InsurTech Weekly gets a Sneak Peak at the new CommerzVentures White Paper on Emerging Technologies for the Insurance Industry
Earlier today, CommerzVentures published a white paper on the emerging trends they are seeing in the InsurTech space. This report brings together their own point of view as well as analysis from looking at over 50 InsurTech startups.
I was privileged to have an advance look at the white paper before it came out and spoke this morning with lead investor, Paul Morgenthaler, about the report.
Rick: Hi Paul, it’s a great piece of research and very informative for all those interested in digital innovation and InsurTech. Can you tell us how you approached the research?
Paul: We survey InsurTech startups as part of our deal evaluation process. For our white paper, we synthesized our findings from the conversations with these startups, as they relate to technology. We actually interacted with more than 50 InsurTech startups, but chose the 50 we included based on the potential future impact they will have, from our POV.
Rick: In the white paper, you name Google, Amazon and Facebook as potential competitors for incumbent insurers, how do you see these new entrants entering the market?
Paul: Google, Facebook and Amazon can draw on massive assets for a value proposition in insurance: vast amounts of consumer data, massive computing capacity, capital and direct access to large, loyal customer bases. However, they will need to make insurance a top priority, if they want to break into the market successfully. This has not happened to date and we think it will happen on a large scale only if incumbent insurers “invite” them into their market, by not innovating fast enough and by not cooperating with technology startups.
Rick: It’s certainly the case that everyone is looking over their shoulders at what these guys will do. Let’s look at CommerzVentures now that you have made your first investment in InsurTech. Please tell us more about GetSafe and why you made them your first InsurTech investment?
Paul: GetSafe gained excellent traction with consumers within a short period of time. This is no easy feat, as insurance typically is a low-interest product. GetSafe’s pitch to consumers is all around convenience, making their lives easier and turning insurance into a more attractive product to interact with. As they build a large customer base, they have the potential to become a platform and further expand their value proposition to both consumers and insurers.
Rick: Got it, I was very impressed by them when I spoke recently with Christian Wiens, their CEO. One thing I picked up in the report is the point you make about insurance compared to banking. InsurTech has a much larger revenue pool than FinTech but has received only one twelfth the levels of investment. Why do you think that is?
Paul: Both entrepreneurs and investors took a long time to recognize the potential in InsurTech. Insurance was not perceived as “sexy”, compared to models like marketplace lending, social trading or robo investment advisors. As the general FinTech space matured, founders and investors in search of “The Next Big Thing” realized that insurance is a gigantic industry that has not adopted technology to the extent that other sectors have.
Rick: I agree with that and for me InsurTech is grown up enough to stand on its own from FinTech. You also make a list the 5 key tech influencers that you see disrupting the value chain. Can you tell us how you identified these 5? And, was there any tech that nearly made it to the list but didn’t?
Paul: We see more and more InsurTech startups using these technologies and they were also mentioned by a significant number of insurance industry executives. A technology that nearly made it to the list is “Augmented Reality”, for which there may be interesting use cases in insurance marketing. These applications are really just emerging. We may take a closer look in a future update of our white paper.
Rick: The report also talks about Tech Disruptors, what’s your POV on InsurTech changing the fundamental value chain for insurance with new business models?
Paul: New business models such as P2P insurance (creating access to insurance as an asset class) are borrowing from the playbook of marketplace lenders. It is still very early days for these players and this model may be harder to conceptualize for potential investors than lending.
Rick: If I understand it correctly, your POV is that InsurTech is not really disruptive and the industry should collaborate and partner, the old and the new working together? Have I understood this right and can you elaborate?
Paul: Yes, InsurTech is only partly disruptive. Some companies may be seen as both disruptive and enabling incumbents. Eg. GetSafe is disrupting traditional offline distribution, but also enabling insurers to reach new customer segments (ie. millenials). Overall, both sides have a lot to gain from cooperation. For startups who know how to work with insurers and speak their language, cooperating involves much less risk and prove a more effective route to market.
The Digital Insurer will review the white paper in the Digital Insurance Library in due course, however you can access it below.