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?
Generally, we see Insurtech accelerating growth, and indeed all of FinTech is seeing massive growth. That’s not just in my view but also when you look at the discussion happening, the growth is global. I think we are still in the early stages and there is more work to be done.
Of course, we must also consider the wider context. With the conflict in Ukraine and the potential for another COVID wave, it is difficult to predict where we will be in the near future. Particularly Ukraine, which has the potential to spiral into a more global conflict. This could reduce confidence and lead to an environment of reduced innovation, which is something I worry about.
We are still on a growth trajectory and are not slowing down, but we want to temper this, making sure our growth is steady and stable.
“The US will continue to dominate just because many big players and big funds are local there and also because it's a more homogeneous market than Europe.”
Do you think Europe will further reduce the gap with the US market in the following years?
That is certainly my hope, as we are not present at all in the US. So, a lot of our work is focusing on the non-US wealth, and in that sense, we see that China is doing a lot and leading the way in many areas, especially when it comes to customer experience, distribution models, and access to customers.
The US will continue to dominate just because many big players and big funds are local there and also because it's a more homogeneous market than Europe, with all the different laws and languages and local adoption needs. In the US, they do not face these issues. Last year we had a few big rounds, for example, wefox with $650M in just one deal and that is huge.
I hope that we will reduce the gap, but I think it will still be there. There is so much money in the US with a huge local market, but we will work on bringing the rest of the world closer.
“I think from a startup perspective, sometimes you don't want this corporate VC funds as an investor because it might close doors to other insurance companies.”
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?
I think we see waves in the insurance industry, where there is a push for collaboration with startups and then a pushback once they realise it is not easy to fit together culturally.
Also, what we see here are waves between the different companies, like aggregating everything and not looking at individual insurance companies, there is a growth trajectory in the sense that they want to be invested and have a part in the new business that is being built. So, if there is a new model on the market, they want to be part of it, then totally miss out, and that is a trend.
Many insurers have started to have their own VC funds. I think from a startup perspective, sometimes you do not want corporate VC funds as an investor because it might close doors to other insurance companies. That is also the reason that general collaboration with Tech Giants is easier for startups since they still have all the insurance companies open.
Overall, what we will see is that insurers will try to invest with a focus more on financial benefit rather than strategic benefit.
In summary, I see these financially-focused investment growing in the next several years in a more hands-off non-strategic way, but in a financial investment way just to diversify their future value pools.
In the startup investment strategies, it is well known that investors consider relevance to the other investors in the round. When participating in an investment round with other investors is there any preference for the type of investor? VC, Tech Giant, or another Insurer. Or do you just consider the startup to invest in and not the investors behind it?
Any investor will always look at the investors. So, in any investment scenario, you look at who is already there and that is part of the due diligence, but also the screening.
And where I think there will be more hesitation is if there is a competing company already there. Although I will say I am a big advocate of cooperation, working together in the market to offer a better solution to the client.
What remains obvious is that when you have competition, you don't want to be in a place where your direct competitor is already. Instead, you'll try to find companies where maybe the buyer is a Tech Giant or VC.
Insurers are investing increasingly 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?
We are currently working with our strategic partners to resolve their challenges around distribution. For example, we have an ongoing piece of work with HITS/Generali, looking at how they can improve their distribution, work smarter and augment their direct sales force.
In regards to investments, I see it more as metrics, it´s not either health or distribution channels, but distribution channels that can go across all types of insurance offerings. In the future, it will be about access to client acquisition costs, profitability, long term customer lifetime value. I think Distribution will continue to be super important.
“The biggest impact and value Tech Giants can bring to an Insurtech company is helping them with the distribution, getting access to the end client, and being smarter on how to reach those clients as well.”
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?
Both insurance companies and Tech Giants move into the same direction because for both their biggest asset is access to the end client. They have a trusted relationship in both cases and they will try to monetise this unfair advantage, an advantage a new Insurtech company will not have. So, the biggest impact and value that Tech Giants can bring to an Insurtech company is by helping them with the distribution, getting access to the end client, and being smarter on how to reach those clients as well.
Is it competing or collaboration? If we talk about a startup, then it depends on if they are invested in the same startup, but if not, Tech Giants might start to offer their own insurance offerings and solutions. And with that, potentially compete with existing insurance companies, leveraging their newest technology and superior insights into the end client.
For example, when we talk about Meta, formerly Facebook, they know everything about you. They know about changes in life events, so they could perfectly target you with suitable insurance when you marry or when you move in together or when you have a kid. They know all this data and potentially an insurance company does not. So, they might be competing with the existing players. They also have much more frequent touchpoints, and I think the only insurance where insurers have a high number of touchpoints is in health. On the other end of the scale, in home and motor insurance, the number of touchpoints is very low. And yes, there is room for innovation in that area as well.
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?
It is about proximity. Most of the Tech Giants we see are either US- or Asian-based. Generally, the starting point to invest is you have either expert knowledge or you are just closer to the market, and you therefore understand the market better. Also, when you look at how Tech Giants roll out new features, usually it is available first locally, where they understand the situation better.
So, it is just very pragmatic. It is not even have a conscious decision against Europe. It is just what is close to home.
What kind of value do you see a Tech Giant can bring to a young Insurtech?
Depends on the Tech Giant. If we talk about Platform Giants they have the expertise on how to build appealing things, how to scale, or how to localise and go global.
With regards to Industry Giants, it is normally the other way around, it is knowledge on how to do underwriting, how to value something, or how to make sure your books are compliant with local regulations.
There is a different and complementary value-add, depending on if it is a Platform or an Industry Giant.
“At F10, we see ourselves as a global innovation ecosystem for financial services and we act as the orchestrator, bringing the parties together.”
We have seen mainly three 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.
At F10, we see ourselves as a global innovation ecosystem for financial services and we act as the orchestrator, bringing the parties together.
When we come to insurance companies, if they want to own an ecosystem, it is key to put enough resources towards it. It is not something that can be achieved without major effort.
Also, it depends on how we define an ecosystem. If you have different players that come together and work in an ecosystem, here I see Insurers as participants or enablers, bringing the insurance knowledge and even leaving the customer touchpoints or at least the technology underpinning on digital channels to another party.
How do you see the journey to ecosystems in your organisation?
As mentioned before, we see F10 as an innovation ecosystem. We are also working with other ecosystems that are doing innovation and are active in supporting startups. We also often join as a network or community partner to have broader exposure. We have the strategy to have our own ecosystem, which is our focus, but then also have an adjacent ecosystem to increase the overall impact.
“Insurers … should try to use the regulatory sandbox as a safe space to play, explore and find out if there is something underneath.”
Do you consider that submitting an idea or project to a regulatory sandbox is positive for an insurer? Has your company considered participating in any of them?
I am always supporting companies trying things and with regards to insurers on submitting an idea or project to a regulatory sandbox, they should try to use it as a safe space to play, explore and find out if there is something underneath.
For us, it is not so relevant, because we are not an insurance company. But we would encourage people to use the regulatory sandbox, but also then to be on the sidelines to help shape the regulation and be part of it.
“Insurance companies will need to switch more to weigh usage-based or behavior-based underwriting so data will be super key, the more data you have the more accurate you will be able to price.”
Looking into the crystal ball, what are your predictions for the Insurtech industry for the next years?
We will continue to see embedded insurance grow so that insurance is integrated into normal buying processes. Also, I think that insurance companies will need to switch more to weigh usage-based or behavior-based underwriting, in which data will be key. The more data you have, the more accurate you will be able to price, and with that comes a more competitive landscape on both low-risk and high-risk lines of business.
Moreover, I see more work to be done in the mobility space, with people in the future having access to cars without owning them. For an insurance company, having access to cars means you are not talking to the individual, rather you are talking to Uber, or Tesla, who directly has their fleet on the street and offers their cars on demand. Today it can be Uber or a taxi, but I think this will become a platform that you can access and just have a car whenever you need it. This will also totally change the approach to motor insurance.
Which trends do you see becoming increasingly important?
It is about embedded and data-driven pricing and underwriting, and the whole distribution and access to the customer, more digital and less paper. I think a lot of this has moved forward in the last few years, but we still have further to go in the journey.
Who do you think was the top Insurtech of 2021 and why?
Looking at all the headlines, I think wefox in Europe did super-well on the fundraising round, which is the key, and their efforts to internationalise and go into different new countries is very exciting.
Which was the top technology in 2021?
I think it is still the cloud, many big companies are moving more into the cloud, having more access and more portals. I think a big one also will be AI in the coming years.
What are the models that you think are not going to grow or have relevance in the future?
Agents are here to stay, especially also for the more sophisticated insurance. Basic lines of business will move to self-service, whilst for the more sophisticated, complicated, and global multi-jurisdiction business, there will still be a lot of advice needed. And so, I do not think that will go away, but it’s pervasiveness may see a decline in the future.