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One For All: Is Macro-Insurance the Future?

by Precise Leads

June 19, 2017

One startup wants to buck the micro insurance trend and go “bigger.”

As insurtech startups increasingly divvy up the insurance marketplace into micro policies based on a fixed time period, finite event, or single asset, one entrant has decided to take a different approach. U.K.-based startup Sherpa plans to cover all personal risk based on a single underwriting process.

U.K. consumers will be able to obtain home, health, life, travel, auto, device, and pet insurance when Sherpa’s officially launches its platform later this year. Sherpa is combining innovative technologies like artificial intelligence with actuarial science to assess an individual’s unique risk profile. Sherpa then recommends coverage based on that data.

Sherpa takes into account how a person’s circumstances have evolved over time. Instead of the usual premium, policyholders pay a flat monthly membership fee, which enables coverages to be automatically updated based on any life changes.

CEO Chris Kaye says Sherpa has created “a simple, comprehensive solution for personal risk management.” At least one big names has taken notice: Sherpa last month partnered with reinsurer Gen Re. But will consumers put all of their eggs in one basket?

Is Macro Better?

Sherpa’s strategy counters the growing micro insurance trend. San Francisco-based Trov, for example, intends to launch its on-demand app later this year in the U.S. With a click, Trov users login to buy coverage for computers, smartphones, cameras, or sports equipment, setting the coverage period. Another micro insurance trailblazer is Next Insurance, which allows personal trainers to purchase coverage of up to $2 million via a chatbot.

No doubt micro insurance will prosper, especially on cloud-enabled platforms. At least one observer, however, finds the macro insurance model promoted by Sherpa intriguing and one that might someday rival its opposite business model.

Mark Breading, a partner at Strategy Meets Action in Boston, explains that the “one-policy-covers-all-risk approach” typified by macro insurance lags behind the speeding advance of micro insurance. Yet he asserts it could eventually find its place within the insurance ecosystem, especially as consumers demand innovative technological solutions to service their insurance needs.

“Macro-insurance is in its infancy and may take a long time to develop, but the concept is intriguing, and it appears that the industry is willing to begin to explore the potential,” Breading writes. “The most likely scenario is that traditional insurance lines of business will remain for a long time, supplemented by rapid growth in micro-insurance that often extends into new coverage areas, while macro-insurance begins a period of discovery and slow evolution.”

What Happens to Agents?

At this moment, Breading cautions bundling auto, home, liability, life, disability, and other risks for one person “has not yet been practical.” In that regard, Sherpa serves as a test case, and the industry will closely monitor its growth.

Sherpa’s progress has industry-wide implications; namely, does the macro insurance foretell the end of the agent? Maybe not. Although Sherpa’s model cuts out the agent, Breading envisions some macro insurance platforms using a fee-based or commissioned agent for sales.

Breading further hedges on whether your clients will immediately switch to a macro insurance platform. Obtaining comprehensive coverage without paying a commission and from a one-stop-shop, so to speak, captivates most clients, to be sure. But that means putting all their policies in the same bucket, which, Breading writes, “could be a deterrent to the macro approach for some customers.”

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