What Cyber Security taught me about Life Insurance
I have been enamored with both insurance and cyber security startups as an investor over the past 2 years but have always assumed that these were two separate interests of mine that managed to find a random meeting point in my life. I have been extremely fortunate to be an investor in Cirrosecure (acquired by Palo Alto Networks), Prevoty and InAuth, three thriving startups which I believe will form the pillars of cyber security in the future. In late 2014, I went on a hunt to find a startup that was keen on disrupting the online insurance market and thanks to my good friend Roseanne Wincek, I came to know two eager and highly talented founders, Jennifer Fitzgerald and Francois de Lame who were trying to disrupt the online insurance distribution model through their platform called PolicyGenius (you should Google the original name they came up with). After a year together, 4 board meetings and an additional $20M in the bank, I am blessed to have the both of them as friends and chalked it up to another fortunate chapter in my book of life.
So it was with interest that I read the TechCrunch article on Cockroaches vs Unicorns: The Golden Age of Cybersecurity startup as part of our daily reading as a team. Interesting data — expected that. But insightful? Didn’t see that one coming. Yes, the article was supposed to discuss the future of the cybersecurity ecosystem, but what stood out were the parallels they drew between cyber security and life insurance. The two disparate interests I had were not so anymore. While insurance and cyber security are two very different industries, the purpose they serve, value to the customer, the way they should be sold and what makes them so compelling as investments are strikingly similar. That “Aha” moment made me realize how I should be helping my other portfolio companies and improve my judgment as an investor
1. Consumer education needs to be data-driven but stay away from threats
I find it hard to do business with people who sell based on fear, “What will happen to your kids when you pass away?” or “Think of how much money you could lose if your servers went down for a day”. I am not asking you to downplay the risk factors but make your argument using actual data, probabilities and honest counsel. 83% of Americans don’t buy life insurance as they believe it is too expensive. $400 is what most Americans believe a 20-year, $250,000 level term life policy for a healthy 30-year-old costs annually. It actually costs $150 and more than half of that 83% would consider it to be affordable. Would that change your opinion on getting a life policy?
2. Choices are a good thing, but today’s consumer is overwhelmed with choices and desperately needs guidance
There are 18 million ‘stuck shoppers’ in the US who want life insurance but have been derailed in the shopping process largely due to the overwhelming number of options. The most common words you would hear if you attend a meeting with Chief Security Officers (CSO) is cyber threats and they want to know how to deal with it. Like life insurance shoppers, they are being approached by different software vendors who all sell the promise of helping them cast away all their worries. The 3 cyber security startups I invested in are all building a product in response to a specific, yet sizeable threat and have made that crystal clear in their messaging. Take Prevoty for example, organizations these days run multiple applications and the number will continue to grow. Instead of having a one size fits all security solution, organizations now need tailored security platform for each of their applications. Guiding the CSO to understand the problem, its magnitude and how your platform will fix that is what Prevoty does well.
3. “You can check-out any time you like, but you can never leave! “
Hotel California is one of my favorite songs of all time. I remember trying to learn the riff on the guitar back in high school, but could never quite master it. Perhaps not being able to leave might be too harsh a way to describe insurance and cyber security startups, but in a way it is true. Technological changes notwithstanding, insurance and cyber security is something that individuals and businesses will always need and will always pay for. The lifetime value of a customer is incredibly long and it makes no sense for customer who has been diligently paying their monthly payments to give up their insurance policy or security platform as if something goes wrong thereafter, then all the previous payments would have gone to waste. I challenge myself and entrepreneurs out there to create business models where the consumer is incented to continue with their monthly payments.
Ok, I shall end my post with a honest confession. I still have not bought a life insurance policy. I know, i know… and that is one of the first things on my ‘to-do’ list for 2016.
Sources: TechCrunch, LIMRA