Space is exciting – it’s shiny and bold. The Internet from space? Check. Reusable rockets? Another check.
Insurance – while important and a mainstay of the global economy – would probably not be described as shiny. And perhaps that’s a mistake.
Overall, insurance has undergone heavy modernization over the last decade. And while insurance may never be as shiny and exciting as space, it has become openly disruptive with the growth of startups serving new markets and new customers.
It may seem superficial to state that the insurance and space industries have a ‘history,’ both individually and with each other. But it’s the truth – both have transitioned to ‘legacy’ industry status, regardless of recent technology advancements. These legacies have led to these two industries having five fundamental things in common.
Growth of Tech
The first commonality between the Insurance and Space industries is the rapid proliferation of new technology. Both industries have emerged as powerful technology sectors that are undergoing a revolution. Technology tailored for these industries has been historically few and far between making this change all the more pronounced.
What makes this new technology so noteworthy is the productivity increase that is experienced as a result. New technologies often proceed a growth of the market itself as greater efficiency attracts more investors and more innovative products.
This technology growth has led to specific acronyms for industry-specific insurance and space technology: ‘InsurTech’ (sometimes InsureTech with an e) and SpaceTech. Right now, insurtech is the fastest growing market in the world at 30.3% compound annual growth rate (CAGR). Similarly, The Next Frontier is growing rapidly at 10.6% CAGR with revenue expected to triple by 2030. For both insurance and space, there is no limit in sight for the role new technology will play over the next decade.
As with most legacy industries, Insurance and Space are full of legacy tools and software solutions. This technological debt has been a major contributor to the total market size for these industries. But recently, this debt has been chipped away at by new software solutions aiming to improve productivity and revenue.
Companies in both these industries tend to be slower to adopt new technologies because of the implementation cost of their legacy systems and the previous lack of specialized software tailored to the industry. Overcoming these barriers is an important step for any insurance or space company looking to modernize.
Insurtech and spacetech companies see software (e.g. SaaS, AI, collaboration tools, etc) as a force multiplier: less staff doing fewer redundant tasks. Before the rise of these industry-specific software companies, companies had much less flexibility in growing their revenue. Often, growing revenue meant growing the staff count and all of its associated costs. New technology companies seek to remake this paradigm by helping staff spend their time on tasks that directly contribute to bottom-line revenue.
No article on the common traits between the insurance and space industry would be complete without discussing insurance in space. As long as humans have been launching spacecraft, the insurance industry has played a role in insuring against losses: from the (lack of) life insurance policies of the Apollo program astronauts to alien abduction insurance.
With space increasingly becoming the domain of private entities, insurers are being asked to underwrite greater and greater risks. For large geosynchronous satellites costing hundreds of millions with no way to repair once in orbit, companies are willing to pay huge premiums. Choosing to insure satellites in case of loss during loss or manufacturing defect that prevents it from completing its mission is becoming standard practice.
The workforce in the insurance and space industries are heavily comprised of the ‘Baby Boomer’ generation. And these ‘Baby Boomers’ are retiring. This has led to many companies in both industries struggling to hire qualified replacements and plan for future staffing needs.
Another issue being grappled with and exacerbated by the changing generational workforce is the brain drain of experience that occurs when older professionals retire. As both Insurance and Space are knowledge and relationship-based, retirements place a strain on how these sectors have traditionally done business.
In response, companies in these industries have begun to recruit directly from universities. One of the side effects of hiring younger professionals who recently graduated is the faster adoption of emerging technology. These young professionals are constantly looking for ways to improve manual or otherwise redundant processes. Contributing to this is that insurance and space have both changed drastically over the last 75 years in response to consumer habits. This means that entry-level insurance or space professionals experience a totally different landscape than their older counterparts.
Entering a Period of Uncertainty
As a result of both economic and political instability, Insurance and Space are entering periods of uncertainty. For insurance, the unknown effects of COVID-19 are another contributing factor to the hardening market. For Space, the battle over Low Earth Orbit (LEO) and commercialization opportunities is leading to the increase o new companies failing sooner than expected.
The instability in both industries is also leading to new opportunities for startups. In the early 2000s startups were primarily categorized as disruptive forces, threatening to put established companies out of business. Today, though, B2B startups see themselves as change enablers for established companies. Rather than outright disruption, startups seek to use their technology to help their partners innovate and gain efficiencies.
Insurance and space? Check. Bold? Also, check. Legacy industries like space and insurance have commonalities that run deep; so deep in fact that they may not be clear on the surface. Over the next ten years, both industries will need to navigate a plethora of external factors – the most important being working with technology startups and recruiting new professionals to fill the ranks. While these challenges abound, the last 75 years have proven how resilient these two industries are and illuminate the bright future ahead..
About the author:
Colby Tunick is the CEO of ReFocus AI, a technology startup helping insurance professionals make more revenue. He has worked in both the insurance industry at the California Earthquake Authority and in space technology at Voyager. In his spare time, he enjoys thinking about planetary transportation insurance and being outdoors mountain biking.