Insurance typically is a very risk-averse industry, but the next generation of consumers is shaking up the market. Many millennials are getting married or having children later, pushing insurance purchasing events further into the future, with some eschewing products like life insurance altogether. They also want insurance offerings to be online and mobile. Established insurers now have to be more nimble and look for new opportunities, and partnering with or investing in startups is a great way to do it. Startups are the jelly to established firms’ peanut butter, layering on the freshness and versatility.


Because the insurance industry is under threat from new forms of automation—like self-driving cars, negating the need for insured drivers—and fewer people are buying products like life insurance, established firms are looking to gain advantages in pricing, underwriting and customer experience, making  startup partnerships and investments both prudent and timely. If established firms are more willing to take risks and enter into such partnerships, they’ll appeal to the next generation of consumers and improve their overall offerings and customer experience.


Insurance-focused startups have raised more than $700 million so far this year, according to TechCrunch, and larger insurance companies also have started their own venture firms to explore new technologies and offerings. A startup with some strong momentum is the millennial-focused Oscar Health, which, according to TechCrunch, took in $400 million in growth funding last year and recently partnered with Humana to sell its Oscar for Business small-business insurance in the Nashville area.


Oscar, which launched in 2012, successfully capitalized on the Affordable Care Act by offering individual plans to younger consumers. Oscar started in a confined geography, New York, which is dense with its young target customers, catching their attention via subway ads and through content marketing partnerships with BuzzFeed. Oscar’s current tagline is, “Health insurance that’s easy,” and the company has succeeded in large part through its simplicity: Its policies are all online, with language explaining the concepts and benefits of each one in an easy-to-understand, approachable way.


Established insurance companies are targeting millennials with similar product positioning, or investing in startups that do so. MassMutual-backed startup Haven Life bills itself as “modern life insurance,” with plans that are available for purchase online and broken down in clear, simple terms with 20-minute approval processes.


There are also many examples of startups partnering with insurers to leverage their balance sheet strength and established regulatory practices. Trov, an on-demand insurance startup for personal items such as a smartphones, engages several global insurers in this model. Trov provides a highly intuitive and mobile-first user experience, and collects premiums through the app, but then its partners ultimately underwrite the risk. Many of those insurers also have small equity stakes that promote joint decision-making and further strengthen the partnership.


These examples show how partnerships can create innovative insurance offerings and better customer experiences. That said, not all partnerships and relationships are created equal, and not all have been deemed a success. In my next blog post, I’ll detail some critical success factors that carriers should consider for getting started with and managing partnerships.