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Much of FinTech’s recent boom is due to entrepreneurs finding ways to bring innovation to industries that have long been mired in the status quo. The financial regulatory environment is so overwhelming, legacy companies have to clear dozens of checks and balances each time they take an exploratory step in the evolution of their industry.
Still startups, free of the constraints that bog down progress for larger institutions, have found ways to push the ball forward and have begun ushering in a new era in finance. But while innovative payment systems and financial analysis services receive fanfare, the insurance industry still finds itself tucked away in a corner; a $3 trillion dollar industry in desperate need of transformation but without a significant step forward in a century.
The reasons for that are varied, but the primary barrier to entry is simple: Insurance is incredibly difficult to understand.
“Insurance tech is so complicated it does scare people away, so we don’t see that many startups,” Blanc says. “When I talk to someone, it usually takes 30 minutes to explain what reinsurance is, to get that laid out, before we even get to insurance itself.”
Understanding the Industry
Reinsurance, the part of the industry RGA operates in, can best be understood through risk. Simply put, reinsurers provide insurance to insurance companies.
If a direct insurer is uncomfortable with the amount of risk they have in a certain area (in industry lingo, “overexposed”) they would buy insurance on that risk. It allows them to offload it, free up capital, and diversify the type of risk they take on.
RGA, which was founded in St. Louis and has had its headquarters here for 40 years, is the third largest life and health reinsurer in the world, operating in 27 countries.
With a far-reaching and varied customer base, RGA’s view of the insurance market is much broader than primary insurers.
“For us as a reinsurer, we can see the wide market. Multiple different carriers and multiple different markets,” Blanc explains. “We are thinking we could help accelerate some of the transformation in different parts of the value chain.”
Forging a Partnership
That thinking led to a partnership with FinTech accelerator SixThirty, where Blanc and RGA bring valuable perspective and advice to startups whose core services could aid the insurance industry or who directly want to impact it.
For one, they have a true sense of the market and a customer base of primary insurers with whom they can facilitate relationships.
For example, “A company writes a lot of life insurance in Boston. That’s a different product and set of risks than final expense in Arizona. Since we see slivers of both, we have a bigger view,” Blanc says. “[A startup] starts going down the line with a Boston company and they say, ‘We don’t really write this type of product,’ they wouldn’t have that knowledge or expertise to refer it to another carrier.”
In addition to acting as a shepherd for product and market fit, RGA’s core business also gives primary insurers more leeway to take on new risk, allowing them to explore innovations with less trepidation. A startup could hit a roadblock with a direct insurer, for example, where the direct insurer doesn’t feel comfortable crossing a certain threshold of risk on a new product. RGA would provide that protection, and allow the direct insurer to explore the new risk where they wouldn’t have before.
The partnership with SixThirty also gives RGA value as well. In addition to exposing the company to new ideas, working with SixThirty also teaches them how to run their own incubator. RGAx, a subsidiary of RGA focused on building non-reinsurance businesses, is an in-house incubator dedicated to moving the insurance industry forward. While RGA brings industry expertise and perspective to SixThirty, the latter teaches the former the best practices for due diligence, how to bring innovative ideas along and how involved they should be in the startup process.
Through RGAx and their partnership with SixThirty, Blanc says the goal is to be in the best position possible when the industry begins its innovation-driven lurch forward.
“We’re not too late, we’re trying to get ready. Our view is when, not if,” he says. “We just thought it was really important to grow that talent here in Midwest, right here in St. Louis where RGA was founded and had its headquarters for 40 years.”