“What happened to the Insurtech revolution?” Globes business magazine asked earlier this year. Companies like Lemonade stormed Wall Street with promises to reinvent the world of insurance. However, their prices now would rather make a disappointing story.
Successful insurtechs do not disconnect established structures, such as intermediaries, they “enable” them. In the life insurance sector in particular, personal advice is essential. Of course, advice is more digital and intelligent. Ultimately, insurtechs, along with everyone involved, can leverage their strengths to overcome complex societal challenges.
“What happened to the insurtech revolution?” asked the Israeli business magazine Globes earlier this year. High-tech companies like Israel-based Lemonade have moved onto Wall Street with the promise of reinventing the world of insurance. However, falling prices now would be more of a disappointing story.
As always, such generalizations should be treated with caution. Until now, international media focus has been disproportionately on B2C insurtechs like Lemonade or Metromile, no doubt fueled by corresponding IPOs in 2021. However, building a “fully digital neoinsurer” for products that require intensive advice is a difficult task. , for which the appropriate drill is often required, has not yet been found. In other words: Insurtechs that focus on the last mile to the end customer cannot easily be compared to B2B or B2B2C Insurtechs. This is exactly why I think it is wrong to talk about general problems in the insurtech industry. The call for a revolution must be preceded by an analysis of what is good about the insurance industry and where there is room for improvement. What founders, regardless of industry, need to consider: Progress does not automatically mean interruption. Rather, it is important to digitize in a way that makes sense so that everyone involved gains notable added value. And in the context of insurance, these are the same insurers, final clients and intermediaries.
At the same time, a look at the socially important issue of old-age provision shows that technology can make an important contribution to making complex problems understandable and solvable.
Our global pension gap is already huge today, growing by $28 billion worldwide every day. By 2050, the deficit will accumulate to $400 trillion. The need for action is urgent and solutions from different perspectives and schools of thought are more than welcome. The potential for innovative start-ups and founding teams (eg with software-as-a-service solutions) to help close the pension gap is immense.
However, from our point of view, it is crucial that the classic “insurance agent – policyholder” value chain remains the starting point for new solutions. From our point of view, there is no point in trying to interrupt or even cut anything here. Rather, it is important to digitally “enable” this value chain as a whole. The key links are the mediators. If they are able to target customers with the help of digital solutions, this increases efficiency. More deals can be achieved with less effort because clients (in the case of company pension plans, this means employers and employees) are better informed and, as a result, feel better advised. This succeeds above all through the targeted processing of data and information, which in turn builds transparency and trust.
This clarification is necessary when it comes to assessing which business models of insurtechs -especially in the case of products that require intensive advice- are promising now and in the future. Our thesis: Complex products need an intermediary. In old age provision, for example, we are talking about contracts that have terms of 30 years or more, not comparable with personal liability or motor vehicle insurance, where there is a greater willingness to change.
From our point of view, the formula for success of Insurtechs 2.0 is “Never change a winning team” or better yet, “Make a winning team even better”. This has huge benefits, for example with a view to customer acquisition costs. If you don’t sit between the insurer and the end customer, you don’t have to worry as much about these costs. Anyone who has tried to acquire qualified leads to convert into business, regardless of industry, knows how high these costs can be.
For us, the famous “music” that magazines like Globes seem to overlook in the insurtech world is in the empowerment of individual players in the B2B2C business. And technology is key. Above all, the platform economy offers opportunities here, as its basic principle is to connect all relevant players in a market with each other in an extremely technologically deep way and thus create space for innovations. What the world of insurtech, and everyone who is considering becoming part of it, must not forget: intermediaries already have extensive expert knowledge and provide very good and sought-after advice. They need support on another level, namely when they enter the digital world with solutions that make complex products understandable, comparable and thus attractive to younger generations.
About the Author
Tobias Wann is CEO of Xempus AG.
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