Is the insurtech sector maturing? Insurance says yes

Grupo Asuranza has recently published the Latest INSURANCE number, its monthly publication dedicated to informing professionals about the insurance and financial sector. This includes a report on insurtech:”The Insurtech sector, maturing but still far from its roof”.Insurtechs are startups that have gradually been entering the insurance sector and have been gaining experience. However, they have before them the opportunity to continue growing, since, until now, they have kept intact their power to attract talent and investment. Let's look at the key points of the article.

Analysis of the insurtech sector

When analyzing the insurtech sector, Insurance draws two conclusions:

1. The ecosystem is far from reaching its peak of growth.
2. The startups that comprise it fight against all odds to progress, gain a foothold in the market and gain the trust of investors and customers.

In the words of Guillermo Alén, CEO and co-founder of Life5 and distinguished by Forbes Spain as one of the 30 most talented young Spaniards, “the insurtech sector has experienced significant growth in recent years and has demonstrated a significant potential in terms of innovation and disruption”. “As technologies continue to advance and insurtech companies find sustainable and scalable solutions, the sector is likely to continue to mature and have an increasing impact on the insurance industry” In fact, so far this year we are seeing fewer investments in terms of number, but with larger volumes. This means lasinsurtech come with a lot of strength and that they bring real and concrete value to the sector.

The insurtech ecosystem in Spain

In Spain, the insurtech ecosystem is quite large: at the end of 2022 it consisted of 328 startups, of which more than 140 were Spanish. This is how Spain is ranked 14th in a ranking by country based on investment in insurtech, as we collected in the III Insurtech Map of Santalucía Impulsa, published in December 2022. In addition, and as we mentioned in the report, in recent years there has been a slowdown in the creation of new insurtechs. “In Spain, there are some factors that may affect the slowdown in the founding of an insurtech, and it's not just due to low investment. The lack of regulation in the insurance sector, the consumer's resistance to change, the lack of information about the advantages of insurtech and the lack of knowledge in insurance and technology, which makes it difficult to find specialized talent in both fields, are just some of the factors that influence the slowness in creating an insurtech”, observes the CEO and co-founder of Life5.

The barriers of insurtech

And here begins the analysis of the second conclusion mentioned at the beginning of the report, the obstacles faced by insurtechs.Pilar Andrade, member of AEFI (Spanish FinTech and InsurTech Association) and CEO of LISA Smart Insurance, states that it is “a complex and heavily regulated sector. To enter it, you must have extensive knowledge of the sector itself, regulations and technology. All of this influences the fact that there is a more limited initiative, but the projects that are being launched are very interesting and bring considerable value to the industry” .Therefore, this halt in the emergence of new insurtechs is circumstantial, and in the coming months, new relevant initiatives will emerge in very specific areas.

Differences between Spanish insurtechs and European countries

These barriers that Spanish insurtechs must overcome explain why Spain is so far from other nearby countries when it comes to investment. Insurance extracts from our III Insurtech Map the fact that Spanish insurtechs attracted 13.8 million dollars in 2022, a sidereal distance compared to France (716 million), the United Kingdom (589 million), Germany (549 million) or even Italy (94 million). For Pilar Andrade, the difference between Spain and these European countries also “may have to do with hyperregulation and with the need to reform the Insurance Contract Act” since “it is a law in force since 1980 and more than 40 years have passed.” The AEFI spokeswoman and CEO of LISA Smart Insurance also recognizes that these countries “have an advantage in terms of the rounds that their insurtech raises”, something that “influences the development of the sector”, but believes that The “business models” of Spanish insurtechs have nothing to envy.

The Spanish and European insurance sectors: are there also differences?

El co-founder and co-CEO of Tuio, Juan Garcia, believes that for a correct analysis of the development of the insurtech sector, it is also necessary to bear in mind the existing differences between the Spanish insurance sector as a whole in relation to other European markets. “In Spain, the insurance market is much tougher than in others,” he points out. The Tuio spokesman points out another aspect why the insurtech world in Spain is uneven compared to that of our neighbors: it has to do with the investor profile, which is not similar to that found in leading insurtech countries. “Most of the funds in Spain are seed funds (focused on seed capital rounds) or series A funds”, which means that Spanish insurtechs have a very small group of investors in their country when they need more funding for their expansion. In addition, he believes that it also hurts the development of the insurtech sector that “Spanish insurers do not have their own funds of Venture Capital”, as is the case in Europe, “with exceptions such as Santalucía.” Therefore, we can see that the path taken by Spanish insurtechs is not flat, but rather contains potholes, slopes and obstacles.

Insurers and connected insurtechs

At this point, we can say that traditional insurance and insurtech models are interconnected and have a relationship of collaboration and adaptation mutual as the industry adapts to the digital age and new customer demands. Pilar Andrade also adds that collaboration between insurers and insurtech “is increasing and will continue to grow. Insurers know how to assess the possibilities offered by insurtechs when it comes to generating new products and marketing channels adapted to today's consumer. They have verified that alliances allow them to accelerate their digital positioning and that they are agile in the creation of insurance and, above all, in their arrival to the market”.

Trends and opportunities in the insurtech sector

The CEO and co-founder of Life5 believes that the trends will be focused on latest technological advances. “The major trends expected in the insurtech sector will be:

• La automation and customization driven by artificial intelligence and the Machine learning.
• La data collection through IoT for a more accurate risk assessment.
• Los insurances based on telematic data taking advantage of information collected from connected devices”.

In short, and in the words of Pilar Andrade, insurtechs will have an opportunity “in everything that has to do with new economies, integrated insurance, more flexible products... Above all, with the capacity to detect new business opportunities and create more personalized and customizable insurance, adapted to these new subscription economies or Peer to Peer, with market agility and speed”.