Insurtech may not seem like the most exciting area in fintech — but investors are seeing dollar signs.
Global VC investment in insurtech grew from $1.8bn in 2016 to $10.5bn in the first three quarters of 2021 alone.
VCs also funnelled €2.7bn into European insurtech startups in 2021, minting six unicorns in the process including Marshmallow, the second Black-founded unicorn in the UK, and AI insurance startup Tractable.
But what are the key areas for growth in the year ahead? We asked insurtech founders and CEOs to make their best claims.
More user-friendly claims with AI
Anyone who has had to make an insurance claim knows what a massive pain it can be. Enter Bdeo, a Spanish insurtech that’s developed visual intelligence solutions that help to automate the underwriting and claims management process, specifically for property and motor insurance.
VCs funnelled €2.7bn into European insurtech startups in 2021, minting six unicorns in the process
Traditionally, policyholders have to wait for an assessor to come onsite and assess the damage, but Bdeo allows policyholders to collect evidence themselves through a self-guided process, speeding up the once-painful claims process.
For home claims, the user sends in information and photographs of property damage, for example, which is then fed through Bdeo’s platform. “This allows us to identify insights such as the cause of the damage, lack of coverage within seconds, prioritise which claims should be attended first according to their severity and make a decision on the first professional who should attend to repair,” CEO Julio Pernía Aznar tells Sifted.
“What makes our technology unique are two key things; on the one hand, the precision of our algorithms and their ability to provide actionable, automated and reliable outputs to simplify and speed up decision making. On the other hand, the usability. Bdeo solutions are really simple to use and do not require downloading any apps.”
3x a week
We tell you what's happening across startup Europe — and why it matters.
Another insurtech founder predicting 2022 as the year of AI is Freddy Macnamara, CEO of UK-based flexible motor insurance provider Cuvva. He says in the year ahead insurance will continue to digitise, and AI will only improve once-clunky processes.
“The insurance industry has always relied on data predictions but now with access to so much more, insurtechs have a great deal of insights and are able to deliver offerings that are far more accurate,” Macnamara says. “We’ll see more AI, machine learning and internet of things (IoT) across the journey, from hyper-personalised policies to claims handling and fraud detection.”
Other European startups making claims speedier are UK-based FloodFlash, which shells out immediate flood claim payments if sensors are triggered by rising water, and French-based insurtech Koala, which compensates its clients for travel disruptions like delayed flights, replacing the cumbersome claims process with an almost instantaneous digitised experience.
More transparency with personalisation
Insurance is no stranger to personalisation — after all, charging premiums tailored to the size of the risk being insured against is what it’s is all about. But a notorious lack of industry transparency has led to a lack of trust towards insurers.
Thanks to more intelligent solutions, personalisation will become even more important to insurtechs so they can get people the best coverage for the lowest cost, and replace antiquated industry forecasting with more transparency.
We’ll see more AI, machine learning and internet of things across the journey, from hyper-personalised policies to claims handling, and fraud detection
In car insurance, for example, Macnamara says prices and policies will be increasingly based on how long and how well someone drives instead of antiquated averages. This results in a fairer system.
“For consumers, it means the better they drive, the less they’ll pay, giving them far greater control over their car insurance,” Macnamara says.
“[With Cuvva] you no longer have the hassle and cost of installing a black box in your car. It’s now all managed from a sophisticated app on your phone with far superior data analytics. This ease will drive even more uptake in 2022, especially as drivers with this type of car insurance switched on see cheaper premiums.”
Sustainability and sharing
Consumer behaviour is influencing insurtech in other ways. People are concerned about their carbon footprint and increasingly want to rent items rather than own them, and buy second hand.
Ola Lowden Landström is founder and CEO at Omocom, a Swedish startup that provides insurance for the sharing and circular economy. Landström says demand for and availability of rented or refurbished products is growing and will force the insurance industry to rethink traditional warranties and guarantees.
From an insurance perspective, there is a threefold interest to push for sustainability. We can expect regulatory pressure towards insurance companies (and their B2B clients), damages caused by global warming will have a direct effect on loss ratios and consumer demand is booming
“As more and more companies move towards service oriented and pay per use business models, their insurance needs change quite dramatically. Risk calculations need to be calculated on the output value of products rather than their value on the balance sheet,” Landström says.
Sustainability has become increasingly important to consumers and Landström hopes this trend will continue in the long term.
“From an insurance perspective, there is a threefold interest to push for sustainability. We can expect regulatory pressure towards insurance companies (and their B2B clients), damages caused by global warming will have a direct effect on loss ratios and consumer demand is booming,” Landström says.
When we think about the tech trends ahead for insurtech, we can’t leave out embedded insurance, which bundles and embeds insurance coverage and protections seamlessly into a platform, marketplace or ecosystem. While not new, embedded insurance is quickly heating up, with predictions putting it at an estimated $3tn opportunity.
Major European players include Element Insurance, a Berlin-based digital insurtech valued between €71-106m, and Qover, a Belgian insurtech that allows ecommerce sites to add insurance into their checkouts with a single line of code.
Hot competition from giants
As consumers demand faster payouts and fairer pricing, insurance companies are facing increasing competition.
“We are seeing manufacturers and distributors of multiple services creating and servicing their own insurance products,” Julio Pernía tells Sifted. “A couple of good examples are Amazon or Tesla that are now insuring the products they build and sell, and they are having very interesting traction. And we can see this in multiple other industries like technology manufacturers and travel agencies.”
We've all been speaking for years about how relevant digital transformation would be. But it was often overlooked that in order to transform, a business must undergo a complete organisation-wide change
And while competition is forcing innovation, and Pernía Aznar says the insurance industry has embraced digitisation, it still has some way to go. Digitisation is a constantly evolving process that needs commitment across companies, not just in the tech departments, in order to capture market share.
“We've all been speaking for years about how relevant digital transformation would be. But it was often overlooked that in order to transform, a business must undergo a complete organisation-wide change,” Pernía Aznar says. “When these transformations eventually take place, we’ll realise that the world has already moved on. So, it’s a journey, not a project, not a one-time thing that happens in isolation.”
Want to learn more about the UK home insurance market? Download Bdeo’s report on challenges and opportunities in 2022 here.