Underwriting A New Future

My move to Insurtech Venture Investing

(Connect with me on LinkedIn)

After a 30 year career highlighted by 5 startups, a Fortune 50 employer, and a wild ride on a unicorn, I am thrilled to announce the next chapter in my professional career — I am entering the world of venture capital at OMERS Ventures. In my new role, my investment focus will be on “Insurtech.”

If you are unfamiliar with Insurtech, consider it the application of modern technology to improve the world of insurance. Insurance has long served as the backbone for global economic growth. But, like other older industries, insurance has not maintained the pace of innovation today’s customers expect. This lag opened the door for many smart outsiders to peek inside and ask “why?” The answers many found are unsatisfying.

Now I am excited to help entrepreneurs with their own vision for advancing the space. We are still in the early innings of what has already proven to be transformational time for the industry. Before I explain my passion for the market, along with where I plan to focus my investing, let me set the stage by first telling you a little more about OMERS Ventures.

OMERS who?

OMERS, or the Ontario Municipal Employees’ Retirement System, is the pension plan for more than half a million Canadians. The firm manages CAD$114B in net assets in various investment vehicles, including real estate, private equity, growth equity, and venture capital. And despite establishing the venture arm over a decade ago, OMERS is the only pension plan in the world that does direct early stage venture investing.

OMERS Ventures’ HQ is in Toronto, with US offices in Silicon Valley and London. The firm is best known for its investments in Crunchbase, DuckDuckGo, Hopper, Shopify, and Wattpad among others. The current fund is US$750M and generally invests in Series A-C with typical check sizes of US$5M-$20M. In the US, we follow a “thematic” approach to investing in markets, including: 1) HealthTech, 2) Enterprise SaaS, 3) PropTech and 4) Insurtech.

OMERS is no stranger to Insurtech. We have a broad representation in the sector including venture capital investments in Wefox and Clearcover and a growth equity position in Ladder Life. We are also about to announce another large venture investment in a tech-enabled Worker Comp insurance play. I am excited to bring the hands-on industry knowledge to the team to bolster our commitment to the space.

From there to here

I first entered the world of Insurtech in 2017 when I was at Comcast Xfinity. I led growth strategy for our Smart Home offering. I believed insurers would be a primary benefactor of safer homes and I spent the better part of that year meeting all the early players in the Insurtech space. What I saw blew me away…

So many passionate entrepreneurs had bold visions for improving the world of insurance. The more I learned, the more I became hooked on the space. I decide to get my P&C insurance license and make the sector my full-time focus. Not only did we choose to partner with Hippo, we also decided to lead its’ Series B. In hindsight, this is where my career in venture began. Being part of diligence for both strategic partnership and investment gave me a unique perspective on the industry and showed me how venture capital can catalyze a nascent industry.

Hippo’s CEO, Assaf Wand, is one of the industry greats. I was fortunate to work with him and his team in these early days. I got to watch first-hand as they challenged every part of the insurance experience — from underwriting to claims. This experience opened my eyes to how I yearned to be on the inside of the Insurtech revolution. Years later, I had the opportunity to join Hippo and see the proverbial making of the Insurtech sausage. Working with the best and brightest, I learned what insurance could be. I saw firsthand how there was potential for improvement with every step, and how we were only at the beginning of change.

I immediately saw an opportunity to further my impact on the sector when long-time acquaintance, Michael Yang, called. I have known Michael since my early days of startups and have admired his no-nonsense and patient approach to investing. I also knew he wouldn’t call me without OMERS having a true commitment to the sector. Here was my chance to double-down my impact on an industry I love.

Why Insurtech?

Never did I imagine that my passions in life would include insurance. It wasn’t until I began to explore the market day-to-day that I realized that insurance is hard not to love. You cannot underestimate the significance insurance has in global growth. The peace-of-mind that comes with knowing you have protection helps us have the confidence to buy a home, drive a car, even start a business. And there are many reasons why insurance is a great space to target and growth:

1. Huge and fragmented market — The global insurance market produces $5.5T+ in annual revenue — $1.28T in billed premiums in the US alone (2020). In the US Property and Casualty industry alone (home, auto, renters, etc.) there are over 6,000 providers. Winning even a small percentage of the base adds hundreds of millions in revenue.
2. Underpenetrated and growing — Although one of the largest industries in the world, many risks are not adequately covered. Some of this “protection gap” comes from a lack of understanding of the buyer. But the nature of risk is also changing. For instance, climate change is relocating the geographical risk of flood and hurricanes; cybercrime and pandemics are suddenly jeopardizing business continuity; and digital assets are largely unprotected by traditional coverages. These emerging risks are yet to be addressed by incumbents.
3. Highly regulated — Insurers are regulated, state-by-state, by a complex set of laws. Insurance regulation focuses on ensuring insurers stay “solvent”, or liquid, enough to pay for expected and unexpected claims. The larger the insurer, the more oversight you receive as the risk of failure is greater. This makes it harder for big players to lead innovation.
4. Tremendous tech-debt — Insurers were the first to adopt computers in their early days. These systems are complex, with significant custom code and institutional knowledge built in over the years. As these systems began to support hundreds of thousands of customers upgrading them became more challenging.
5. Seems boring… to the outsider — Let’s be honest, the insurance industry suffers from an image problem. Incumbents have found that attracting top tech talent into the sector has been challenging, especially as markets with glitz and glam like SaaS, Fintech, Crypto have boomed.

My investment focus

Insurance is a big industry, and there are so many areas of interest. Here are some areas I plan to focus on — at least for now. And future blog posts will explain each in more detail:

1. Coverage + Enabling Technology — The insurer traditionally pays a claim after a loss. Today’s Insurtechs are challenging that approach by bringing “proactive loss avoidance” tools and technology as part of the offering. The challenger’s focus is to better assess and manage risk before it happens. I like to think of it as a risk solution versus a loss product.
2. Embedded Coverage/Alternative Distribution — People are largely under-covered from risk, and one of the most exciting concepts technology is enabling is alternative distribution that matches the need. The TL;DR is when you buy something, insurance could come with it. For example, cancellation coverage offered with an airline ticket or a new car that comes with optional insurance coverages.
3. Emerging and Specialized Coverage — As I mentioned above, the world faces new risks. To underwrite these risks, you need expertise. Every sector of insurance is seeing new and/or evolving risks and specialized products are needed to ensure full coverage.
4. Parametric Coverage — Insurance claims can be messy, and the industry suffers from murky response in time of need. Parametric coverages may be a key approach to filling the coverage gap. They feature fixed payments and “triggers” are deterministic and irrefutable. For example, earthquake insurance that pays $5k within 24 hours when a national seismometer in your neighborhood reads 7.0 — no questions asked about damages.
5. Infrastructure/APIs — From new data sources and advanced APIs, this broad category covers all the tech focused on improving the insurance experience.

Moving forward

Most of my professional career was as an entrepreneur. I know firsthand that innovation happens best when we all work together — investors, founders, customers, etc. I plan to be one of these catalysts by regularly sharing my thoughts, ideas and beliefs on where we need to go as an industry. I hope you join me in making this happen! And if you have an idea you want to share, please engage me at any time — dwechsler@Omersventures.com. And please connect with me on LinkedIn!