In the insurance industry in the US, wherever you turn, there is an Israeli InsurTech startup waiting around the corner. It seems we are everywhere — disrupting or enabling the industry with Israeli innovation. There are dozens of startups operating in the American insurance domain providing everything from smarter underwriting to AI-based policies. There are well-known Israeli companies like Lemonade, Next Insurance, and Hippo, as well as a few that are not well-known but do well under the radar. In Tel Aviv, we headquarter some while others operate from the states that are led by Israelis.
There are delegations of investors and large global insurance carriers that visit Israel regularly to scout new technologies. There are some who even maintain a local innovation hub, like Japanese insurance carrier Sompo, that facilitate innovation and get better connected with the Israeli startup ecosystem.
But why in Israel of all places?
Israel is also known as the “startup nation”. After bringing to the world Waze, Wix, Mobileye and more, we are known to have the most startups per capita in the world. There are more than 6000 active startups currently operating in what we often call ‘the silicon wadi” – wadi in both Hebrew and Arabic means “vally”. It is the area along the coastline of Israel between Tel Aviv and Hertzelia.
Israel is a small country; its population is only 8.5 million. However, the Israelis are very friendly, informal and our work culture makes it easy to create a strong professional network. Most of us serve in the army since it is mandatory. Some serve in units that use the top technology of Israeli intelligence. They use cutting-edge technologies and are not afraid of taking chances and rolling the dice. In general, the Israeli culture cultivates creativity and taking initiatives. Therefore, it is not surprising that hundreds of startups launch each year in Israel of all places.
Why American insurance?
To answer this question, you need to understand the Israeli insurance industry. As I mentioned, there are only 8.5M of us; therefore, the Israeli insurance industry is small and not that developed. There are only five large insurance carriers in Israel, and when I say “large” I mean that it is the equivalent of a medium size carrier in the US.
The government highly regulates the Israeli market; therefore, the products are not always standard, and the carrier might operate differently than it would in the US, so their needs are different as well. Different products and different needs are equal, in most cases, to a different technology. With Israeli innovation spreading itself to the US, it may surprise you to hear that Israeli carriers are not that innovative and are light-years behind the US market.
Our English, in most cases, is considered respectable and Israel, culture-wise, is similar enough to the US that we fondly refer to ourselves as the 51st state.
So, it is natural that we look for a larger market to spread our innovative ideas and technology and prefer to do it where we feel at home, or somewhere that is like home.
Looking into the future, I assume that Israeli startups will continue to bring innovative ideas into the American insurance space; however, we will probably succeed less. We are good at bringing new ideas to the table but do not excel at leveraging them into sustainable businesses. We are good at planting the seeds and growing the sprouts, but when it comes to the flowering stage most of our startups struggle. The reason lies with the fact that it is hard doing business when you are a thousand miles away, not to mention understanding the nuances of the American insurance space. To make it through you will need not just a foot on the ground, but also to be a part of the culture and to grow a strong network in the US.
I believe startups that collaborate with local talent will do better than those who try to open the door themselves. When talking about collaboration, I am not talking about just hiring a US salesperson, but adding professionals from the American insurance industry to the upper management teams. By doing so, these startups will understand how to provide a good ‘market fit’ and create technological products that will help both startups and the insurance industry to thrive.