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How is Insurtech bringing value to insurers from an investor perspective?

Jean Bertin, Investment Director, BlackFin Capital Partners

Jean Bertin, Investment Director, BlackFin Capital Partners

In 2020, European insurtechs have raised more than €610m through 64 deals. Halfway through 2021, 51 of them have already raised 3 times more (€1.8bn).

At BlackFin, we’ve invested in 5 European insurtechs since 2018: Paris-based Descartes Underwriting, Epsor and Akur8, Dutch Friss, Spanish Bdeo. As a joyful reward in such a tough year, 3 of them were featured last November in the InsurTech100 list as part of the world’s most innovative InsurTech companies.

As we’ve seen in the past couple of months, European Insurtech has become highly competitive for investors, with valuation rising at every stage. Let’s take a step back and see how insurtechs deeply change the insurance game, by helping insurers to transform their process. How is technology bringing value to insurers all along the value chain?

Product design / development

Before creating a new insurance product, insurers usually look at huge datasets. By using innovative sources of data, Descartes Underwriting, which relies on data from satellites and sensors, is able to offer parametric insurance policies to protect companies and governments against natural catastrophes and emerging risks. It’s then up to insurance companies to decide if they want to enrich their product offer with such innovative insurance policies. That’s why Generali announced a partnership on parametric insurance with Descartes Underwriting a few months ago.

We’ve seen in the past couple of months, European Insurtech has become highly competitive for investors, with valuation rising at every stage.

Cyber risk is part of those new types of threats insurtechs want to tackle. Because they are able to deep dive the dark net in order to chase hackers, some startups can help insurance companies protecting their clients against a threat that can be very harmful from a strategic point of view. In the US, emerging players like Coalition or Zeguro are protecting SMEs against cyber risks.

Pricing / underwriting

How does insurtech help insurers adjusting their pricing and underwriting methods? French startup Akur8 does so by providing insurance companies with a unique AI-based insurance pricing solution that automates their modeling while keeping full transparency and control on the models created, as required by regulators worldwide. No doubt that it’s a precious time and money saver for insurers!

Another way to add value is to connect insurers with new sources of data thanks to APIs. Many players chose such a positioning: Cytora and Carpe Data for business lines, Concirrus for transportation or Kovrr for cyber risk.

User experience

Technology is undoubtedly a way for insurers to improve how they are perceived by their customers. They now have the opportunity to become real service providers able to delight their customers with an overall experience, broader than risk protection. It’s obviously something that is seen more often in B2C, with players as Lovys for P&C insurance, Luko for home insurance or Alan for health insurance. All three are pure players that are customer-centric and offer tailored digital insurance policies. They aim at building from scratch a relationship that cannot be reduce to the negative emotion linked to the insurance claim. That’s why Luko just launched Dr. House, a remote service that help customers to assess their housing with an expert for free.

Distribution

Some insurtechs act like marketplaces, using APIs in order to integrate insurance products into existing sales channels. That’s the case of Belgian Qover, German Simplesurance or British Anorak, focused on life insurance. Others, like French insurtech Zelros, bet on intensifying product distribution. The startup, which works with several major insurance companies in France, uses IA to improve the efficiency of insurers’ commercial teams: coached by Zelros’ IA, salespersons become more convincing.

Policy / claims management

Regarding claims management, it is crucial for insurers to fight against fraud. Players like Shift Technology in France or Friss in the Netherlands enable insurance companies to prevent from fraud thanks to IA that successfully identifies fraudulent patterns. Another way of improving insurers’ process is to automate as much as possible claims management. Through automatic damage detection, Madrid-based Bdeo helps 30 insurance companies digitalising their claims management process — reducing their operational costs by up to 70 per cent while radically improving the experience of policyholders.

What about COVID?

There’s no denying that COVID crisis has fastened all of the above changes. Cloud-based solutions like Akur8 are thriving during lockdown, when employees have to work from home — unable to access their office computers on which are often installed their underwriting license. Insurers that had already put in place digital paths have been less impacted by the crisis. Without much surprise, the economic crisis has forced insurance companies to lower their costs ; in a tough situation, they can benefit from insurtech solutions such as Descartes Underwriting’s parametric insurance or Bdeo’s automatic damage detection, which significantly reduce costs. Last but not least, as it happens with every crisis, there’s a rising in fraud attempts — what insurers call “opportunistic fraud”. Startups like Friss, that keeps on predicting fraud models accurately, can definitely help insurers cope with such an important issue.

Let’s hope that the move that was experienced towards insurtechs in the past months will last — even after the crisis is over.

 

 

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