{"id":2510,"date":"2022-04-28T10:36:44","date_gmt":"2022-04-28T14:36:44","guid":{"rendered":"https:\/\/insurtechadvisors.com\/?p=2510"},"modified":"2022-04-28T10:36:44","modified_gmt":"2022-04-28T14:36:44","slug":"the-root-of-moats-past-1q-2022-results","status":"publish","type":"post","link":"https:\/\/insurtechadvisors.com\/old\/2022\/04\/28\/the-root-of-moats-past-1q-2022-results\/","title":{"rendered":"The Root of Moats Past: 1Q 2022 Results"},"content":{"rendered":"

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On Wednesday, Insurtech Root<\/a> announced the first quarter 2022 results, most of which show improvements, which I will discuss in more detail shortly. Root also announced the intention to carry out a reverse stock split, which interestingly will have the potential for long-term dilution, as they retain the right to issue the same number of additional shares. However, there is a statement at the very beginning of the shareholder letter that, in my opinion, defines who the Root leadership believes to be them – technologists. And perhaps this is why they will continue to struggle to pass the Insurance credentialing exams.<\/p>\r\n\r\n

According to Alex, Dan and Rob:<\/p>\r\n

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“Nevertheless, we drove progress on what makes us special — our ability to build world-class products through the very best technology. At the heart of this is our\u00a0technology\u00a0<\/strong>moat.”<\/p>\r\n

Root’s 1Q 2022 Shareholder letter<\/cite><\/p>\r\n<\/blockquote>\r\n<\/figure>\r\n\r\n

For thousands of years, moats protected castles and rulers. Companies try to copy this in order to maintain their supremacy. However, in order to resupply a moat, you have to open the gates and lower the drawbridge. So, at some point, you have to abandon your defenses. If you have a completely closed ecosystem, you suffer from inbreeding and eventually become weakened and either extinct or captured. Many companies thought they had moats only to find that others were able to hurl themselves over them. Remember Kodak, Nokia, Blackberry, The Hummer, Blockbuster, PanAm, Tower Records, Polaroid, MySpace, and the list goes on….<\/p>\r\n

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I can’t say if Root will suffer this death. What I can say, is that technology companies parading as Insurance companies have traditionally failed or been acquired at rock bottom prices. As I wrote earlier<\/a>, the Insurance industry has a very simple operating model. Collect more premium than all your expenses put together. To do this successfully, you must combine technological advances with the historic rigor that comes from an industry that is many centuries old.<\/p>\r\n

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Table of Contents<\/p>\n