TigerTech Interviews: Gretchen Hayes — Sandbox Industries
Each month TigerTech dives into some of the most talked about trends, technologies and movements across the InsurTech space, providing our insight and opinion on how they’ll impact the future of our industry.
In this edition, we look to add further insight by bringing in additional expertise in our newest feature: TigerTech Interviews.
We are incredibly fortunate to have had the opportunity to spend some time with Gretchen Hayes, Venture Partner at Sandbox Industries, to discuss a wide array of topics across the startup and VC sectors.
In our discussion we received some wonderful insight from Gretchen about what she sees as the greatest challenges the industry faces, the largest opportunities for both startups and incumbents, as well as her thoughts on what the future of the industry will look like.
1. What do you think will have the greatest impact on the industry in the next 5 years (AI, Machine Learning, Blockchain etc)?
There are so many exciting things happening in the industry and lots of bright, shiny objects in the InsurTech toy box. Start-ups in the world of AI, machine learning, deep learning and predictive analytics will definitely have a big impact on the industry. The most valuable data is still a company’s proprietary data but too often it is “dirty” — unstructured, miscoded, incomplete, and disaggregated across business units. Better ways to derive value from existing data plus the integration of external and contextual data (like granular geocoding) will allow a company to see which combination of variables actually contributes to outcomes, like customer retention or loss severity. The entire customer/agent experience from initial engagement through claims can be personalized and elevated as a result. I think specialized domain expertise in this business is also important. Companies that optimize both will gain a distinct competitive advantage.
2. What do you see as the most pressing challenges your business faces in the next 5 years?
For insurers, significant cost must be driven out of the equation. Paper, key strokes and redundancy are the enemy. True transformation to a digital, cloud-based environment is a process that starts with a flexible business model that has the customers’ expectations at its center (not “the way we do things”). External partnerships with InsurTechs can bring sophisticated technology skills to support the model and add innovation, urgency and speed.
For entrepreneurs, the good news is that many companies now actively seek partnerships with InsurTech start-ups. But don’t confuse the size and number of carrier meetings with momentum. The industry is still slow and hard to penetrate. InsurTech innovation centers and incubators can sometimes be expensive “petting zoos” for executives that are eager to learn more but not tasked to do more. Mid-market carriers and super regionals can be great partners for start-ups. They are often more nimble, with engaged executives eager to show results.
3. What is Sandbox Industries doing to respond to the evolving market?
At Sandbox, we think InsurTechs and incumbents need each other.
Sandbox Industries is a Chicago-based venture capital firm founded in 2004. The co-founders, based on their personal experience leading two major companies, launched the firm with the belief it takes the institutional expertise and resources of large incumbent entities combined with the agility and fresh thinking of start-ups to actually fuel innovation within industries. To enable that, Sandbox pioneered a unique approach, the “Collaborative Investment Vehicle,” that integrates large strategic corporate investors into the start-up investing process to share industry knowledge and support business development with portfolio companies.
InsurTech start-ups need more industry insight plus use cases and revenue opportunities with a variety of companies. And incumbent insurance companies value a wide lens on the InsurTech space and the opportunity to invest through an experienced venture capital firm, which should be less risky and require less capital than a solo strategy of independently sourcing, vetting and developing relationships with entrepreneurs.
4. What do you see is the greatest opportunity for the industry?
The industry needs to change its humdrum image and we have to get the word out: it’s a great place to work! This industry needs and must attract an entrepreneurial and digitally savvy workforce. Especially now with the industry at a major inflection point and 25% percentage of executives set to retire, we have the opportunity to re-tool the industry with more talent, more creativity, more women, more diversity.
5. Do you have a prediction for what the industry looks like in 20 years?
As today’s risks are reduced by technology or become much more predictable, many types of insurance will become more about loss prevention rather than loss indemnification. And the industry will be challenged to remain relevant. Regulations, large balance sheets and product complexity have kept disrupters at bay for years. But that will change and the companies that move decisively now are likely to be among the survivors.
Personally I get excited about the concept of “connected life” coverage. Home and auto sensors and wearables will aggregate so much data about a person’s health and behavior. It would be great to see a convergence of preventive health care, access to catastrophic care, life insurance and personal insurance — a connected life/health care approach centered on the individual. A new insurance entrant with a trusted brand and no legacy constraints could make that happen. Apple Care may take on a whole new meaning!
About Gretchen Hayes:Gretchen is a Venture Partner at Sandbox Industries (“SBX”), a Chicago based Venture Capital firm that pioneered a “collaborative investment model.” SBX identifies investment opportunities to advance (and challenge!) its investors’ business strategies and to generate revenue for portfolio companies through its investors and is currently evaluating investment opportunities.
Gretchen is also a board member/advisor to several InsurTech companies and is primarily focused on technology-driven innovation in the insurance sector. Prior to joining SBX, Gretchen held leadership positions with AIG and Guy Carpenter. Most recently at Guy Carpenter, she developed and lead its InsurTech strategy, including: building a portfolio of minority investments in promising start-up companies; mentoring and advising the CEOs of these companies; serving on boards and collaborating with other lead investors to drive revenue and achieve results; and overseeing successful investment exits.
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