Breaking Billions – Insurtech on the Rise.
An Analysis of funding in Europe and 6 interesting insurtech by Florian Graillot (astorya.vc) and Dr. Robin Kiera (digitalscouting.de)
InsurTech is an enormous industry whose global market size is projected to reach US$ 11940 million by 2027. Ever since the first insurtech startups tested the waters in 2010, it has been hotting up and on a constant path of massive development.
As if the InsurTech space’s upward trajectory isn’t high enough, the pandemic even accelerated its growth. During the third quarter of 2020, InsurTech firms globally raised $2.5 B in funding across 104 deals led by the American health insurance Bright Health for its $500 M Series E round and Lloyd’s of London syndicate Ki Insurance $500 M investment.
While the always-leading North American InsurTech market slowed in 2020, it is an interesting year for the European InsurTech market. Aside from Ki insurance, the French Healthcare InsurTech Alan and the Pet InsurTech company Bought by Many contributed to Europe’s exemplary performance.
2021 couldn’t be more exciting for Europe as many EU InsurTech companies are propelling to the unicorn status. The London-based InsurTech Zego gained the UK its first insurtech unicorn status from the company’s $150 M Series C funding. Not long after, Bought by Many reached more than $2 B valuation following its Series D funding round. Germany’s wefox also secured a whopping $650 M Series C round. As of this writing, 2021 has already surpassed the all-time high European InsurTech records in 2020.
As we enter another quarter of the year, new players will enter the European InsurTech space. New trends will emerge, new market behaviors will surface, new venture capital investments will break a record – and we should keep track of all these changes.
One place to keep track of developments and get real-life insights into insurtech companies is the EU InsurTech and Investment Show by Florian Graillot, founding partner of astorya.vc, and Dr. Robin Kiera, CEO of Digitalscouting. Here are six interesting learnings from six leading European insurtech.
Data and AI as the king of innovation
Anthony Peake, CEO of Intelligent AI Limited, is a huge believer in AI as a key innovation tool. Their AI and Data Analytics solutions disrupt risk management that reduces costs and increases customer engagement.
“AI is fantastic for being able to fast forward and rewind history”, Anthony said during the live show. Based on the data gathered, it allows them to predict when and where risks might be coming and where the market is heading. To highlight the importance of data, Anthony shared the Grenfell tower incident, which had a fire insurance loss estimated at up to £1 billion. He added that 79% of properties worldwide are underinsured because they don’t know the actual value of the building for insurance. Lack of data? Probably. It is worth noting that data doesn’t work on its own. It isn’t about how much data we have but how we can bring data together intelligently.
Flock, a motor fleet and commercial drone insurance company, also relies heavily on data to quantify risks. It helps them offer cheaper and flexible policies.
Antton Peña, its founder and chief product officer, explained in the live show how their technology and business model is helping fleet managers. By analyzing the vehicle, the driver or the pilot, the environment (e.g., type of road, weather) using vision processing and big data techniques, they can provide safety precautions and offer fair pricing options.
Intelligent AI Limited and Flock are just another proof that insurance is a business of saving lives. Imagine how many more lives we can save with the availability of data and the power we can have over it.
Modernizing legacy systems through core insurance IT
As one of the oldest business industries, insurance companies have been fighting against legacy systems for the longest time. Why can’t we get rid of it? Bringing in technology in the organization isn’t as easy as it sounds. The transition is also far from rainbows and butterflies, not to mention the very high cost it would take.
According to Pierre Dubosq, CEO of tech11, most legacy systems are working and stable, so many insurance companies still rely on them. Today’s struggle is the lack of competent people who could maintain it and the increasing pressure brought by the rapid acceleration of technology.
Through tech11’s Legacy Replacement approach, small to medium companies can modernize their existing core legacy backends. Digital Speedboat is another approach that allows fast onboarding of new and tech-equipped distribution channels.
Tech11 aims to provide a central vehicle for digital transformation for E2E insurance and P&C insurers through core IT solutions. In reality, we can’t dump-off legacy systems just like that, but we can slowly adapt to a whole new era of digitalization. Tech11 can answer the question of how they can work together without replacing the entire existing old systems.
Understanding a full-stack health insurer in Germany
Ottonova is a full-stack health insurer in Germany led by Roman-Marcus Ritwegger. They topped the funding round of August for a successful €40 Million Series-E Financing Round. In the recent live show, Roman mentioned that the fund would be used to increase business power and expand customer acquisition.
“The Apple of Insurance” – ottonova applies apple’s logic of owning the software and the hardware to provide a great customer experience. It is not an easy path to take, but Roman believes they can only fulfill their business model if they opt to be a full-stack company since inception. Several insurtech early successes started as brokers or MGAs before going full-stack to enjoy the flexibility and improved unit economics.
Full-stack insurers in Germany acquire their own license regulated by the Federal Financial Supervisory Authority (BaFin). They mainly focus on the supervision of the country’s financial institutions to maintain the safety and stability of the whole financial system. In a world where the InsurTech startup space is getting bigger, Kathleen Köhn, in an interview with The Digital Insurer shared that BaFin views it as an opportunity for competition that consumers could benefit from.
Entering the life insurance market in the UK with a hybrid business model
We all know how important life insurance is, yet we don’t know that much about it. This often leads to getting the wrong insurance policy or, worse, not getting any life insurance at all. Anorak Technologies wants expert financial advice accessible to the mass market for them to have a good understanding of life insurance’s complex preposition.
The life insurance industry in the UK is huge. As of July 2021, the majority of the 362 authorized insurance in the country are life insurance carriers. David Vanek, CEO of Anorak, is very much aware of it. But the openness of the UK to innovation and the savviness of consumers in technology still make the UK a good breeding ground for an InsurTech like Anorak. Besides, David is also proud of their hybrid business model that will be their competitive edge against the competitors in the country.
Automation and human expertise – David and his co-founder find these two a perfect combination in providing the best customer experience. Being an independent online broker made them realize that customers prefer an actual person’s recommendation and advice in making insurance choices. Anorak makes this process instant, tailored, and just right for everyone.
The massive success of wefox
From unifying all the business brands to opening a new tech office in Paris, more than the unicorn status attained, wefox proved to have grown significantly since 2015 for the crucial leaps they have taken.
Data analytics is wefox’s leverage against the competitors. They do not seem to grow by buying the market and burning through cash as many suspected, but actually by ruthlessly selecting which risk they take and which not. That is why wefox was able to announce that it had reached profitability and record growth simultaneously. If wefox can scale the AI-driven selection of risk, it may have cracked the nut of what many insurers worldwide are working on.
This year, wefox has already laid out its plans, still with growth and profitability as goals. In fact, not long after the live show with Julian Teicke, wefox notched another record-breaking US$3 billion valuation after closing a $650m Series C round. To date, it is the largest Series C for an insurtech globally.
The conclusion we can draw from it is that taking risks and embracing innovation is the first few steps to achieve something disruptive. It may sound overwhelming, but the action doesn’t have to be grand in the beginning. Growth comes easy when you start from a small number. A small act of change could make a big difference.
Europe is in one hell of an InsurTech ride that we’re all eyes on. We’ve been through the long and bumpy road towards success, and more startups are about to take the same path. In the coming years, more successful funding rounds will indeed dominate the headlines of insurance articles. There will be new players to the list of EU’s growing InsurTech Space. We’ll hear expansion, new product launches, revenue growth, and a few more milestones. But more than anything, it all leads to innovation and happy customers that will drive the Insurance industry.
This article is a product of the successful collaboration of Dr. Robin Kiera and Florian Graillot.