Juan Alejandro Cifuentes
Juan Alejandro Cifuentes
Vice President Customers, Access and Ecosystems
Seguros SURA

Insurtechs In Alliance With Insurers, Building A Stronger Value Proposition

~ 11 minutes

Seguros SURA is committed to providing a fully digital experience that makes life easier for its customers. Juan Alejandro Cifuentes shares his view of the insurance sector from Latin America in this interview.

"I believe that the Insurtech sector is still growing rapidly. In Latin America, around 350 Insurtechs are operating and by 2025 it is expected to exceed 1,000 companies, so we can see that there is still strong growth. In the case of Chile, we are talking about 50 Insurtechs and I would say that there are several emblematic cases".

Given the new historical investment rise, do you consider that the Insurtech market is still growing, or is it going more towards consolidation?

I think that during the pandemic there was a behaviour change, in terms of the use of different services and digital access through which companies can distribute our products and deliver our services. And that, somehow, gives a boost to the whole ecosystem and all those partners, such as the Insurtechs, because there is a greater demand for more digital services. In general terms, I would not say that this sector is in a stage of consolidation; I think it is still growing. At least in Chile and Latin America, what I see is that significant growth is still expected for the next four or five years in the whole Insurtech segment.

Seguros SURA is participating in an Insurtech association, which was launched a year ago, where there is not only Insurtech but also insurance companies. I think we still have 3-4 years of growth ahead for the consolidation of the industry. Today, in the mapping that we have seen through the Insurtechs association, which also has connections with other Insurtechs in Latin America, it is said that around 350 Insurtechs are operating in the region and that by 2025 it is expected to exceed 1,000, in other words, we see that there is still strong growth. In the case of Chile, we are talking about 50 Insurtechs and I would say that there are several emblematic cases. Betterfly, for example, is already a unicorn with a presence in several countries. But there are a lot of other companies that are still at the growth stage and many that are emerging.

"Within the financial sector, the insurance industry probably has to be the most traditional. I think that Insurtechs are going to help in a very important way to accelerate that process of change that the industry needs.”

With regards to post-IPOs results and the exponential growth of these startups. Do you consider there is more hype in Insurtechs than real impact in the market?

I am convinced that there is a real impact on the market, and it is not just a marketing effect. I believe that Insurtechs in general are becoming very relevant players and that in some way they have been helping for some years now in the whole transformation process that the insurance industry is undergoing.

Today, we can visualize the presence of these Insurtechs in different areas of the insurance value chain and with different value propositions, some of which are even going to establish themselves as insurers because it seems to me that the value, they are offering is much more powerful than the insurance component of this value proposition, which today is outsourced to a company.

This is real and it is here to stay. And that companies are going to have to compete with them in some cases or work hand in hand with them because they are helping us to accelerate all the processes of change and transformation that the industry needs, which is imperative. Within the financial sector, insurance is probably the most traditional industry. And I think Insurtechs are going to help in a very important way to accelerate that process of change that the industry needs.

"We have structured a year and a half ago, an area of Alliances and Ecosystems because we are working on finding Insurtech allies. An example of this is the agreement we have with Jooycar, which is showing very good results.”

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

Yes, I would say that we are on two different fronts. One on the investment side and another one on the partnerships with Insurtechs. From an investment point of view, I would say that, locally, we are not investing in Insurtechs. Yes, our corporation has some initiatives, investing in some, but it is still learning about the different types of relationships with investors that you must have in this context.

From the alliance point of view, we have been doing quite a lot of work. I would say that about 5-6 years ago, we started working with several Insurtechs in the development of new products, seeking to gain value that we did not have before. An example of this is the agreement we have with Jooycar, which is showing very good results. 18 months ago, we structured an area of "Alliances and Ecosystems", because we are working on finding Insurtech allies - and other industries too – to replicate more transformational processes that we see maybe developing and that we can adapt and enhance in our value offer.

"In Chile, the insurance market penetration rate is 3.1%, so I think there is an important challenge for insurers to incorporate Insurtechs here, where there is room for growth.”

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 developing within the coming years?

In general terms, this trend will continue in the coming years, and perhaps part of the explanation for this is that in Latin America, insurance penetration rates are still very low compared to the rest of the world. In Chile, we are above the Latin American average at 4.9% as a percentage of GDP. But this is half true because in Chile there are life annuity premiums that are ultimately pension funds. Therefore, if you isolate this business segment, this penetration drops from 4.9% to around 3.1%. And I believe that this is an important challenge for insurers to incorporate Insurtechs here as well, where there is room for growth. In the case of Chile, as a reference, two-thirds of the car fleet does not have car insurance. And that is part of the explanation why the focus is on the development of distribution channels or other ways of reaching customers with a relevant offer.

Insurtechs can play a key role here. They can communicate with new customers using digital channels, so they can reach out with an offer and with a much clearer language to customers, which is often difficult for us as an insurance company. And I do not see those health segments growing. It is a segment that is much more capital intensive. It seems to me that they are also a little bit further away from the insurer's expertise. They are specialized goods, but they are niche, they are not so much dedicated to other types of business. This issue is very complex to resolve, hence why I see the development of marketing models growing more than working and developing and investing in the health side.

“The objective we have is to become more and more owners of the ecosystems that are probably associated with our main product lines.”

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

It seems to me that insurers have mainly played a passive role in some ecosystems. But I think in the medium term it will start to change. From our side, we are doing it; we even formally structured an area that is focused on the development of ecosystems. The objective we have is to become more and more owners of the ecosystems that are probably associated with our main product lines.

However, I think we are going to move between those three roles that you mention. That will depend on these different alliances and the interconnection that we make with other similar ecosystems, where we will probably be a participant, but we yet want to connect with an external ecosystem that may even be from another industry.

We have a mobility and health ecosystem today. In the health ecosystem, where we are structuring a whole value proposition around our health products and our car products, motorbikes, etc. Within our mobility system, we have been focusing on electromobility, connecting with players in other industries who are also leading or building mobility ecosystems for other industries. We have a role that aims much more at being an owner, but when we connect with these ecosystems, we take on a different role, and I believe that this interconnection between different ecosystems will generate these different roles.

One of the main pillars of ecosystems is Data. Sometimes data comes from insurance. However, data is now required to be real-time and actionable, this source is most likely to come from outside Insurance. If Data is the main driver, will Insurers transform into data-driven companies or will they just serve the ecosystems at the end of the value chain?

Undoubtedly, in the medium to long term, insurers are going to be data-driven businesses. It is a reality for every type of industry. There is a lot of information that is generated within the ecosystem, by different actors, but I think data ownership is a critical success factor and we must ensure access and make it very clear who owns each of these different pieces of data. We have this experience with Insurtechs in developing pay-per-use insurance telematics products. We have millions of data where we have established contractual relationships to ensure that the use and ownership of the data are ours, independent of who does the processing.

During the pandemic, thanks to the amount of available data, we generated a “good driving” initiative for all vehicles under the “pay-per-use” scheme. In addition to the 4 or 5 variables that we need to verify these products, we have a lot of information, for example, the vehicle condition, and one of the things we were able to look at was the battery status. We then proactively generated preventive actions that were maintained over time. So, yes, we are going to be more and more data-driven companies, both for service delivery and even to be able to find opportunities to develop new solutions for our customers, through the analysis of the data.

“The speed of change that we are seeing means that regulation will always lag far behind what is happening in the reality of any type of business and this is undoubtedly happening to us in the insurance industry as well."

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

I think it is an issue that is not only related to the insurance industry but any industry in general. I have the feeling that this situation is going to get deeper and deeper.

The speed of change that we are seeing means that regulation will always lag far behind what is happening in the reality of any type of business and this is undoubtedly happening to us in the insurance industry. There is no way back as I do not see any way in which it can be easily resolved. Therefore, what we need to have is more and more regulations that are based on a very general framework and principles.

I have 3 or 4 things that I think the regulation needs to address in the very short term. For example, the possibility of extending the means of delivering documentation, with greater flexibility in terms of the different technologies we have today. All aspects of distance contracting of products, which is going to grow in some way, also define how many consumer rights will be protected. How we incorporate more and more and make the electronic sale of insurance products more flexible, to increase the growth of the insurance sector, requires a very good Data Protection to ensure that the use of information is going to protect our customers. In September last year, the Chilean government proposed in Congress a Fintech law, which should be advancing quite quickly, and we will have the first draft version.

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

I think we have a fairly high level of maturity; we have been working with an open mindset. I would say that we took this step approximately 5 or 6 years ago with a strategic view of making strong progress in a process of digital transformation and digitalization of the company.

And what we envisioned at that time was that if we did not open our platforms, if we did not establish interconnection mechanisms with third parties, it would be very complex and difficult to move forward at significant speed in our development process.

And, somewhat with this logic, how are we going to integrate, and adapt some of these services to what we have today? We now have many examples of services, even products that we have launched and that we are working on in cooperation with different types of partners.

Looking into the crystal ball, what are your predictions for the Insurtech industry for the next years?

It seems to me that the Insurtech industry is still in a period of growth, and I think it is still 3-4 years away from consolidation. I think we will continue to see many Insurtechs appearing in different areas and solving different problems that we have within the insurance industry.

Which trends do you see becoming increasingly important?

Connectivity, the Internet of Things, everything related to Data Analytics and Big Data are issues that insurance companies, Insurtechs, and the industry, in general, are going to be working on.

There is a very powerful disruption that today I think is still incipient in this industry towards the use of artificial intelligence, machine learning, robotics, and cyber security.

It sounds a bit cliché, but the focus on the customer is also a debt that this industry owes. We do not make life easy for the customer and I think that it must be part of the challenges to address in the coming years, a mission to make life simpler for customers.

Who was the Top Insurtech of 2021? Why

Betterfly And Jooycar in the world of telematics has also had a very strong development during 2021.

Who will be the next Unicorn? Why?

I do not know; I think there are going to be lots of unicorns in this industry.

Which was the top technology during 2021?

I think everything that has to do with cloud and services. And there is the use of platforms, but more than technology, particularly as concepts, the movement that we are seeing, the journey towards the cloud of many of the services, and many of the processes that we have as a company. And the other one I think has to do with all the concepts of artificial intelligence, Machine Learning, and robotics. I see them at a similar level.

What is the highest hype in the Insurtechs?

It seems to me that the distribution models and the way of being able to reach customers. The way of communicating, of relating to customers.

What are the models that you feel are not going to grow/have relevance in the future?

I find it difficult to visualize models that are not viable. I think it is still too early to understand where these different models will develop and adapt. I think we are still in a period of growth, of maturity, and many of these models are still adapting, still moving. So, it is hard for me to think that you can say, well, this one did not work, and it is never going to work. I think we are still in a period of learning and evolution, and we still have a couple of years to go before we can understand which ones are not going to survive.