Slice Labs Case Study: New Economics at Work

Slice Labs Case Study: New Economics at Work

Just published: a detailed case study on the first year of Slice Labs. (see @Celent_Research http://bit.ly/2pgJ65b ) This insurtech delivers a tailored insurance contract to sharing economy operators on a digital platform. Homeshare coverage is live in production in multiple states and rideshare was just released to pilot. The experience of Slice Labs provides a valuable benchmark against which insurers, insurance technology providers, and insurtech firms can measure their innovation efforts.

Truly disruptive insurance innovations are rare. Most insurtech propositions are service improvements for current products in existing markets.  Slice Labs is disruptive in that it targets an underserved customer niche with a proposition that involves changes to the core insurance product using new technology tools and development methods. The solution was delivered to pilot within one year at a predicted and managed cost within the limits of their initial capital raise. This combination of insurance expertise, new tech skills, and dev ops processes illustrates a new model for insurance development.

Some of the key lessons from the case study include:

  • A one-year timeframe and an accurately predicted investment delivered a minimum viable insurance product and IT platform. This low-cost threshold and speed challenge in-house insurance innovation approaches and argue for wider use of greenfield initiatives.
  • The effort and elapsed time necessary to identify a risk sharing partner are significant and should not be underestimated.
  • Affinity groups/communities of interest can create significant pull demand.

This model is repeatable. The challenge for incumbent insurers is to develop approaches which allow them to benefit from the new economics at work in insurance product development.

The Muslin is off the Lemon — Lemonade Launches

The Muslin is off the Lemon — Lemonade Launches

Today’s announcement by Lemonade provides an example of what actual disruption in insurance looks like. Disruption — the term is overused in the hype around innovation. In Celent’s research on innovation in insurance, we see that what is often tagged as disruptive is actually an improvement, not a displacement, of the existing business model.

The information released describes how Lemonade seeks to replace traditional insurance. Yes, they have built a digital insurance platform. Beyond that significant feat, they seek to replace the profit-seeking motive of their company with one based on charitable giving, acting as a Certified B-Corp (more info on B-Corps). They are also using the charitable motive as the guide to establish their risk sharing pools, thus creating the peer-to-peer dimension. Unlike other P2P efforts, Lemonade goes beyond broking the transaction and assumes the risk (reinsured by XL Catlin, Berkshire Hathaway and Lloyd’s of London, among others).

However, like other P2P models, such as Friendsurance, Lemonade faces a real challenge regarding customer education. The Celent report Friendsurance: Challenging the Business Model of a Social Insurance Startup — A Case Study details the journey of the German broker along a significant learning curve regarding just how much effort was required to teach consumers a new way to buy an old product.

The next few weeks will surface answers to they second-level questions about this new initiative such as:

  • How/if their technical insurance products differ from standard home,renters, condo and co-op contracts;
  • What happens to members of a risk sharing pool when the losses exceed funding;
  • Will the bedrock assumption, that a commitment to charity will overcome self interest and result in expected levels of fraud reduction?

It is refreshing to see some disruption delivered in the midst of all the smoke around innovation. Celent toasts Lemonade and welcomes this challenge to business as usual!