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In insurtech, opportunity for insurance industry veterans

A number of executives from traditional insurance companies jumped ship to join the burgeoning insurance technology space in 2016 — a trend that appears poised to continue in the coming year as insurtech continues to gain traction.

Lemonade Insurance Co. was a case in point. The peer-to-peer property and casualty insurance carrier has hired several executives with experience at major insurance companies. Ty Sagalow was a founding member of the startup and now serves as chief insurance officer, after spending 25 years at American International Group Inc. in positions such as president of product development and chief underwriting officer. Lemonade CFO Ron Topping was formerly AIG's head of financial planning and analysis for the Americas.

John Peters joined Lemonade as chief underwriting officer after working at Liberty Mutual in positions including executive vice president, chief underwriting officer and chief product officer. James Hageman, an ACE Ltd. alum, joined Lemonade as chief claims officer.

As more players enter the space, more investments are expected to pour into insurtech, PricewaterhouseCoopers said in a report out earlier this year, "InsurTech: A golden opportunity for insurers to innovate." Early stage insurtech startups like Lemonade and InsureOn have been attracting experienced insurance executives who join these ventures to help them develop peer-to-peer insurance models and small business aggregators, according to PwC.

This trend is likely to continue, according to industry expert and Lemonade board member Tom Hutton. Hutton is a managing partner and director at XL Innovate, a venture capital fund sponsored by XL Catlin, which made an investment in Lemonade this year. Hutton has a long background in both the insurtech and insurance fields. In 1990 he became the CEO of catastrophe risk modeling company Risk Management Solutions Inc. and eventually got into traditional insurance with roles at Montpelier Re, Safeco and White Mountains Re.

Executives with experience in traditional insurance can leverage their networks and contacts to help insurtech companies build relationships, Hutton said. A background in insurance can aid startups as they try to work with incumbent carriers and companies in the insurance industry and develop relationships with clients and customers.

"The insurance industry is very relationship-oriented," Hutton noted in an interview. "When I began as an entrepreneur in insurtech in 1990, it took me weeks to determine what individuals I should seek out that companies were trying to build relationships with."

To Samir Shah, CEO of Ledger Investing, working in an insurtech startup environment is an opportunity to be free of institutional constraints that come with working for a large corporation. Shah is an AIG veteran who went on to help establish Ledger in 2016. Ledger, which has backing from Silicon Valley companies, provides a business-to-business marketplace to securitize insurance risk.

As insurtech grows, Shah believes there will be more opportunities for insurance executives to bring their expertise to the space in 2017.

"Everybody in the industry, the leadership of likely all companies, recognizes that change is coming," he said. "They need to confront it and take advantage of it."