Data, Content Services and Security
- Diving Deeper into Prioritizing Your Strategic Digital investments
- Why Content Rules
- How Mass Personalization Will Open the Small Business Benefits Market
- At Year End 2017, Will Your Organization Be Protected from Cyber Risks?
- Do Insurance Bots Dream of Mitigating Risk?
- Conditioned to Respond
- Managing & Mobilizing Insurance Data in a Connected World
- Race to the Finish Line
- New Tools, New Opportunities in Claims
- ITA LIVE: Reaching Insurance Industry Crossroads
- Advice to Insurance IT Leaders: Keep Your Eye on the Ball
- New Date, Venue for ITA LIVE 2017
- Guidewire Makes Major Push to Small and Midtier Market by Acquiring ISCS
- Insurance Disruption is Happening Right Now
- Insurity Adds Strategic Investment Partner, General Atlantic
- Beyond Transformation: The Convergence of Finance, Risk, and Actuarial Functions
- The Rapid Evolution of Consumer Protection Regulation
- Talent Hunt: Finding, Attracting, Retaining Top People
- Insurers Flexing Their Distribution Models
- Technology Driving Disruption in Insurance
- Fear of ‘Next Bubble’ Challenges Life, Annuity Carriers
- Technology Allows Commercial Lines Insurers to Stand Out
- Single Sign-on Viewed as Biggest Tech Challenge for Agencies
- ISCS Observes 20th Anniversary; Scurto Predicts Major Changes Ahead
- Policyholders and Their First Impressions
- Progressive Making Progress on the UBI Front
- High and Dry: Insurers Search for Disaster Recovery Plans
- Insurers Sign The (Un)Dotted Line
- Reflections of a Retired Insurance CIO
- Mobile Device Management Just One Answer to BYOD Issue
- Lessons from GEICO and Progressive on Winning the Critical Buying Stage
- You Are a Target for a Cyber Attack
- Web-based Systems are the Next Evolution in Claims Technology
- Gaining a “Wow” Experience from Web Users
- Time to Shift from Business/IT Alignment to Business/IT Alliance
- Healthcare Insurers Changing to Consumer Model
- Organization is the Key for Selecting Software Vendors
- Analysts Expound on the Needs of the Mid-tier Insurance Market
- Finding the Cure for Obamacare’s Website
- New Software Solutions Benefit Insurers on the Inside and Outside
- Products, Market Impede Investment in Systems for Life Insurers
- Combatting Cyber Threats: Predict, Prevent, Persist
- The Future of Telematics Heads Beyond Insurance
- The Shame in Cyber Security Lapses
- Building Policy Administration Systems for the Future
- Insurers Look Into The Eyes of Their Policyholders
- It’s a New Dawn for the ITA
INSURANCE IT NEWS
- Electronic Chat with Eugenio Gonzalez, Plug and Play
- Nexilis’ Distribution Platform Selected by W.H. Greene and Associates to Drive Underwriting Transformation
- Breeze Adds Critical Illness Insurance to Digital Platform, Growing Partnership with Assurity Life
- Buckle Appoints Sharon Fernandez to Head of Insurance
- InsurTech NY Announces Global Early-Stage Insurtech Competition
- Altshuler Shaham Selects Sapiens for the Operation and Automation of its Provident and Pension Funds
- NetVU Announces Plans for 2021 Accelerate Conference
- Openly Secures $40M in Series B Funding Round to Accelerate Rapid Growth
The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
ITA LIVE 2020
ITA LIVE 2020 –SAVE THE DATE!
April 5th – 7th, 2020
The Diplomat Resort
Become a member today to receive updates – www.itapro.org/MR
BLOGS AND COLUMNS
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits... READ MORE
With stagnant growth and lingering low interest rates, the life insurance industry faces a challenging future... READ MORE
Finding insurance carriers willing to write commercial lines risks has always been a challenge for producers... READ MORE
As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing... READ MORE