An executive at a $771 billion life insurance firm explains how it's teaming up with digital upstarts to disrupt itself

Thomson Reuters

The world's oldest woman, Jeanne Calment, 120 years old, is kissed by two young girls during a special ceremony in a retirement home.

• Amanda Wallace, head of direct to consumer at insurance giant MassMutual, told Business Insider that insurance companies, which are traditionally conservative, can benefit from partnering with startups.
• Wallace highlighted Cake, an end-of-life planning tool MassMutual is working with.

Any life insurance company worth its salt can walk you through the policy you need to ensure your family is compensated if you die unexpectedly.

But how about figuring out what to do with your Facebook when you're gone? Or if you'd like to be honored by your friends with a stiff drink on the anniversary of your death every year?

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As 1 in 5 US residents are expected to be at retirement age by the year 2030, insurance companies are increasingly using new digital platforms to cater to a growing customer base.

It's a tricky problem, as rapid change isn't the forte of most life insurance companies, said Amanda Wallace, head of direct to consumer at insurance giant MassMutual. For that very reason, life insurance firms are beginning to look to agile startups for inspiration.

Read more: Top venture investors from Bain and a16z tell us the 4 hottest fintech themes they're watching in 2019

Areas like payments and wealth management have garnered lots of attention from fintechs over the years, but the insurance industry has been a slower to adopt new tech.

Patchwork regulation, which in the insurance space is driven by state insurance commissioners, has been one holdup. But the biggest issue facing insurance companies is their risk-averse nature.

"Insurance companies are conservative. We are really good at managing risk. That is what we excel at. That is how we make sure that we can keep those promises for the next 80 years," Wallace said. "We do a huge disservice if we don't innovate it, and it is the same model it is today that it was 20 years. Things are changing and we have got to grow and change with it."

The insurance industry is shifting as more startups are starting to emerge with digital-based offerings, and venture capital investment firms are taking notice. Health-insurance startups like Oscar and Devoted, property and casualty insurers like Lemonade and Metromilem, and wealth-tech companies like Ladder and Halo have all grown in recent years.

Read more: It's a fintech frenzy - top venture pros spill why the $11 billion party won't end anytime soon

MassMutual, which reported $771 billion in assets under management at the end of 2017, has made strides to work with startups. The life insurance giant is participating in the MassChallenge accelerator program, which pairs financial firms in the Boston area with local fintechs.

One company MassMutual has teamed up with is Cake, a digital end-of-life planning tool that helps users manage legal documents like wills and share last-wishes such as funeral plans.

"[Startups] don't have the same level of constraints that we have," Wallace said."Whether it is regulatory, financial or, frankly, our own mind set. And their burst of energy and enthusiasm and thinking not even in a box - because they don't have a box - creates a lot of value for us as an organization," she said.

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