The “Evaporation Theory” & Where the Trail of Money Disappears: Insurance

written by Garrett Goldberg

At Bee Partners, Michael and I pride ourselves on being pragmatic investors at the earliest stages of venture creation. Invest in Founders with deep market insights solving specific business problems. If the enterprise pain is not acute enough for the developed solution to be able to extract significant, ongoing economic rent, it’s not for us. Perhaps oversimplified, but valid nonetheless.  It would then make sense that we must understand where this economic rent is continually being extracted (perhaps disproportionately), and invest along those highways into innovative, technology-enabled, disruptive businesses. I call this my “Evaporation Theory” – a living thesis on where the trail of money disappears and thus, where we should look for businesses to support.  


Given Embroker’s recent Series A financing, and CB Insights’ recent Future of Fintech Conference and subsequent blog post about the future of the insurance industry, it seems appropriate to start with Insurance. Our new friend Brendan Dickinson of Canaan Partners recently penned a great article on how and why there are specific opportunities in insurance today. We wholeheartedly agree with his assessment, and were looking in the space to begin with because it’s an obvious road to….where? How many insurance checks have we all cut, seemingly into oblivion?  

Yes, we know this money comes back around to those who need it the most at crucial times. Since the Enlightenment in Europe (or well before, if you want to go there), risk has been distributed among the masses in order to protect the acute loses of the few. Seems fair. But someone is extracting money from this cycle of commerce. Also seems fair as they administer the service. But given the level of information flow, transparency, and technology we now enjoy, can’t we temper this cycle to lower the costs for all?

However, if this was easy, the large carriers and brokers would be innovating from within. It’s difficult to navigate to true innovation given the constantly changing legal and business landscapes.  Users are frustrated by entrenched data systems that obfuscate true coverage or make it difficult to understand the “what ifs”.  When products get so complicated (like insurance policies) and people struggle to really understand them, there’s a heap of potential value lost on both sides – buyers and sellers – by under or over buying.

Lastly, there’s even the thought that insurance is an industry that distinctly lacks younger people working on forward-thinking solutions. If the majority are approaching retirement, it should more urgently usher in new systems with entirely new opportunities. Whatever the combination of reasons, there is a sense of change required.   

At Bee Partners we continue to be bullish on this mighty road, whether it be brokerage, risk assessment, underwriting, or adjustment.  Perhaps more accurate and timely data collection could lower system costs or time to reimbursement? Or, an aggregation of big data analyses could bring clarity to the underwriting processes of both current policies and emerging insurance needs. All this to say, there’s plenty of room for innovation across all aspects of insurance, and definitely across the highways that make up our “Evaporation Theory”!