US insurtech Ladder takes early steps into life insurance
California-based insurtech Ladder has begun selling life coverage online and via mobile with policies that pay from $100,000 to $8 million and last from 10 to 30 years. Life insurance has been one of the last areas to be automated because of its relative complexity. Ladder is targeting younger, working people who are starting families but don't have time to go through the lengthy application process. Ladder offers a short questionnaire and will send a medical professional to carry out an examination if needed. It also offers term policies, which are much cheaper than whole policies
BI Intelligence

This story was delivered to BI Intelligence "Fintech Briefing" subscribers. To learn more and subscribe, please click here.

The US insurtech sector has grown far more quickly than its UK and European counterparts, mostly due to the size of its insurance market and its high costs.

Now, another US insurtech is stepping in to make one of the most expensive forms of insurance more accessible, according to press releases seen by and interviews conducted by BI Intelligence.

California-based Ladder allows users to get a quote and apply for instant life coverage online or via mobile in a matter of minutes, with policies that range from $100,000 to $8 million, and from 10 to 30 years. Ladder launched on Tuesday, and is so far available only to California residents.

Ladder is targeting young consumers who need life insurance but find the current system too expensive and time-consuming. Historically, buying life insurance required multiple in-person meetings with brokers, manual paperwork, and waiting times of circa six weeks for coverage to take effect, with most incumbents encumbered by inefficient legacy systems. This has particularly deterred younger, working consumers who are starting families — people likely with a need and desire for life insurance, but even less time than most for the lengthy process. This is the group Ladder is now targeting. Jamie Hale, Ladder CEO, cites a LIMRA (a global FSI association) study which found that, as a result, there are 19 million "stuck shoppers" in the US who cannot buy policies despite needing them.

Ladder aims to solve this problem in several ways:

Streamlining the application process. Applicants fill out a short questionnaire with details such as gender, age, whether they smoke, and a rating of their overall health. Live personnel can also be contacted to answer questions. This speeds up documentation and approval times. If a medical examination is required, Ladder dispatches a medical professional to a place and at a time chosen by the applicant.

Lowering costs. Ladder does not charge annual policy fees, unlike most incumbents. It also offers term rather than whole policies — the latter are much more expensive as they also act as an investment vehicle. Rather than overpaying upfront if they overestimate their needs, users are allowed to layer on additional policies, and extend the term of their policy later on — for example, if they have more children.

Several factors are in Ladder's favor. First, it is targeting a large and underserved market: LIMRA estimates stuck shoppers account for a $16 trillion coverage gap in the US. In addition, as millennials come of age and start families, their demand for life insurance will only increase. And if incumbents continue to lag behind in digital innovation, Ladder will be able to win market share, particularly if it can learn from legacy players' mistakes. Moreover, it is backed by impressive names such as Hannover Re, a reinsurance giant, as well as Fidelity Security Life Insurance. This is likely to reassure consumers left undecided about the new entrant's trustworthiness.

The global insurance industry is worth nearly $5 trillion, and insurance companies are at risk of losing a share of this valuable market to new entrants. That's because these legacy players have been even slower to modernize than their counterparts in other financial services industries.

This has created an opportunity for a group of firms known as insurtechs. These startups are leveraging new technology and a better understanding of consumer expectations to increase efficiencies in the insurance industry. Some are helping incumbents deliver better end products, while others are directly competing with legacy players.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on insurtechs that looks at the drivers behind the increasing number of insurtech companies, how they are helping or disrupting legacy players in the insurance industry, and where legacy players are innovating off their own backs.

Here are some of the key takeaways from the report:

The opportunity is currently biggest in the US and Europe. That's because these regions have large, very mature insurance industries.

Insurtechs' products and services mostly target retail customers. This includes small businesses and consumers.

Most insurtechs are acting as enablers. This means that they offer products and services that help insurers and reinsurers improve their processes and better serve customers.

Of the main players in the insurance industry, brokers are most at risk of disruption. This is because insurtechs can easily replicate their services and are solving historical industry problems faster than legacy players.

Legacy players are also innovating. In particular, insurers and reinsurers are investing in insurtechs and fintechs working with relevant technologies. At the same time, they are improving their own direct-to-consumer digital interfaces, increasing their disruptive threat to brokers.

In full, the report:

Explains the structure and current state of the insurance market.

Highlights areas where insurtechs can help legacy players modernize.

Describes where insurtechs are competing with incumbents and how their models compare.

Provides case studies of insurtechs.

Outlines the legacy response.

And much more.

Interested in getting the full report? Here are two ways to access it: