Insurance company executives don't expect the industry to see disruptive changes in the coming years, according to a recent study. Investors' faith in the future of insurtechs remains unbroken.
As part of our joint study with Versicherungsforen Leipzig on the future of private health insurance in Germany, company executives were asked about the challenges posed by insurtechs. In essence, the management bodies of insurance companies do not expect any disruptive changes in the market in the coming years. This confirms an impression that has emerged in recent years, namely that insurance companies and insurtechs are primarily concerned with cooperation rather than confrontation.
Meanwhile, the young companies continue to be given a lot of confidence, which is also reflected in the investments in the capital-hungry start-ups.
Insurance companies are also investing in the record year 2020
For a long time now, it has not only been institutional investors who have provided insurtechs with money; insurance companies have also invested in the young companies. The most prominent recent example is HDI, which acquired a majority stake in the insurtech Community Life. The company, which was founded in 2013, offers fully automated online contracts for term life and occupational disability insurance. The aim of the acquisition is apparently to launch its own profile in digital sales.
2020 was undoubtedly dominated by the pandemic, but it was also another record year for insurtech investment. The big deal was a EUR 100 million funding investment in the company WeFox in December. Among other things, the company will invest this money in the development of a prevention solution based on the networking of smartphones and other data. The aim is to warn users in good time of dangers, for example, reminding them to close open windows because a storm is imminent, or to pay attention to road conditions because they are approaching an area where heavy rain has just fallen.
As the management consultancy Willis Towers calculated, just under EUR 6 billion was invested in insurtechs, around 12 percent more than in the previous year. This impressively underlines the dynamism of the market and the expectations placed on newcomers to the industry.
Insurtechs: Partnering with insurance companies through whitelabeling and digitalization
Digital patient records, apps on prescription, online consultation, health management via wearables, networking via IoT, straight through processing, changing customer expectations, the growth of the platform economy and the associated ecosystems, significant advances in artificial intelligence – the list of topics that insurance companies need to work on in order to keep pace with digitalization despite costs and regulatory pressure is long. Too long to manage in a timely manner and on their own.
Insurtechs focus on precisely these topics; selective cooperation with the young companies, or as in the case of HDI, complete takeover and integration into their own organization; this makes sense for insurance companies in order to move forward more quickly and secure innovations.
Away from the traditional brokerage business as a multiple agent, many insurtechs have also recognized this and offer their solutions to companies as white label solutions. Hepster from Rostock in Germany, which recently raised 10 million euros, wants to further expand its platform for embedded insurance. Hepster offers a whole range of digital applications for insurance groups and third-party providers. This is an opportunity for insurance companies to meet customers in completely different contexts and to do business, for example, in the context of a digital application for a leasing contract, at the counter of a car rental company or in online shops.
Investors worldwide are convinced that insurtechs will become drivers and vehicles of innovation. A development from which insurance companies will also profit in the end.
Would you like to learn how insurtechs are driving digitalization? Then please read this blog post.