“I try not to get involved in the business of prediction. It’s a quick way to look like an idiot.” ~ Warren Ellis

I don’t like to make predictions, but the amount of foolish predictions that have been flowing from the Silicon Valley self-appointed insurance industry “disruptors” has forced my hand.

While I may be motivated by some paternal instinct for our shared insurance industry, I genuinely believe my experience taking Effective Coverage from insure-tech startup to established renters insurance niche leader provides a unique and realistic perspective on what the future may hold for the insurance industry.

Those of you who have actually been in the insurance industry know that firms have driven methodical and deliberate investment in technology innovation for years.  Evidence of this investment can be found in a report by research and consulting firm Celent, which estimated insurance IT expenditure at $174.9 billion in 2015.

That is real capital deployed by real leaders using all the tools at their disposal to innovate.

Innovation will continue, and new entrants will contribute, but those new entrants should be aware of three big trends that will materialize in the next 12 months.

SEE ALSO: Why Silicon Valley Believes the Insurance Brokerage is Broken

1) Venture capital firms will NOT pick insure-tech leaders.

Leaders will be determined by the firms’ abilities to develop strategic partnerships and replicate on proven patterns of success. The ability to raise $14 million dollars in venture funding in 12 months is in no way an indication of an entrepreneur’s ability to lead or even build a business.

Insureds deserve a better customer experience and transparency, but the complexities of insurance demand much more than just money.

According to research conducted by CB Insights, there was $4.08 billion in VC investments in insure-tech companies from 2011 to 2015.  While $4.08 billion is a lot of money, it is still billions less than the $6.59 billion in net income that just one leading insurance brokerage, Marsh & McLennan, enjoyed over the same period.

Over the course of the next year, the firms that have been driving innovation for decades will focus their significant capital resources and attention on utilizing available technologies to hone their product distribution and value propositions.

[tweet_box design=”default” float=”none”]Don’t fool yourself into believing $10M in venture capital provides a meaningful advantage.[/tweet_box]

SEE ALSO: Millennials don’t know you. But they’d love you if they did.

2) Carriers will focus on their current partnerships that are driving innovation.

Carriers have been having conversations for years at every level of their organizations to determine the most efficient ways to reward the firms that are growing, innovating, and providing real value to consumers. They have rewarded their partners who have been delivering better than average results through innovations.

We will see more brokerage firms like Lockton making strategic investments in divisions focused on transacting business in digital platforms.

Carriers, like Chubb, took a 24% stake in CoverHound, who has been executing at a high level for over 6 years.

Yes, there have been plenty of me-too copycats popping up over the past 18 months, but those firms that have current healthy distribution models will find their partner carriers eager to help them drive innovation and growth.

Those who lack experience and the infrastructure to support their goals will need to find partners who can bridge the gap.

3)  Carriers and brokers will pay to secure their the top talent.

According to the U.S. Department of Labor, the U.S. insurance industry employed 2.5 million people in 2015.

It is a mistake to conclude that insurance executives are clamoring to join your startup based on a sample of a few recent headlines.

We have been a handful of insurance executives join insurtech startups, but a “migration” implies more than a handful. I resigned from Chubb in 2008 to launch Effective Coverage, and that was unheard of at that time. “Startup” was not the buzzword it is today.


While insurtech startups have certainly benefited from a change of attitude, a migration of top talent falling at your door will not occur.  In the same time frame that a few insurance veterans left to join startups, many more left to join Chubb, AIG, and Willis.

Expect to find the best and brightest harder than ever to convince to join your firm.

Most importantly, there has never been a better time to be in the insurance industry.

We are entering a golden age, and our insureds will thank us for the advice we provide and the tools that we use to make the insurance transaction as transparent and efficient as ever.

Good luck!

Eric Narcisco

image credit: Bigstock.

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