Interviews
Sibylle Fischer
Sibylle Fischer
Director Strategic Venturing / Startup Scouting
Baloise Group

Ecosystems and Data, the Interests of Tech Giants in the Insurtech Market

~ 7 minutes

Insurers are increasingly exploring the possibility of collaborating and building ecosystems strategically with startups, tech and industry giants. In this interview, Sibylle Fischer shares her insights on such collaborations and her vision for the future of the Insurtech ecosystem.


With the new historical investment rise, do you consider that the Insurtech market is still in a growth stage, or is it going more towards consolidation?

2021 was a record-breaking year for Insurtech.

This year, however, Insurtech’s growth trajectory is not on track to be as notable, with IPOs and the current price drop of public relisted shares influencing valuations.

However, I think this kind of correction could be healthy for the market overall, as investors become more selective and concentrate once again on the unit economics of startups, especially in Insurtech.

On the other hand, Insurtech has established itself as a known investment category and there remains a lot of potential for new entrants.

Consolidation has certainly begun (for example, the big acquisition of Metromile through Lemonade) and there is likely to be additional consolidation between startups. This will serve to help solidify market sizing, which is not so easy in a regulated market like insurance.

In regards to post-IPO results and the exponential growth of these startups, do you consider there’s more hype in Insurtechs than real impact in the market?

Although some Fintechs, like Klarna, remain privately held, it’s my opinion that many startups have been forced or pushed to the public market too early.

There have only been a handful of Insurtechs to go public this year, but my perception is many of them may have done so too early. They should have waited and, more importantly, got their unit economics right, because what we see now is this perception that they must be underwriting poorly or that their customer acquisition costs are too high (given that they are direct B2C companies). We all know how expensive it is to acquire customers direct B2C, as seen in the Insurtech market.

How do you see the evolution of the volumes of insurers’ investments in startups (both related and not related to the Insurance industry) in comparison to the last 5 years and how do you foresee it will be from now to the next 5 years?

Five years ago, there was a lot of hype around Insurtech startups and virtually every insurance or incumbent insurer was investing in the space, sometimes a little bit blindly. I think now with a lot of experience and work behind them, most have a much clearer picture of how to invest.

Corporate venture capital and investing startups are likely to maintain their relevance in the R&D arm of insurance because insurers need to understand how innovation works.

And while the days of blindly securing money in Insurtech has probably past, I do expect startups to continue to get investments, provided they have a clear value proposition and/or a unique approach. This is also in keeping with the financial objectives of the VC Fund. There might be some who want to collaborate with startups through investment, and others who want to build their ecosystem strategically.

“We're building out two ecosystems, Home and Mobility, where we actively and strategically invest in startups.”

Does your company consider itself an active player when it comes to investment and partnerships with startups?

We're building out two ecosystems, Home and Mobility, where we actively and strategically invest in startups. To build this ecosystem, our core businesses are working in collaboration with startup partners. I think it's important to diversify portfolios and a lot of businesses are insurance adjacent. For example, when you think about embedded insurance, the related startup doesn't necessarily need to be an Insurtech – it could just as easily be a distribution channel or something else.

“Innovation may come more easily, or naturally, with commercial lines than with health Insurance.”

Insurers are investing more and more in distribution channels and Commercial Lines of Business supported by Insurtechs rather than in Health companies. What is your insight on this? How do you foresee this trend for the following years?

Distribution is always a hot topic in insurance given that the product is still sold and not bought. Therefore, I think commercial lines and distribution channels are always a top priority, and innovation may come more easily, or naturally, with commercial lines than with health insurance.

The health market is difficult, especially if it goes into medtech or biotech -- something where we are not experts. In those cases, we are probably not the right investors, which is why insurance is keeping its distance when it comes to Health companies.

“I often have the feeling that the Tech Giants are afraid of insurance, I assume mostly due to regulatory issues, and as a result they keep leaving the field open for us.”

Tech Giants and Big Corporations are very into Distribution and Commercial this year too. Why do you think insurance companies and new entrants such as these companies move in the same direction? Are they competing for controlling these markets or do you feel is more a collaboration scenario?

It depends, but I would lean toward the collaborative scenarios rather than the competitive ones. I often have the feeling that the Tech Giants are afraid of insurance, I assume mostly due to regulatory issues, and as a result they keep leaving the field open for us. On the other hand, they are absolutely interested in the data and tech behind insurance.

Google did some investments in the health space and is becoming a well-being player, but this could change very quickly. I see them most likely acting as a collaborator because they can bring a lot of value to certain parts of insurance, especially when it comes to data.

“I see building an ecosystem as the primary interest of Tech Giants in Insurtech, because within every ecosystem you find insurance.” 

What is your perception of the interest of Tech Giants in the Insurtech market? What kind of value do you see a Tech Giant can bring to a young Insurtech?

I see building an ecosystem as the primary interest of Tech Giants in Insurtech, because within every ecosystem you find insurance.

Next would be data, or the data insurers might have access to. Sometimes it's not structured data, but creating a complete data lake combined with superior underwriting and customer relationships.

Tech Giants who enter these markets can open up entirely new fields of business. Because these companies are natively innovative, they can bring a lot of value to Insurtech startups, especially when it comes to making a product sellable, which is not always easy in Insurance.

How do you see the journey to ecosystems in your organisation?

All insurance companies want to be owners. That's why insurance companies are interested in building out ecosystems. To do this, they have to expand their business into other fields and become owners of that ecosystem. Insurance companies that are serious about building these ecosystems will also be sure to keep direct contact and increase customer engagement.

“When it comes to regulation and innovation, it's never been an either/or proposition, but rather a question of how to do both, best.”

What do you think are the main challenges that affect an insurer when we combine the terms regulation and technology?

When it comes to regulation and innovation, it's never been an either/or proposition, but rather a question of how to do both, best. That question is at the core of all regulated industry, many of which can be resistant to innovation precisely because of these challenges. But regulation on its own won’t lead to new technologies or approaches. Sometimes it can feel like a very real obstacle, hindering insurance companies from change and even preventing them from becoming more client-focused.

How would you define the degree of maturity of your company regarding participation in Open Insurance initiatives?

The PSD2 field helped open up banking, and in that instance regulation was a driver of innovation. I don’t see that happening currently inside our industry, but I do believe that API-fication can similarly help the industry expand into other distribution channels and products. And by doing so, insurance companies will be forced to deal with their legacy, closed systems.

Which trends do you see becoming increasingly important?

The rise of the Metaverse and Web 3.0, the next generation of the Internet – a connected, data-driven, decentralized smart web, could have some disruptive potential for insurance.

Which is the top technology have you seen in 2021?

Blockchain is becoming more important, but the technology is still young and evolving, and we are only now starting to see real use cases.

Who will be the next unicorn?

I’d be interested to see if we move to full-stack insurance from MGAs, or if MGAs hold strong and instead find their way into more distribution channels.

What is the highest hype in the Insurtechs?

I think there’s always a lot of hype around distribution channels, customer acquisition and customer engagement. I'm definitely curious about how this will evolve.

I also think you could also look at the conversation around embedded as another example -- how will old distribution channels evolve compared to new, embedded ones?

Photo by Jasmin Frei on Startup Guide.