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17 January 2020Analysis

Insurtech and captives: a love story

In 2018, two years into my stewardship of the group captive PCH Mutual, a risk retention group serving about 1,700 long-term care providers, I received a call. “Might we be open to a unique opportunity?” I was all ears.

The opportunity, it turns out, is poised to revolutionise long-term care. PCH’s first insurtech partner, CareValidate, offers a solution to a major industry-wide problem—monitoring residents without infringing on privacy, using recording devices or wearables. With our input, the hardware and software-as-a-service (SaaS) has developed to include an application designed to enhance caregiver engagement and retention—yet another monumental problem facing our industry.

“For the price of the engagement we obtained valuable analyses that would otherwise have been prohibitively costly to the company.”

If the application develops as expected, at the end of the rainbow is a treasure trove of data that could lead to artificial intelligence that predicts adverse events before they occur, making them preventable. In other words, the upside of our insurtech partnership is an insurer’s dream which serves the ultimate purpose of our captive programme—the wellbeing of our member-insureds’ residents.

Being open to opportunity soon put PCH in the ring with another insurtech partner. This time the solution offered was on the enterprise side. A.I. Insurance is developing predictive analysis for reserve-setting. The ability to more accurately predict reserves early in the claim cycle promises to be a game-changer.

This is particularly true in the captives space where the profit margins are thin and capital and surplus hang in a delicate balance.

Working together with PCH, A.I. identified a need that was a precursor to the machine-learning component of its application—an easy-to-use claims management system with file management and report-generation capabilities.

In less than one year PCH’s third party claims administrator is running the new system tailored to its specific needs for a fraction of the cost and hassle of the legacy systems currently serving the commercial insurance industry. Even better, having built a strong relationship, the executive and development team is at our disposal.

Good partners

The partnership between a captive and an insurtech startup requires transparency and mutuality. Startups need their first customers to participate in a transaction (some remuneration), collaboration, vision, patience and an appetite for risk.

Captives must garner some short-term benefit balanced with the long-term reward. We are ever mindful of our members’ interests, our board, regulators, rating agency, actuaries and auditors.

There are many due diligence metrics to consider when engaging with an insurtech partner: an evaluation of the problem the insurtech company seeks to solve; the likelihood of success; the knowledge and experience of the founders (personal references or Google and LinkedIn searches are helpful); any seed money or investment prospects; and affiliations with tech incubators or accelerators which may lead to investors and boost the odds of success.

Within months of our first contact, both our partners were admitted into renowned tech accelerators.

The overriding question, even if the insurtech company fails (the overall tech startup failure rate hovers around 90 percent), is ‘will the monetary investment and sweat equity yield something of value to our member insureds?’.

In PCH’s case, the answer was yes. Integral to the work our insurtech partners undertook was an in-depth analysis of our claims history since the company’s inception in 2004. For the price of the engagement we obtained valuable analyses that would otherwise have been prohibitively costly to the company as standalone projects.


In over a year, PCH’s return on investment has compounded. We have built trust and collaborative relationships with highly-skilled partners dedicated to solving pressing industry problems that transcend a simple arm’s-length transaction. We have elevated the profile of our captive, engaged our member insureds and actively listened and demonstrated our commitment to their needs.

This yields a multitude of marketing benefits. If either insurtech partner successfully scales, PCH will enjoy the rewards of being the first champion of these innovators.

The captive insurance industry is fertile ground for insurtech development. With few resources to build tech solutions in-house, the most efficient, cost-effective way to stay in step with industry innovation is early engagement with fledgling insurtech companies such as CareValidate and A.I. Insurance.

Startups cannot grow and thrive without partner companies to provide practical experience, offer pilot partners and legitimise their model by engaging as a customer. The bureaucracy of behemoth insurance companies can quash the creativity and agility integral to startup success.

With competent, streamlined management, captives reside in the sweet spot closest to the businesses they serve and their consumers. There is no need for an algorithm to predict the benefits and weigh the risks of this match.

Julie Bordo is the president and general manager of PCH Mutual Insurance. She can be contacted at: