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Startup success: Why Israel is disrupting the US insurance industry

The world’s largest insurance market is turning to small Israeli startups to disrupt and enable their operations.

By Abigail Klein Leichman, ISRAEL21c

Most of us would agree that insurance is not a sexy topic. But then why is the insurance technology (“insurtech”) sector sizzling hot?

Because nearly every aspect of personal and professional life depends on insurance, yet this major world industry was stuck in stodginess for far too long.

According to InsurTech Israel, which promotes and leads the Israeli insurtech ecosystem, roughly 200 Israeli insurtech startups are shaking things up for the benefit of carriers and consumers alike.

Several have already become unicorns (privately held companies worth at least $1 billion), including Lemonade (renter, homeowner, car, pet and life insurance), Hippo (home insurance) and Next (business insurance).

‘Lemonade’ becomes a verb

Lemonade, founded in 2015 and publicly traded since 2020, was among the first to disrupt the industry. Not just with technologies like AI but mostly by rethinking the claims process.

Lemonade takes a flat fee from customer premiums and uses the rest to run the business, handle claims, and pay for reinsurance. Unlike traditional insurance companies, it therefore has nothing to gain by denying or delaying claims.

“Years ago when Lemonade was still a small startup, I had dinner with the CEO of a top-10 US [insurance] carrier,” says insurtech veteran Udi Ziv, currently CEO of Tel Aviv-based Kissterra.

“He asked me about Lemonade and I said, ‘Why do you care? They’re so tiny.’ And he said, ‘It’s not their business that worries me, it’s the concepts they’re introducing to the market.’ He said he’d like to ‘Lemonade’ his claims process,” Ziv recalls.

“This showed me that a little Israeli insurtech had changed the process of thinking about claims and the CEO of one of the largest insurance companies wanted to replicate it. That’s a great tribute to what’s coming out of Israeli insurtech.”

World’s largest insurance market

Notwithstanding the recent fraud scandal involving Tel Aviv-based Vesttoo, Israeli insurtech is a big success in the United States — the largest insurance market in the world, with annual premiums exceeding $1 trillion.

Ziv says Israeli insurtech companies focus on both tech innovation and market innovation, which is unusual.

“Insurance is almost the foundation of the world economy because nothing runs without it. That lends itself to a lot of attention from tech companies, but it’s also a very complex market because it is based on differentiation,” he says.

“The cost of goods to the insurance company is unknown and depends on who the consumer is. You and I may be similar, but my auto insurance cost may be low if I never had an accident and yours may be high if you’ve had an accident. This makes the industry extremely complicated and that is why a different type of thinking is needed.”

Fortunately, Ziv says, Israelis are conditioned to think in a non-linear way to solve complex problems.

“In a complex industry that is very rigid and behind the times, moving it into the 21st century can’t be done linearly. Only when you start thinking completely differently is when you start making a difference.”

Disruptors and enablers

“We see two types of insurtechs in Israel: disruptors that change the incumbent industry; and enablers that apply sophisticated AI and machine learning to enable it,” Ziv tells ISRAEL21c.

“Both have developed tremendously and are making a lot of positive noise and impact. We’re providing significant value because everyone benefits from better matches between companies and consumers.”

After heading insurtech company Earnix for six years, Ziv became CEO of Kissterra in February.

“Kissterra is the first and only insurance marketing system,” he explains. The eight-year-old startup developed marketing software for American auto and home insurers that analyzes and characterizes potential customers.

“Large US carriers often have marketing budgets of hundreds of millions of dollars,” he says, but they’re flying blind and need help controlling their spend. Kissterra provides highly granular insights into marketing effectiveness by aggregating and analyzing reams of incoming data.

Another reason for the rise of insurtech is that even in a traditional industry, new sectors emerge that call out for innovation.

For example, Voom raced to fill the gap in “new mobility,” offering digital, usage-based insurance for everything you can ride, drive or fly. Think motorcycles, e-scooters, drones, light planes and more.

Attracting investment

Although CB Insights reports a global decline in insurtech funding since the beginning of 2023, several Israeli insurtech startups closed investment rounds recently.

One is Click-Ins, which along with Ravin AI, Spinframe and other startups from Israel, is automating vehicle inspection for purposes including insurance assessments. Click-Ins just closed a $7.5 million funding round and announced a collaboration with Direct Insurance.

New clients of Direct receive a link to Click-Ins’ web app, allowing them to scan their vehicle using their smartphone’s camera.

The AI-driven technology examines and reports on exterior damage, thereby streamlining and speeding up the process while customizing the insurance policy to the vehicle’s condition in minutes.

Faye, which offers AI-powered travel insurance and traveler services in 48 US states and counting, recently raised $10 million in Series A funding, just a year after launching its 100% digital product in America and earning millions in premiums. Faye also launched a one-stop-shop portal for travel advisers and agencies.

“Until Faye, travel insurance was often thought of as a reimbursement service,” said cofounder and CEO Elad Schaffer. “Faye fundamentally views travel insurance differently, combining travel insurance with real-time assistance, smarter, faster assistance and claims resolutions, trip alerts, a 24/7 concierge and even financial support.”

Easing health insurance pain points

Health insurance is a pain point in the United States due to skyrocketing costs and uneven coverage. According to the US Centers for Disease Control, 8.4% or 27.6 million Americans did not have health insurance in 2022.

Israeli insurtech companies are on the case.

Since most Americans are insured through their employers, an AI-powered digital platform from Healthee (formerly Insurights) gives employees on-the-spot answers about health coverage and benefits, helping them find lower-cost providers and even info on preventive care benefits. In half a minute, Healthee’s personal health assistant suggests a plan and explains what it covers.

Air Doctor connects travelers to private doctors worldwide through its app, which serves customers through their insurers for a streamlined process. While traveling abroad, they can easily book an in-person or virtual medical appointment at their location, and their insurance company handles the rest.

Launched in 2018, Air Doctor has attracted $30.9 million in funding and is now available in 75 countries, with 20,000 doctors in its network.

“It was the realization that our product could address a significant problem in the travel insurance sector, improve the customer journey, and reduce costs that brought me to the insurance industry,” said Air Doctor founder and CEO Jenny Cohen Derfler.

“By leveraging technology and innovation, we can drive positive change and make a meaningful impact in an industry that is ready for transformation.”