Paulo Yagust
Paulo Yagust
Director of Innovation & Customer Experience - Chief Operating Officer
Meridional Seguros

Insurtechs In Latam: A Key Player In The Evolution Of The Insurance Industry

~ 8 minutes

Insurtechs are emerging and, at the same time, helping the Insurance Industry to accelerate its transformation path. In this interview, Paulo Yagust shares with NTT DATA his insights regarding the Insurtech sector and explains how insurers in the Latin American territory are facing challenges.

“We are starting to see the growth of Insurtechs in Latin America, so I think consolidation is going to happen in a few years.”

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 first important distinction is between Europe and Asia. There was much more investment than in Latin America, so I understand that we are still in a growth stage. We are starting to see the growth of Insurtechs in Latin America, so I think consolidation is going to happen in a few years.

“What these Insurtechs are enabling is an acceleration in the development and growth of the insurance industry.”

In regards 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?

The impact on the market will be real. I think Insurtechs are going to be a fundamental piece in the evolution of the insurance industry, which is a very old industry and was generally just a follower of the banking industry. And, what these Insurtechs are enabling is an acceleration in the development and growth of the insurance industry, as well as the traditional companies that are starting, and we're only going to start investing in these upcoming years.

"Insurtech investments give insurers the opportunity to diversify in a much more powerful way than they have in the past".

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 investments are expanding a lot and will continue to expand because investments in Insurtechs give insurers a possibility to diversify in a much more powerful way than they had before. And the Insurtech world gives insurers a channel to enter unregulated markets that the traditional insurance industry does not. So I think the trend is towards a greater volume of insurance companies investing in startups.

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

I think we are going to be a very active player, we are not there yet, but we are evaluating different opportunities, so we are going to increase our activity in this area in the coming years, no doubt.

“Further down the line, I believe the insurance industry will have a lot to explore, in principle in a collaborative way, and to be able to empower itself further.”

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?

The whole area of insurance distribution and marketing is one of the places where there are most opportunities because it is where there has been the least technological penetration in the insurance industry in recent years. We are seeing a trend towards collaboration and there is a lot of talk about open collaboration between the different parts of the market. However, as this topic is quite new, we are going to have a stage of collaboration, and then move on to a stage of more control or consolidation. But later on, I think the insurance industry will have a lot to explore, initially in a collaborative way and to be able to empower itself further.

“The challenge for industries and insurance companies will be to adapt quickly to these new contexts, and to take advantage of these new technologies as quickly as possible.”

How do you see this funding trend evolving in the following years? Do you think Insurance companies will follow a trend marked by Tech Giants or vice versa?

I think that due to the dedication and capacity of insurance companies, they will continue to be followers. I don't see it as a very disruptive industry, and I think that all the disruptions in the insurance industry come from imitating what the Tech Giants are doing. So I think the insurance industry will continue as a follower of what the tech companies are doing. I think innovation is going to come more from that side and the challenge for industries and insurance companies is going to be to adapt quickly to these new contexts and take advantage of these new technologies as quickly as possible.

What is your perception of the interest of Tech Giants in the Insurtech market?

I think there is going to be growing interest, there is a lot of capital coming into the insurance industry, it is very attractive and it is generally of low or calculated risk. So I think there will be interest and investment.

What kind of value do you see a Tech Giant can bring to a young Insurtech?

Technological value. A lot more investment in research and development of new technologies, which can be adopted by the insurance industry. I think there is going to be an increase in investment and much greater collaboration in the following years

“Insurance companies are going to transform themselves into what they call Data-Driven Companies. There is no doubt that this is the future of this industry."

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

I fully agree that data is a key issue for the insurance industry. The insurance industry has always been based on data for actuarial issues or risk analysis. But now with technology you have much faster access, that information can be processed more quickly, in greater volume, and conclusions can be drawn more quickly. So, I totally agree that insurance companies are going to become what they call data-driven companies. I have no doubt that this is the future of this industry.

We, in particular, are going through two big forces in all the big projects. We are changing all our technology in our core system and we are additionally creating all the data areas and all the artifacts for data management. For example, our data lake, the procedures, how we understand the information, how we share it, how we socialize it within the whole organization, and also how we start to connect to other databases. We are also entering the world of beginning to cross-reference data with other competing companies, with some with everything that is within our value chain, so I absolutely believe that it is going to be one of the pillars of the development of the insurance industry.

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

At Meridional Seguros, we are changing our core system. We have already started to implement our data lake, and we are also working hard on data governance to give it an appropriate framework to be aligned with the regulations, with the demands of the market, and the different stakeholders involved in this process.

We are at this moment, in this upward evolution and taking the first steps, but they are very big and very solid steps, so I have no doubt that we are going to go down this road very successfully in the short term.

“The main challenge in Latin America is to have regulatory bodies that accompany the technological development required by the industry.”

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

The main challenge in Latin America is to have regulatory entities that accompany the technological development required by the industry, to be able to accompany companies with regulations that allow them to be more flexible, to do business more efficiently, which will benefit the entire community. So, the main challenge is to have a regulatory framework that supports all insurers in a better way. On the other hand, we also need the evolution of the market, here in these latitudes, to be able to accompany us in the development of these businesses. So we have the challenge of the growth of the Insurtech market in these countries and also have a regulator that is willing to evolve according to the needs of the market.

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

Open insurance initiatives in Latin America are very embryonic. We in the media have already begun to work on these issues and are starting to analyze projects to participate in these initiatives. Therefore, at our level of maturity, although it is embryonic, we are familiar with the subject and we are ready to take important steps in that direction.

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

A total, exponential growth of the insurance industry.

Which trends do you see becoming increasingly important?

Data-driven companies and open insurance are also going to be very important for the industry.

Which was the top technology during 2021?

I think the most important technologies have to do with those related to the ability to integrate different platforms. Technologies that allow you to integrate very quickly, creating web services with other ecosystems. And I think that has been one of the most important trends in 2021.

Which will be the next top trend in the industry?

I think it is going to be a collaboration with competitors. That scheme, where competing companies are going to be working together, collaborating to attack different niches, markets, or distribution channels.

What is the highest hype in the Insurtechs?

There's a lot with everything that is portal creation, everything that is Mobile Apps. The industry is going to move towards WhatsApp as a communication mechanism with its customers, as opposed to creating company-specific apps.

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

Models that are not based on collaboration, closed models, where brokers or producers do not actively collaborate with insurance companies and Insurtech, to create higher value-added options for end customers. We are going to have a very strong collaboration between all the players in the industry and I think the models of exclusion and non-collaboration are going to decline in the future.