Trōv | Embedded Insurance Specialist | Scott Walchek

According to Trōv, the insurtech’s team and Trov’s embedded technology will be positioned within Travelers’ Personal Insurance segment.

Michael Klein, president of Personal Insurance at Travelers, said, “This is yet another example of how we’re investing to enhance the experience for our customers, agents and partners,” adding that Trōv’s technology and team would “help to accelerate ongoing efforts to provide customers with personalized solutions in their channel of choice.”

Earlier this year, during a fourth-quarter earnings conference call, Travelers Chief Executive Officer Alan Schnitzer confirmed the property/casualty insurer’s continued interest in making technology investments. “Our scale, profitability and cash flow support our ability to invest well over a billion dollars annually on technology,” Schnitzer said during the call.

The Look Forward

Trōv’s first innovation in the insurance world was the 2016 introduction of micro-duration insurance policies for items like guitars, laptops and cameras, delivered on demand through completely digital buying experiences. But Scott Walchek, the serial entrepreneur who founded Trōv, actually launched the platform four years earlier as a way to digitally store an inventory of a person’s valuable possessions.

In subsequent years, the company expanded into verticals including the gig economy and transportation, offering coverage for passengers and items traveling in autonomous vehicles. For example, in December 2017, Google’s self-driving car unit, Waymo, partnered with Trōv to provide trip-based insurance coverage underwritten by a nonadmitted affiliate of Munich Re. And in mid-August 2019, Trōv announced the launch of a portfolio of end-to-end digital, white-labeled insurance products designed to be rapidly deployed by financial organizations and insurers in partnership with Lloyds Banking Group, the UK’s largest retail financial services provider.

Most recently, the company launched its embedded insurance platform, public APIs, and developer support tools to enable companies to distribute insurance products within their existing digital applications.

Walchek, who is also Trōv’s CEO, attributes the Travelers transaction to the company’s years of experience at the forefront of insurance innovation and credits Trōv’s team and partners for successfully introducing technologies and experiences that he says have produced material change in the insurance industry. “Over the past several years Trōv has reimagined many components of the insurance value chain,” he said in a statement.

In an article in Insuretech News by Christy Anderson it states that while historically InsurTech distributors have been seen as potential competitors, capable of eventually capturing significant market share from incumbents, the Travelers/Trov deal shows that even startups that have behaved like competitors are not necessarily so, observes Stephanie Dalwin, an Advisor at Aite-Novarica Group (Boston). “InsurTechs bring more opportunities than competition to carriers,” Dalwin says. “InsurTechs offer opportunities for carriers to learn and to bring technology expertise in-house.”

Incumbents are obviously better positioned for longevity, whereas InsurTechs contend with the struggle of maintaining funding runway sufficient to demonstrate their business proposition, Dalwin stresses. “A related trend we’re seeing is that the InsurTech MGAs are realizing that there is a potential revenue stream from becoming software companies or licensing their tech stack. In other words, there are increasingly more opportunities for them in partnering than competing with carriers.”

Cash Scouting for Ideas

More acquisitions in this vein are likely to follow, as insurers seek to bring innovative people, assets, and relationships into their companies, according to Mark Breading, a Partner with SMA (Boston). There are many InsurTechs that are maturing and looking for exits,” he elaborates. “Although they may not have considered carriers to be their target acquirers, the insurers have the cash and continue to scout for new ideas that can accelerate their innovation.”

InsurTech distributors have sometimes vaunted themselves as the next wave of commerce in insurance, but whether that was out of confidence—merited or otherwise—or simply a tactic to make them an attractive acquisition target is hard to say. As either MGAs or full-stack carriers they offer something new and exciting, but as startups, being bought by a bigger company is a natural trajectory.

That said, mere opportunity may not be the only driver, suggests Stephen Applebaum, Managing Partner, Insurance Solutions Group. “I think it is inevitable that most pure-play InsurTechs will either get acquired—either in whole or in part, as with Trov—or just fail,” Applebaum says. “Either way, their investors aren’t likely to be happy.”

Applebaum insists that it simply takes too much capital and experience to scale a new insurer and acquire new business while also being price-competitive and controlling loss ratios. “Companies such as Travelers who acquire these assets and people can do so at attractive prices compared to developing these resources themselves,” he explains.

Applebaum sees the Travelers acquisition of Trov technology and talent as a reflection of several macro market factors that will cause more such M&A.  “Pure play InsurTechs of the Trov generation have now had several years and many rounds of funding to try and achieve their vision but few have,” he comments. “However, what they did accomplish is highly valuable to legacy insurers such as Travelers.”