Assurance — Five Learnings from a Multi-Billion InsurTech Exit

InsurTech has always been a somewhat controversial space, and that has been especially true for B2C distribution.

Proponents of the space highlight the incumbents’ structural inability to provide a 21st century customer experience — while critics point to high customer acquisition costs as a barrier to growth for startups.

In venture, nothing gives a sector more validation than a huge exit. And last week, that’s what happened for B2C InsurTech: Prudential acquired three year-old Assurance IQ for up to $3.5 billion!

In fact, Assurance IQ was one of the fastest-ever startups to achieve a multi-billion exit.

I believe there are a lot of learnings we can take away from Assurance’s rapid success, highlighting key opportunities for B2C InsurTech:

Growth comes from customers, not from policies

For InsurTechs such as Assurance, this insight has always been blindingly obvious. Most incumbents, however, still struggle to transition away from a policy-centric inside-out focus and are unable to engage with consumers as individuals.

Given their internal systems and organizational boundaries, they lack a 360 degree understanding of their customer across lines of business, products, and processes.

Contrasting with the “I switched and I saved” pitch, that so many incumbents have come to rely on, Assurance was built from the ground up as an “engagement platform”, that offers “protection-led financial wellness”.

The company sees each consumer as “wildly unique”, and uses thousands of data points to build plans precisely for everybody’s individual needs and budgets.

The deep insight Assurance has on each each (potential) customer allows them to cross-/ and up-sell efficiently and capture more value from each customer relationship.

The power of data is real

For an industry that is based on probabilities, one would assume that data analytics is at the core of everything insurers do. Yet, the industry is still largely process-driven rather than data-driven.

Assurance, however, uses data science models and machine learning along every step of the customer journey. In the words of co-founder Mike Rowell, the company “(…) relies on series of models that, as the consumer progresses through the process, are really analyzing the consumer and making decisions over what is most likely to satisfy this customer.”

As these models continued to get better and better, the business started its exponential growth.

Technology is a means of empowering people, not of replacing them

The key insight driving Assurance was, according to their founders, the realization that both technology and humans have a specific role in a customer journey.

In the early stages of the journey, technology has an advantage by being able to process far more data points about a consumer than a human can. Towards the end of the journey, getting human advisors involved is a huge driver of conversion.

While the platform makes quantitative decisions consistently and fast, advisors “focus on the soft part of the conversation, making that connection, answering their questions”. Therefore, an Assurance advisor is able to handle far more transactions than what a typical agent or advisor would be able to do.

Other InsurTech CEOs, such as Bought By Many’s Steven Mendel, have made that same point time and again. End-to-end automation is not the future, human augmentation is.

The “Three Ts” of InsurTech investing: 1. Team, 2. Team, 3. Team

To build a scalable platform, InsurTechs need to hire superstars on every level. That’s why people are at the core of my investment thesis.

In the words of the Assurance founders: “When it came to hiring, we really scrutinized every single hire. We looked for absolute superstars and we’ve had great success attracting those superstar engineers and superstar data scientists. As a result, we just have been able to do far more with far fewer people.”

Focus is a better predictor of success than amount of funding raised

One of the biggest urban legends in InsurTech (and in the broader venture scene) is that huge funding rounds equal success. Obviously startups need to raise enough cash to stay in business and reach their milestones. That’s why VCs exist.

However, the fixation on funding rounds that we see in the tech press and on the conference circuit can become a big distraction for founder teams. Too much funding may seem like a luxury problem — it is not.

The startup world is littered with heavily funded companies that lost their focus and their agility and never lived up to the high expectations placed in them.

Who would know this better than Assurance’s co-founder Michael Paulus? He was previously a Partner with VC firm Andreessen Horrowitz.

Assurance did not raise any external equity finance and the company, until now, operated very much under the radar. According to Paulus, it was key to Assurance’s success that the team remained “laser-focused on the mission and the customer from day one and tried to remove as many distractions from those as possible.”