Date: 27 January 2021
Author: Nikolaus Suehr, CEO & Co-Founder of KASKO
As we are starting into the new year, I would like to share my observations around insurtech so far and what I believe we can expect to happen in 2021.
Now the reason for writing this down is not in any way an expectation that things will pan out as described, but it is a synthesis to structure one’s thoughts and hopefully trigger a discussion with you to even further my own understanding.
So let me start with some observations around the nature of insurtech to begin with.
My observations for 2020
- In my view four types of insurtech plays have shown to be successful. I hereby define success not by being able to gather investments but by acquiring and serving insurance customers better (more convenient and at lower costs) than incumbents could themselves.
Niche B2C: Going directly to the consumer works, but only if you have a very specific target market. Some successful examples are Bought By Many (Pet insurance), OCC (Classic Car Insurance)*, GetSafe (first time insurance buyers) or Roland Rechtsschutz*.
- Serving existing insurance distribution: Really digging into the price, coverage and process requirements of your channels and delivering a better experience, be that via price comparison sites or brokers (tied agents are generally not accessible for insurtechs, but I will get to that later). Some successful examples are Neodigital, One via brokers and price comparison sites, Mailo via brokers and AndSafe via their parents’ banking and tied agent partners.
- Ecosystem-play: Serving customers of big brands within banking, mobility, retail, travel, e-commerce etc. by essentially being able to cost-effectively offer a whole range of specifically configured products delivered by API and white-label front-ends. Some successful examples are Wakam (formerly La Parisienne), Zego and Element.
- Enabling incumbent insurers by augmenting their time and cost to market capabilities as a tech solution. Here the field is very broad but true success has been with augmenting rather than replacing the core. Whilst certain greenfield approaches have been tried, they usually do not leverage the existing distribution AND back-end process capabilities of insurers so they won’t be able to deliver substantially to the bottom line. Some successful examples are Hyperscience within OCR, Next within authentication, Shift and Friss within fraud detection and real-time underwriting, Claimsforce and Rightindem within claims, Skendata vertical buildings data and – shameless plug – KASKO within product, underwriting and distribution.
One lesson I learned over the last five years on the insurtech circuit: Access to customers trumps products which we define as the interplay of pricing and underwriting, document generation and delivery, policy management and payments. Now don’t get me wrong. A great product is important, but the world is full of great products, the key is to understand where the customer is already looking for insurance and design your “product” to fit into that exercise. Now, if you feel you can change customer behaviour, be my guest. We will be watching and fast following on your steps :-).
My predictions for 2021
With that in mind, I will make the following predictions for 2021 in terms of growth:
Focus on flipping existing demand vs new business
- Insurtechs (and incumbents alike) will focus on helping brokers and agents to more easily switch their existing product to their own. NB: if you are looking for someone who is writing the playbook here, check out One Insurance.
- Large commercial brokers with large and diverse offline portfolios of SME and retail (via their employee benefits programmes) customers will engage with tech-savvy insurers to help them digitalise their portfolios in exchange for access to their book of business.
- Price comparison sites and large digital brokers rather than simply comparing what the market offers will co-design products to optimise for unserved customer segments or leakage.
- In order to finance their digital transformation efforts, incumbent insurers are looking to sell off and monetise non-core business legacy portfolios at a much larger scale. NB: Legacy Portfolio Partners by Swiss Re and core system provider MSG is one concrete example.
- Incumbent insurers will take a page from the B2B2C White-Label playbook from players such as Wakam, Element, Neodigital and Ottonova and offer their own products and services to other insurers and big brands alike.
The rise of the MGA-stack as a true change and innovation engine
- Big brands will look to establish their own captive MGAs to better orchestrate various insurers and their offerings and to reduce dependence from a single insurance partner.
- Insurers conversely will also establish their own MGAs to better orchestrate the various products within P&C, health, life and assistance to provide one interface to their large distribution partners and (where possible) source other insurers’ products whilst keeping pipeline control.
- Existing brokers and MGAs will partner with insurtechs to offer MGA as a Service (or MGA incubation services) to allow insurers and big brands to easily access this market without breaking the bank.
New products will capture changes around mobility, work and living, economic uncertainty and connected health
- In terms of products, the following new products will be introduced to capture the rapidly increasing demand AND also provide brokers and tied agents with specific sales stories: For personal lines: pet, bike/e-bike, camper insurance, legal risk and usage-based car insurance. For SME: generally revenue-based products with daily mid-term adjustments, hybrid retail and e-commerce, work from home (accident, equipment, cyber), commercial subletting, invoice protection and legal risk
- Health insurers will lead the charge to evaluate and aggregate sensible value-adding services within the health ecosystem to focus on managing their customers’ health rather than merely their sickness.
- Insurance CIOs will pay more attention to the “front-end” whilst continuing multi-year back-end transformation.
- Insurance CIOs will look to augment their existing (back-end) tech stack within 1) Omni-channel advisory and self-service front-ends allowing for direct customer purchases, advisory-driven sales, different product complexities and appointment scheduling, 2) use-case driven cross- and up-selling stories (think legal risk advise, legal risk insurance, liability, home etc.) and 3) easy to use, no-code and decentralised campaign tools for brokers and agents that don’t require personal data aggregation into the insurer’s own systems
- The current practice of agency-driven non-reusable and uni-channel advisory and purchase flows will come under increased scrutiny, and developer-first, low-code front-end frameworks will be introduced for the first time.
Actually, I cheated. The above are not really predictions for next year, but rather a sneak peek into what is already being done and implemented right now but not broken into mainstream awareness, yet.
Get in touch if you want to discuss the merits of each case and more importantly, how to get going and capture the tremendous opportunities yourself.
Hoping you all had a great start to 2021, your friends at KASKO
*not technically an insurtech but even more interestingly an example of an established “incumbent” leveraging technology in a new way
Nikolaus Suehr is the CEO and Co-Founder of KASKO. He has 10+ years of professional experience from strategy consulting, product management and sales. Prior to co-founding KASKO, he held Business Development and Consulting roles in insurance management companies like Funk Gruppe, OCC and Zeb. His LinkedIn community has 10,000+ members and he was named the Best InsurTech Founder of 2019, and KASKO the Best Scaleup, by EXECinsurtech.
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