BI Intelligence Oct. 14, 2016, 11:41 AM
TheGuarantors, a New York-based insurtech, has launched a platform that makes it easier for renters to get a guarantor for a lease, Insurance Journalreports.
The platform connects renters unable to secure a lease independently with an insurance-backed guarantor through the Hanover Insurance Group. A common model in the US is to mandate that renters have a guarantor — a person who guarantees to cover the costs if the renter becomes unable to make a rent payment. The concept of TheGuarantors' platform is to improve renters' access to such guarantors, and in turn, to boost landlords' confidence, making them more willing to sign a new lease with the renter.
It aims to provide a highly automated digital service for all parties, while making it easier for renters to find an apartment. Prospective tenants who need a lease guarantee to meet a landlord's criteria can submit an application and upload supporting documents to the platform for free. TheGuarantors then places the renter into one of seven different risk categories based on their credit score and liquid assets. Approval requires a salary that is around 27x the monthly rent — this is much lower than typical requirements in New York which can be around 40x the monthly rent.
Fees are based on the risk category, the renter's financial situation and nationality — US citizens pay 5%-7% of the annual rent while noncitizens pay 7%-10%. Once the landlord confirms the lease details, renters have to sign a Lease Rental Bond backed by Hanover, and the landlord then secures the property for the renter. Landlords can log into a dashboard on the platform for an overview of their rental activity, and can easily check when tenants' policies are expiring, and how far along each application is.
TheGuarantors has tapped into a huge opportunity in a huge market. In fact, 64% of New York's housing market is rental. Moreover, rent prices are very high in most areas of New York, which means many would-be renters are locked out of the market because their salaries do not equate to 40x the monthly rate. TheGuarantors can therefore be reasonably confident of high uptake among renters, while landlords are likely to appreciate the improvements to the efficiency of their business the platform can provide. Meanwhile, Hanover gets another distribution channel.
The global insurance industry is worth nearly $5 trillion, and insurance companies are at risk of losing a share of this valuable market to new entrants. That's because these legacy players have been even slower to modernize than their counterparts in other financial services industries.
This has created an opportunity for a group of firms known as insurtechs. These startups are leveraging new technology and a better understanding of consumer expectations to increase efficiencies in the insurance industry. Some are helping incumbents deliver better end products, while others are directly competing with legacy players.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on insurtechs that looks at the drivers behind the increasing number of insurtech companies, how they are helping or disrupting legacy players in the insurance industry, and where legacy players are innovating off their own backs.
Here are some of the key takeaways from the report:
- The opportunity is currently biggest in the US and Europe. That's because these regions have large, very mature insurance industries.
- Insurtechs' products and services mostly target retail customers. This includes small businesses and consumers.
- Most insurtechs are acting as enablers. This means that they offer products and services that help insurers and reinsurers improve their processes and better serve customers.
- Of the main players in the insurance industry, brokers are most at risk of disruption. This is because insurtechs can easily replicate their services and are solving historical industry problems faster than legacy players.
- Legacy players are also innovating. In particular, insurers and reinsurers are investing in insurtechs and fintechs working with relevant technologies. At the same time, they are improving their own direct-to-consumer digital interfaces, increasing their disruptive threat to brokers.