In this episode of The Connected Podcast, we delve into two major developments in the insurance world: the rising prominence of embedded insurance and the strategic growth story of Progressive Corp.
Embedded insurance, defined as coverage integrated into the purchase of another product or service, is emerging as a solution to the protection gap, tackling the issue where 50% of economic losses are uninsured. Think of auto insurance seamlessly linked to car purchases, leveraging pivotal life events to bring in new policyholders. The embedded insurance market is envisioned to experience explosive growth, forecasted to skyrocket from $156 billion in gross written premiums in 2024 to over $703 billion by 2029, marking a compound annual growth rate exceeding 35%. Such growth represents a transformative shift in distribution strategies, presenting new avenues to reach underserved markets.
As far as performance is concerned, Progressive Corp is in the limelight with notable third-quarter financial outcomes, characterized by a strong underwriting margin and strategic advertising push. Highlights include the addition of 1.6 million policies within the quarter, with a significant 80% stemming from personal auto insurance. Progressive's underwriting margin more than doubled from the previous year, thanks to rate adjustments and adaptable billing options. As competitors adjust rates and impose new business constraints, Progressive's effective advertising emerges as a market capture tool, reflected in their net income doubling year-over-year to $2.33 billion and an improved combined ratio. Such developments spotlight the insurance industry's resilience, adeptly adopting innovation and strategic maneuvers to widen coverage and curtail the protection gap.
Additionally, this episode examines AIG’s remarkable third-quarter performance, underscored by strong underwriting profitability and strategic maneuvers. Dive into the intricacies of a minor decline in net premiums, which upon deeper analysis, showcases a 6% growth propelled by their Global Commercial Lines, especially with an impressive 11% increase in North America. AIG’s innovative business initiatives have shown promising results, marking a 9% rise from the previous year. The disciplined approach is further evidenced by a favorable accident year combined ratio of 88.3% and a return of $1.8 billion to shareholders.
Shifting focus to the insurtech market, we note signs of stabilization, with insurance technology funding predicted to reach $4.2 billion by the end of the year. Spotlighting Series B and C funding rounds, we witness a rejuvenation for early-stage startups, albeit later-stage startups facing challenges, as highlighted by Javier Santiso of Mundi Ventures, emphasizing the positive momentum in Series B funding.
In strategic partnership news, a pivotal collaboration sees Next Insurance teaming with Allstate and Allianz through a substantial $265 million investment, aspiring to expand digital insurance offerings for the small business sector. This partnership aims to enhance product availability, co-develop commercial auto solutions, and fortify its reinsurance relationship with Allianz, empowering small businesses with affordable insurance solutions via Allstate’s distribution prowess and Next’s digital acumen.
Moreover, our conversation spans the evolving landscape of systems integration in the insurance sector, spotlighting its essential role in optimizing workflows, enhancing risk management, and
