About 10 years ago, the first startups stepped up to revolutionize the insurance industry. Initially not taken seriously by the traditional insurance companies, then increasingly eyed critically, the industry continues to develop. InsurTechs are driving the digitalization of the insurance industry as partners, but also as competitors.
The first InsurTechs ambitiously announced their intention to roll up the market. It was time for new digital insurances. No more paperwork, faster decisions and insurance coverage at the tap of a finger. The first wave of insurtech start-ups courted direct customer access and thus primarily offered services designed to appeal directly to the insured parties. Contract managers or tariff comparison calculators are the best-known examples of these first start-ups. The companies focused on the digitalization of the consulting and brokerage processes of classic products (SUHK), thus effectively taking over the role of the broker, or offered supplementary services related to the topic of insurance.
However, the start-ups had the same experience as the fintechs in the banking environment. The customers accept the new functions and also the (trade) press is enthusiastic. But away from the traditional brokerage business, the services are difficult to monetize. Although users find a contract manager practical, they are only prepared to pay money for it to a limited extent.
Change of business models and new goals
Some first-generation companies pivoted their business model based on this experience. The best-known example is certainly WeFox, which launched "One", a digital insurance company. Fintechs from the banking segment are also role models here. There, companies like N26 or Revolut, distinguished themselves as "neo-banks". These are characterized by rapid growth in user numbers, while at the same time pointing to a high level of customer satisfaction. However, it is still unclear whether digital insurance companies such as One or Coya will actually succeed in establishing themselves as full-fledged alternatives to established insurance companies. This is because, although the young companies show considerable turnover, they also pay a high price through reinsurance premiums because there are considerable loss ratios.
A different approach is taken by many second-wave start-ups, which position themselves more as partners for insurance companies and brokers and whose technologies offer market participants the opportunity to optimize their own processes or integrate new solutions to complement their solution portfolios. 
How InsurTechs are changing the insurance world
The main advantage of a startup over companies already established in the market is undoubtedly that they can experiment with new technologies without being burdened by IT limits and traditional business models. And thanks to the adaptation of fresh technical approaches and the consideration of customer behavior shaped by e-commerce and open banking, they open up new perspectives for the insurance world.
- Increasing efficiency: A whole range of InsurTechs are clearly positioning themselves as partners for insurance companies, offering tools and solutions for increasing the efficiency of processes along the entire value chain. Examples include technologies and apps that take care of claims management, optimize document capturing and classification via AI, or help with fraud detection using pattern recognition and machine learning.
- Smart contracting and decentralization: If we follow the hype cycle developed by Gartner, blockchain technology should be at the point where the valley of disappointment has been overcome and productive solutions are being developed. Alongside initial approaches to smart contracting, i.e. options for automated contracting, Etherisc may be one of the most notable start-ups The German company is developing a solution that could do without insurance companies and brokers as intermediaries.
- Risk prevention: In the prevention of risks, insurance companies reduce the probability of occurrence of a loss and its amount. At the same time, companies can also position themselves as partners of their customers if potential risks are minimized. Among the start-ups working on such solutions, the transition between InsurTechs and medical technology or smart homes is fluid. The company Preventicus, for example, offers insurance companies a smart solution that can detect users' cardiac arrhythmia via smartphone. This can be used, for example, to detect atrial fibrillation of the heart and reduce the risk of stroke if treated appropriately. Smart home modules monitor glass breakage or water damage and can thus minimize risks that would otherwise be borne by the household insurance. In the area of motor vehicle insurance, too, applications are now being developed to encourage more defensive and compliant driving. Via telematics, the data then ends up with insurance companies, who can react to it with discounts or special offers.
- Pay-per-use models: Another major field of activity for InsurTechs, and thus for the digitization of the industry, is the development of solutions that enable "pay-per-use tariffs" or "spot insurance". Examples are insurance policies that can only be used on a daily basis, ideal for flexible customers who only need such insurance when they are actually traveling by car.