Growing InsurTech sector tackles industry ripe for change

30. October 2017.

After 2 moderate quarters, VC investment into InsurTech startups was strong in Q2’17, with $745.4 million invested across 60 deals. Despite quarterly fluctuation in deal size and volume, the overall picture is one of increasing interest and investment in InsurTech innovations.

Most deals have remained small, focused on seed and Series A rounds, though larger deals are expected in coming quarters as early-stage InsurTechs mature. Investors are also looking beyond the healthcare-focused US market towards startups in Europe and Asia to diversify their geographical risk and earnings profile.

Corporate investment a significant force

As insurers work to manage challenges ranging from legacy IT systems and processes to high competition and low consumer trust, insurtech innovation promises solutions and disruption in equal measure. VC and corporate investors alike seem to want to be part of the trend. While insurtech startups offer attractive diversification for fintech portfolios, heavy with banking and payments firms, corporate VCs seem to see insurtech innovations as necessary investments for the industry’s future.

Corporate VC activity is already a significant force in InsurTech and the influence and activity of corporates is only expected to rise. Partnerships with InsurTechs and M&A activity should continue to increase as insurers seek to redefine their business and operating models to better meet changing customer needs.

Corporate participation also plays a useful role in the development of the subsector by providing greater confidence to VCs in complex, industry-specific areas such as underwriting and regulated activities.

Rising trend for B2B InsurTech

While early-stage InsurTechs were focused on disintermediation, an increasing number of InsurTech startups are building their business models around support for, or partnership with, incumbent insurers and brokers. This approach provides traditional market players with needed digital capabilities, while InsurTechs gain access to distribution systems and a wider customer base. Significant traction is currently seen in front office transactions, such as the use of AI chatbots to provide an initial layer of customer interaction.

Other FinTechs are looking to support the broker model. For example, Berlin-based company Wefox has created an independent service platform that allows brokers ‘at-a-glance’ views of customer coverage, regardless of their provider.

Insurers are also interested in deploying B2C InsurTech solutions for their own customer base, resulting in several B2C InsurTechs pivoting to offer white-label B2B SaaS options. Other models, such as insurance aggregators and comparison sites, are also being adapted to the B2B market to provide guidance to SMEs seeking commercial coverage.

AI, big data and automation set to transform insurance processes

While VC investment in InsurTech is at record levels, front office InsurTechs appear to be grabbing headlines, with InsurTech innovation for back office functions still on the rise. Key trends include automating the many hand-offs between legacy systems, adding API layers to connect to emerging technologies and data warehousing as well as data labelling efforts.

However, an early focus on headcount improvements through process automation has yet to produce desired results, which may be largely due to the challenges of automating legacy systems and processes.

Another area ripe for transformation is claims, with incumbent insurers considering how new technologies can transform labor-intensive claims processes. Pilot programs are currently investigating how AI can assist with triage for high-volume, low-value claims.

Previous ArticleJP Morgan launch interbank payments platform on Quorum blockchain
Next Article PSD2 and Europe’s Open Banking Mandate – a PCM report

About Author

Alex Rolfe

Related Posts

October 24, 2017 0

Pay with Google launched as integrated e-commerce tool

October 23, 2017 0

Strategies for securing retail payment data

October 23, 2017 0

Indonesia takes steps towards a digital Fiat Currency

Leave A ReplyCancel Reply

You must be logged in to post a comment.


    PCM Daily News

    Subscribe to PCM daily news for all the latest payments new direct to your inbox.
    Enter EmailConfirm Email
    AfghanistanAlbaniaAlgeriaAmerican SamoaAndorraAngolaAntigua and BarbudaArgentinaArmeniaAustraliaAustriaAzerbaijanBahamasBahrainBangladeshBarbadosBelarusBelgiumBelizeBeninBermudaBhutanBoliviaBosnia and HerzegovinaBotswanaBrazilBruneiBulgariaBurkina FasoBurundiCambodiaCameroonCanadaCape VerdeCayman IslandsCentral African RepublicChadChileChinaColombiaComorosCongo, Democratic Republic of theCongo, Republic of theCosta RicaCôte d’IvoireCroatiaCubaCuraçaoCyprusCzech RepublicDenmarkDjiboutiDominica

0 0 votes
Article Rating

Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x
Register New Account
Login to
Reset Password