We met with Hugues Bertin, to talk about the development of the insurance ecosystem in LatAm and how the new Insurtech players are redrawing the industry.
Thank you Hugues for accepting the interview, let’s start by knowing about your work and your experience.
I am the CEO and founder of Digital Insurance LatAm, the first strategy consultant, specialized in innovation and digital transformation, with connection and expertise both in the insurance industry and in the world of digital innovation and Insurtech. After 20 years of experience in insurance companies, I started a journey as an entrepreneur with a purpose “Helping the LatAm insurance ecosystem to transform to the digital age leaning on the Insurtech ecosystem in a collaborative way.”
Additionally, I am the Insurtech Advisor of HCS Capital Partners, who developed a corporate venture capital program for insurance in LatAm. Also, I am a partner of Fintechile for the program Connect Insurance.
Finally, for the last two years, I started to give lectures, workshops, and classes at different universities on digital transformation in insurance and insurtech.
1. How does the Insurtech ecosystem in LatAm look like compared to other similar regions (Africa, Asia) and how far are we from areas such as the European or North American?
The Insurtech ecosystem in LatAm has between two or three years of delay compared to the US, European, or Chinese ecosystem. This situation can be an excellent opportunity for the region because it can take advantage of the lessons learned and replicate what has worked, try to “tropicalize” it locally. Precisely, it is what I’m doing with some students of the Chilean insurance school with a copycat exercise of Lemonade, Next Insurance, Ladder, and Cover Wallet.
Many times, when a sector is behind is explained: “because the regulation does not help.” It seems to me that it is a paradigm that we have to challenge. For example, last year, I was invited by the Financial Superintendence of Guatemala to train their officials and give a lecture about the challenges of the digital transformation and the emergence of the Insurtech wave. Also, I am supporting the Superintendencia de Seguros de Argentina in the launch of a table of innovation and Insurtech.
In the end, regulators are like all of us. They use Cabify or Uber, they order food from PedidaYa, Glovo, or Rappi, they shop in Mercadolibre and Amazon; therefore, they understand that there are new challenges that we have to face. Now, I think we should all work together to see the best way to innovate and transform; always with the consumer in mind and the solvency of Insurtechs in particular. The regulator needs help from the insurers, intermediaries, and Insurtechs to evolve.
From human resources, I think that in LatAm, we have excellent raw material. A few days ago, Google announced that it would launch a new edition of Google Business Internship Program in Latin America. That shows that the human resources in LatAm are excellent. Today, knowledge is accessible from anywhere. You can study at Harvard or MIT from a Bolivian town. You can become a blockchain developer from Ushuaia. There are talents in LatAm; now, we have to let them emerge in the insurance sector.
From financial resources, I believe that there is capital available between funds, insurers, accelerators, and the arrival in May of Softbank with a muscle of US $5b. For LatAm, it marks a new milestone: “LatAm is twice the GDP of India and half that of China. ”
Finally, there are many opportunities since competition is less active than in other continents. Assets are relatively cheap, and above all, there is everything to do in a continent where insurance penetration has a lot of room to grow.
2.What impressed you most in 2019 in the insurance and finance industry in LatAm so far? (technology, start-ups, business model, digital product or value proposition).
Three important news in LatAm during the first semester:
- MercadoLibre ( US $30b of market capitalization, PayPal as a new investor), LatAm’s biggest e-commerce platform announced in June that it decided to enter the insurance sector. Today, Mercadopago (Fintech de Mercadolibre) is growing exponentially in Latin America with the payment of QR codes and loans.
- The launch of Softbank LatAm Tech Fund with a capital of US $5b, and Marcelo Claure as CEO. They invested in Rappi US $1b. Rappi is a Colombian company of last mile that is also developing Rappi Pay with its innovative method of payment through the mobile application.
- Nubank (Bra) with Tencent as a major investor is LatAm’s first Fintech Unicorn (created in 2013, with a valuation of $10b. With more than 8 million customers) and is now expanding to Mexico and Argentina.
3. What are the main trends in Latin America regarding Insurtech?
I think that before answering, you have to ask yourself: “What is an Insurtech?” There is no official definition of what an Insurtech is, but as a first approximation we could say that it is a technology start-up that has a part of the insurance value chain and that meets the following conditions:
In the case of insurers or intermediaries (full-stack, broker, MGA …)
- It does not have branches
- The major part of its activity is the distribution of insurance
In the case of “Collaboration Insurtech” (additional services, process transformation, prevention)
- Your activity could be 100% oriented to the insurance sector
- Co-founders have a significant role in the management and shareholders
I think we can summarize the ecosystem in three parts:
Insurtechs developing distribution channels as 123Seguro, Iunigo or Poolpo in Argentina, Qplan or Comparaonline in Chile, Youse or minutoseguros in Brazil, MangoLife or CRAbi in Mexico and intermediaries who develop solutions Insurtech s (40% approx.)
Insurtechs disrupting any part of the value chain of insurance, beyond distribution as Leverbox or Iupik in Argentina, Jooycar or Ceptinel in Chile and there are many more in all countries. In this case, the limit is more diffuse. This last group is undoubtedly the most collaborative of all and perhaps the most interesting. (40% approx.)
Another paradigm that I want to put on the table is the following. It is usually common to consider the Insurtech within the Fintech ecosystem, and I think it is a conceptual error. Because the fintech ecosystem is highly competitive with banking, both in transfers, payment methods, digital currencies, loans. On the other hand, Insurtech ecosystem is highly collaborative, and less than 10% competes with insurers and 90% require insurers to compete.
4. In more developed markets, we see how big tech (Google, Amazon, Apple) are starting to venture into the insurance industry. We have seen examples like Google’s auto insurance comparison capability in England, and a few days ago, Tesla announced the launch of its insurance platform to insured its cars. This competition as the industry can change and for a market like Latin America that could mean. Do you see companies like Mercadolibre or Rappi venturing into the insurance market?
Good question and we already have the answer. Marcos Galperin, CEO of Mercadolibre, announced a few weeks ago that he was going to enter the insurance market as he did in the financial services. Remember that he invested in 123Seguro and developed an extended warranty offer with Assurant. Other exciting projects are about to come.
Also, Rappi is already selling SOAT (Mandatory Accident Insurance in Colombia) in its app in Colombia. Softbank is an investor in Lemonade (US), Policybazaar (India), Collective Health (US) or ZhongAn (China), undoubtedly the most exciting Insurtechs worldwide.
Now, I believe that the error of our sector is to look at Tesla’s failure this week or Google’s in 2016 as an example that insurance is different. Google learned a lot in 2016 and thus enabled him to invest US $300m. in Oscar and get a board seat. In the case of Tesla, I invite you to read Ellee Musk’s biography of Ashlee Vance to understand that arming Paypal, Tesla’s autonomous car or going to Mars with SpaceX is more complicated than disrupting the insurance sector.
5. What are the main challenges that insurance companies have in Latin America to develop partnerships with Insurtechs?
The main challenge is cultural. Starting to work with Insurtech requires a very different way of working, Companies need to learn to take risks, and not all the corporations are prepared or know how to do it. Now, it only works when top management defines that working with Insurtechs is indispensable. This creates a unique dynamic among the teams. For example, in Argentina Rio Uruguay Seguros started to work with a dozen startups last year, it made a significant cultural change and created an innovation environment in the company.
To get closer to Startups and Insurtech, it’s critical to open your eyes and doors to what is happening in the market. I remember when I worked as an insurer years ago, how tough was to get the look outward. We were always questioned for political reasons or internal challenges. For me, this issue is solved by working with external consultants that can help to smooth the process.
6. What have been the main innovations you have seen in the region?
There are many exciting innovations, and it is difficult to list them all, but we could mention some that are critical:
- The development of telematics proposals from Sura and Jooycar in Chile (insurance per kilometre – PAYD). Idem with Consortium or Cencosud (via Sura)
- The connected car of equinoccial insurance in Ecuador (PHYD)
- WeSura’s peer to peer model in Colombia
- Micro parametric insurance in Guatemala or El Salvador, and the development of AxaXL parametric insurance in Chile
- The first steps of Vitality (Discovery) in LatAm
- The important presence of Friss for fraud detection in Colombia, Chile, Argentina
- Blockchain-based insurance from 88 Insurtech in Brazil
- The Insurtech full-stack Iunigo in Argentina
- The development of a 100% digital insurance sale between 123seguro and Zurich in Argentina
- An Insurtech proposal in Chile that will undoubtedly make a lot of noise in LatAm in 2020
7. How do you see the role of insurance agents in the future of the industry with the new technologies available?
I’m afraid to repeat something that is quite homogeneous in the market. The intermediation of mass products without added value, such as auto and home insurance, will disappear in the future. The intermediation may be reborn with a very complementary proposition to insurers in all the more complex branches of insurance.
Now, we can’t forget that many digital actors try to complement its service with the offline channel (case of Amazon that invests in physical stores, for example). This concept is called o2o (online to offline). The insurance sector has to know its strengths to be ready for the offline-online channel. Perhaps there is an exciting way to work in a digital omnichannel but relying on intermediation for the offline. Keep in mind, that on average, 80% of the digital sales of insurance are still closed offline (via telemarketing and other).
Finally, on brokering, I think the traditional channel must find ways to invest in technology such as what asegurar365 proposes in Argentina, or work with insurers to develop it. An interesting example is a case of San Cristobal in Argentina who allows its brokers to self-generate their digital channel with the support of the company.
8. How is the relationship of insurers with Insurtechs in LatAm?
I see exponential growth in the approach of insurers to Insurtechs. In this context, I am going to tell you 4 actions that we are doing.
In Argentina, with Rio Uruguay Seguros (based 4 hours by car from Buenos Aires), we set up an incubator for insurance ventures, in partnership with four local universities. When we launched the call in this city of 90,000 inhabitants, our goal was to incubate only three projects, and we did not plan to receive more than 7 or 8 proposals. In the end, we received 22 projects; the pitch day lasted 5 hours, a pitch day open for the entire city. Therefore, if an insurer opens its doors, then entrepreneurs and solutions approach.
With my HCS Capital Partners, we invite insurers to capture innovation by investing in Insurtechs. For this, we created a Corporate Venture Capital fund with a focus on Chile, Colombia, Peru, and Mexico, but that can be extended throughout LatAm, US, and Israel. This program allows insurers to learn about the trends, and to work closely with the Insurtech ecosystem, allow them to participate in the boards of insurtechs and creating a cultural change of its employees. The consortium has already decided to invest with us US $ 20m. Therefore, there is investment available (“Smart Money”) and know-how to develop the collaborative Insurtech ecosystem in LatAm
In Chile, we are about to launch with Fintechile, a program called “Conecta Seguros.” The goal is to allow insurers to subscribe to this program to join local and international Insurtechs. In a few months, three insurers already joined the program. Therefore, insurers are fully willing to open their doors.
Finally, in March of this year, we set up the first Insurtech LatAm Forum in Buenos Aires, the first Insurtechs competition in Conosur. We were expecting 180 people, and we received more than 330 people, of which 50% had the position of manager or more. Therefore, there is real interest. We are excited for the Insurtech LatAm Forum 2020, next March.
9. What do you think are the main innovations that will impact the insurance industry in the next five years?
The four technologies that will change our sector are the AI (100% of the sector shares this trend), IoT (especially with the arrival of the 5G), the RPA (50% of the tasks in the insurers with automatable) and the blockchain
It is always difficult to answer these questions, and I prefer to talk about challenges such as:
- The attraction and retention of talents in a sector that looks very traditional, the training of our current resources in new technologies.
- Collaborative work with the Insurtechs to accelerate innovation processes.
- Make telematics a relevant and successful value proposition, without a doubt, forgetting about the black box difficult to install or the ODB2 port.
- How to capture and transform all the data that insurers will have available with IoT for prevention and to supply services.
- Cybersecurity, the protection of data, and digital integrity.
- Parametric insurance to accelerate the declaration and payment of catastrophic accidents or concerning climate change
10. What do you recommend to finance and insurance professionals to prepare for what is coming?
My recommendations are:
- Open your eyes on external innovations, open doors to promote the emergence of the Collaborative Insurtechs ecosystem, and work with them. It will be powerful to transform the insurance sector.
- Invest in Insurtechs and Fintechs to capture the existing innovation, promote a new culture, and develop a radical change.
- Train your staff in data science. If you are convinced that IA and IoT are the future of insurance, you must train your staff, attract and retain new talents of data scientists.
- Be flexible with your Digital Transformation plan and be sure to develop a robust ecosystem: our customers expect solutions and not products.