Jan 2, 2019 · 24m · a16z
a16z Podcast | Reinventing Insurance
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z podcast, host Michael Copeland and guests Frank Chen and Mike Paulus explore how modern technology, real-time data, and changing consumer behaviors are disrupting the multi-trillion dollar insurance industry. They discuss emerging risk categories, automated underwriting, changing liability models, and new digital distribution channels that are transforming traditional insurance practices.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 2.8 Guest teaching 2.7 Guest disagreement 1.0 The host pushing back 1.5
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 5:06 Reframing legacy data advantage
Frank Chen explicitly counters the host's premise that legacy insurance carriers hold the upper hand, arguing that historical data will become progressively less important.
Hardest push from the host ▶ 4:06 Challenging startup advantage over legacy incumbentsHost Michael Copeland pushes back on the assumption that startups will easily win, noting that incumbent carriers have centuries of accumulated underwriting data.
Biggest teaching moment ▶ 11:49 Hartford Steam Boiler historical lessonMike Paulus educates the room by drawing on the history of the Industrial Revolution to explain how insurers historically created safety standards through boiler inspections.
The host holds their own ▶ 14:44 Predicting the high cost of manual human drivingHost Michael Copeland demonstrates domain insight by extrapolating that manual human driving will become an expensive luxury once autonomous safety becomes the standard.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Data Transformation and Incentive Alignment in Insurance | 3 | 4 | 1 | 1 | Host Michael Copeland asks whether incumbent insurance companies hold a definitive edge due to decades of historical data. The guests reframe the premise by explaining that real-time smartphone and behavioral data stream updates make legacy static data increasingly obsolete. | |
| Emerging Categories: Sharing Economy, Cyber Risk, and New Assets | 2 | 2 | 1 | 1 | The host asks about emerging categories and responsibility shifting in the sharing economy. The guests cooperatively explain how platforms like Airbnb, Lyft, and emerging assets like drones and Bitcoin are creating new insurance categories. | |
| Cyber-Physical Risk Convergence and Safety Standards | 4 | 3 | 1 | 2 | Host offers a solid analogy comparing uninsurable hillside homes to potential cyber risk security standards. Mike Paulus educates the host on the historical precedent of Hartford Steam Boiler during the Industrial Revolution to explain how insurers drive safety standards. | |
| Autonomous Vehicles, Liability Shifts, and Customer Experience | 3 | 2 | 1 | 1 | The conversation covers self-driving liability shifts to manufacturers. Host Copeland makes an insightful point that human driving could become a luxury or social hazard that becomes prohibitively expensive to insure, which the guests agree with. | |
| Expanding Coverage: IoT, Parametric Risk, and Telematics | 2 | 3 | 1 | 2 | The guests detail parametric weather insurance and telematics, highlighting how real-time driving data bypasses broad demographic stereotyping. The host briefly probes and clarifies how teenage driver pricing bias is rectified by telematics. | |
| Innovative Startups, Business Models, and Distribution Channels | 3 | 2 | 1 | 2 | The guests present startup examples including Zenefits and Chinese giant ZhongAn. The host points out that basic underwriting and capital aren't inherently proprietary, prompting the guests to explain how distribution channel unbundling is the true key to disruption. |
Statements from this episode (15)
Paulus: Insurance is the original big data problem
“I think the really interesting thing about insurance is it's the first big data problem.”
Frank Chen: Startups will pioneer continuous customer engagement in insurance
“It's gonna need startups to show the way of what insurance companies ought to do in their ongoing customer journey, as opposed to the existing companies doing it.”
Chen: Legacy insurance data will lose value against real-time IoT streams
“The way to think about it is the data that insurance companies had will become less and less important over time as these new data streams get unlocked.”
Paulus: Drone sales surpassed Apple Watches at Christmas 2015
“More men bought drones than I watches for Christmas.”
Paulus: One-third of all Bitcoin ever mined is lost
“Something like one third of every Bitcoin ever mind is, is now lost.”
Chen: Cyber loss coverage will be a fastest-growing insurance category
“And so this is going to be one of the fastest growing categories of an entirely new type of insurance, which is I will insure you against cyber losses.”
Paulus: Cyber coverage will be most critical auto insurance for self-driving cars
“If my car drives itself, then that cyber policy is going to be the most important form of auto insurance that I have.”
Chen: Cyber risk standards will be set by commercial markets, not government
“I think it won't be government necessarily. I think it will be commercial standards, right? That sort of puts you into a risk category, right?”
Paulus: Winning insurance companies will focus on risk prevention over payouts
“And I think that the insurance companies that, that win in the, in, in, in the next century, we will be those insure least and that they pay the most claims or they pay the fewest claims rather, and they're the most preventive.”
Paulus: Google, Volvo, and Mercedes accept self-driving liability
“Google Volvo and Mercedes have all said that for their cars, while they're in assault driving mode, they have the liability”
Paulus: Ridesharing platforms will deliver self-driving cars to mass market first
“Services like Lyft and Uber which will likely be the first delivery mechanism on the, for the mass market for self-driving cars.”
Chen: Climate Corp's weather insurance experiments were not a great business
“And I think of the weather company Climate Corp did a series of experiments where you could buy insurance on weather events, right? So if I'm a farmer in Iowa and I want to say, look, if it's a hundred degrees seven days in a row, that's very bad for my corn. …”
Chen: Autonomous vehicle ethical programming choices will affect insurance rates
“And I, one of the really interesting trends is this is going to extend to algorithms. In other words, there are going to be ethical programming that we have to do for our cars, right? So the protocol example is, look, you're building the self-driving car, and …”
Paulus: ZhongAn raised $1B at an $8B valuation backed by Alibaba
“I think another really interesting company that's flown under the radar a little bit is, is on on, and that's an insurance company backed by Alibaba and Tencent that's raised almost a billion dollars. And an eight billion dollar valuation, which would make it …”