Eric Allombert
Eric Allombert
Chief Marketing & Communication Officer

Insurtech, An Enabling Model to Connect Digital Distributors and Insurance Providers

~ 8 minutes

The insurance industry is modernising with the arrival of innovative companies, such as Wakam, a digital B2B French insurer. In this interview, Eric Allombert shares his vision on the new generation of insurance industry solutions.

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?

The market is still growing, especially when we compare it with Fintech a few years ago. Many larger investments and funding are going to Insurtech technology companies. On the other hand, now it´s getting more mature, we will continue to see a consolidation in the market. We have already seen several players merging in Europe. In France, for example, Luko, a fast-growing home insurance MGA, just bought Coya, a German Insurer to obtain an insurance license and operate in Europe.

“There is maybe also a tendency towards a bubble and people are realizing that the investments they have been making in these Insurtechs are growing extremely fast but are not profitable, will not benefit them in the end.”

In regard to post-IPOs results and the exponential growth of these startups. Do you consider there’s more hype in Insurtechs than real impact in the market?

They are not just in one market. If you take the example of Lemonade, they have minimal penetration in Europe, like in the German or French markets. Of course, they needed cash, but instead of getting the cash through funding, they wanted to go to the market, and it is more dangerous because it's very expensive. Marketing is very expensive for these companies because most of them are distributors, and the cash acquisition costs are very high. IPOs will still probably go on and hopefully, we will have good results in the market.

“As Wakam, we have a very specific role, we don´t invest money into startups, but we help them grow by providing them trust, capacity and business expertise.”

Looking at your contribution to Insurtech investments do you think your role is crucial for the Insurtech success or even to avoid the possibility of a new bubble?

As Wakam, we have a very specific role, we don´t invest money into startups, but we help them grow by providing them trust, capacity and business expertise. We help startups do business by creating bespoke insurance products for them and their clients. Since we are a digital insurer, we make products and we deliver and distribute those products through our partners who are mostly Insurtechs, MGA, or brokers, by allowing them to do business and putting the product rapidly to the market.

We are also able to quickly adapt products and the pricing depending on the results of the startups because they are in the form of APIs. And we will not hesitate to take a calculated risk by working with startups and ensuring they have different or new models or that they are working on a new type of risk.

As an insurer we collaborate with many young startups, to see how to make the right product, with the right warranties, at the right price. This allows them to sell their products effectively.

Some of them will become a Unicorn so they will turn to be a good investment because the premiums we have with them will grow accordingly. If I take the example of Zego, which is a UK Unicorn now, we were one of the first insurer to work with Zego four years ago at the beginning of their journey.

The story of Wakam is different, we participate in the development of startups, always as an active player. This year alone, we have done over 30 deals with startups. For instance, in mobility, we helped Cuvva, Flitter, Collective benefits, and Laka, and in pet insurance, we worked with Dalma.

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?

There are different types of Insurtechs, some of them are distributors and some of them are technical enablers, who provide a tool or technology like artificial intelligence. Some insurers will try to cooperate or invest in startups that might provide them with the right tools to be more efficient. Others will invest in companies that focus on distribution, as we mainly do at Wakam.

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?

The health market is complicated because it's very regulated. For example, in Europe, GDPR makes the handling of people’s data a highly sensitive matter. As the regulations are never exactly the same, it becomes very difficult to scale internationally and you must invest in country specific compliance, which requires significant time and investment. However, we feel confident at Wakam that there are business opportunities in health.

Otherwise, commercial lines and distribution channels are also important, especially when discussing embedded insurance. The distribution channels, especially the digital ones where they are selling products or services, can embed insurance very easily and seamlessly in the customer journey, at very low prices.

Why do you think Tech Giants are not yet investing in the European Region. especially in 2021 when Europe stood out among the rest of the regions?

Tech Giants, mostly Americans or Chinese, first invest in their domestic markets, which are huge and with high growth, which is probably why they start there. Moreover, the sheer size of the population in these countries supports this strategy.

Regarding Europe, it's more complicated and more regulated. One country is different from the other, so you don't have so much ability to scale. However, I do believe that they will begin to invest in Europe in the future.

"We provide the product and distribute it to partners that we are connected to via APIs. I would rather believe in the enabling model than the other models.”

We have seen mainly 3 roles in the ecosystems: owner, enabler, and participant. On the one side, we see insurers are participating in different ecosystems actively partners, but sometimes insurers are intending to build and own their ecosystems. What are the roles that you think that Insurers are playing in different ecosystems?

It depends on the insurers and their strategy, but for insurers like us, we would rather be enablers and partners. We believe that if we work in partnership with the Insurtechs or business and IT, they grow together. We enable them to do business on a new type of usage or risk.

In the case of owners, they like to control everything and build their ecosystem with distributors or with the service they can provide. However, we think that it's better to partner, as we cannot do everything. We believe that now it is better for every player to work with the best in their field. Especially with open insurance, APIs, and digitalization of all the parties, it's easier to connect and do business in this way.

“We can lead the ecosystem by leveraging data and digital tools like APIs.”

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

We provide a technology platform to all our partners, enabling them to access all our products and services, like the creation of products or their technical monitoring. This is how we lead the ecosystem that we have with our partners based on the technology and APIs we have.

On the other hand, we are also the insurer, we have all the technical data once a product is on the market. We can lead the ecosystem by leveraging data and digital tools like APIs.

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

We need the technology to be compliant, which is one of the pain points. The time to market might be affected by the regulation. We need to have the technology to react quickly and, in our case, to build the products quickly and put them on the market as fast as we can.

“We believe that sharing data is very important, so when we work with a partner distributing our products, we share all the data, including the technical data and the financial data, such as loss ratio.”

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

The difficulty for larger incumbents and the old-fashioned type of insurers is their legacy systems. It is difficult for them to be open because they have a legacy system that is by nature very closed.

We started from scratch seven years ago and rebuilt all our systems. We are very open; our products are based on APIs that are connected to all our partners, be they distributors, contract managers, or claim management. The maturity of our company is very high regarding open insurance.

There is also a question of culture. Some companies prefer to keep the data for themselves. We believe that sharing data is very important, when we work with a partner that distributes our product, we share all the data, including the technical data and the financial data, such as loss ratio. The partners have access to these data in our tech platform and they can see all the data with full transparency. The more data we provide, the better it will be for them and us.

If a product is not working well, for example, the frequency of the claims is too high, we can correct it very quickly. We have the tech tools to adapt the product to make new pricing and since everything is online/in API, we can make changes in a matter of hours.

Looking into the crystal ball, what are your predictions regarding the Insurtech sector for the coming years? What trends do you think are becoming more important?

We are observing with interest the platforms that connect digital distributors and the providers of insurance products. We have companies that want to distribute insurance products. On the other hand, we have the insurers that make the product. We think It's a very interesting ecosystem and it's a new way of doing business.

Who was the Top Insurtech of 2021? Why?

We are already highly ranked in the list of the global Insurtech 100. Also, I would say Luko is a good Insurtech, they have great traction on underwriting. I believe this French company could become the next Unicorn.

Which was the top technology in 2021?

Artificial Intelligence is a very important disruptor currently and will continue to be, especially in the claims and pricing spaces.

What is the highest hype in the Insurtechs?

The next trend might be Crypto Asset insurance. I don't know if it's hype or trend. If it's a trend, crypto insurance might be interesting, being able to insure digital items in virtual worlds may be a new frontier for the insurance industry. This may even extend to the NFT space, where we have seen a significant amount of value placed on single items.