About 10 years ago, the first startups stepped up to revolutionize the insurance industry. Initially not taken seriously by the traditional insurance companies, then increasingly eyed critically, the industry continues to develop. InsurTechs are driving the digitalization of the insurance industry as partners, but also as competitors.
The first InsurTechs ambitiously announced their intention to roll up the market. It was time for new digital insurances. No more paperwork, faster decisions and insurance coverage at the tap of a finger. The first wave of insurtech start-ups courted direct customer access and thus primarily offered services designed to appeal directly to the insured parties. Contract managers or tariff comparison calculators are the best-known examples of these first start-ups. The companies focused on the digitalization of the consulting and brokerage processes of classic products (SUHK), thus effectively taking over the role of the broker, or offered supplementary services related to the topic of insurance.
However, the start-ups had the same experience as the fintechs in the banking environment. The customers accept the new functions and also the (trade) press is enthusiastic. But away from the traditional brokerage business, the services are difficult to monetize. Although users find a contract manager practical, they are only prepared to pay money for it to a limited extent.
Change of business models and new goals
Some first-generation companies pivoted their business model based on this experience. The best-known example is certainly WeFox, which launched "One", a digital insurance company. Fintechs from the banking segment are also role models here. There, companies like N26 or Revolut, distinguished themselves as "neo-banks". These are characterized by rapid growth in user numbers, while at the same time pointing to a high level of customer satisfaction. However, it is still unclear whether digital insurance companies such as One or Coya will actually succeed in establishing themselves as full-fledged alternatives to established insurance companies. This is because, although the young companies show considerable turnover, they also pay a high price through reinsurance premiums because there are considerable loss ratios.
A different approach is taken by many second-wave start-ups, which position themselves more as partners for insurance companies and brokers and whose technologies offer market participants the opportunity to optimize their own processes or integrate new solutions to complement their solution portfolios. [1]
How InsurTechs are changing the insurance world
The main advantage of a startup over companies already established in the market is undoubtedly that they can experiment with new technologies without being burdened by IT limits and traditional business models. And thanks to the adaptation of fresh technical approaches and the consideration of customer behavior shaped by e-commerce and open banking, they open up new perspectives for the insurance world.