Despite Big Tech Promises, Insurance Prices Are Still Sky High
As it turns out, there's a lot more to it than just developing an algorithm. GiphyNews that is entertaining to read
Subscribe for free to get more stories like this directly to your inboxMost of us have lamented the price of insurance, whether due to the up-front premiums, the fact that many expenses aren’t covered, or both.
High-tech startups claimed that they could revolutionize the industry and bring down prices for everyone. But so far, that’s not been the case.
What went wrong
Over the past decade or so, a growing number of fledgling companies have touted their supposed ability to use computer algorithms and massive amounts of information to come up with custom policies that will provide the most coverage for the lowest price possible.
In theory, this is one of the few upsides to the fact that the websites we all use are constantly collecting our personal data. In practice, however, the results leave a lot to be desired.
There are many reasons, but here are a few of the biggies:
- These startups didn’t have access to the historical info used by established companies.
- Many of the emerging insurers didn’t fully factor in strict government regulations.
- The big players in the industry had far more money to market their traditional policies.
So it’s fair to say that these companies promising to disrupt the system started out behind the eight ball … but is that a good enough reason to let them off the hook?
A tale of three startups
There are a handful of companies that have launched in recent years with what at first appeared to be a promising take on the insurance business. Lemonade, Root, and Hippo all promised, in their own ways, to use technology in creating a better policy.
Now they’ve been forced to acknowledge that it wasn’t as easy as they made it seem.
As Lemonade co-founder Daniel Schreiber said: “We did a fairly shoddy job of pricing and identifying risks. And we knew we would.”