The state and growth of Insurtech in Europe: a technological (re)evolution in the insurance sector

Technology is entering the insurance industry in a powerful way, with significant growth investments and strong new entrants in the market driven by the adoption of new technologies that are set to permeate the industry in the long run.

We have been hearing more about “insurtech” for a few years now and the question to ask is what is changing in the world of insurance.

First of all, what does insurtech mean? The term (insurance + tech) refers to companies, startups and products that leverage complex technologies such as big data, artificial intelligence, and machine learning as well as simpler ones like mobile apps, innovating and changing the traditional insurance industry.

Put very simply, the traditional insurance system is based on pooling together groups of people with similar levels of risk and in exchange for a premium provide them with a certain insurance product. These groups are very broad, in this way, there are individuals who pay a higher premium than what they should considering their risk level and others who pay a lower one. This first instance of inefficiency is targeted by insurtechs that by relying on real data rather than statistical models try to build ad hoc products and gain an advantage in the market by offering cheaper premiums that fit specific groups of people.

Moreover, today and in every sector, the market demands products that are easily accessible and convenient to use. Nobody likes slow and complicated processes or filling in complex forms. Especially for young people, the use of 24/7 digital channels to receive an insurance quote or make a claim is infinitely preferable to a visit to a branch or office. And this trend is set to grow in the future.

Insuretech has offered the product that covers this demand, with simple processes and often in a few clicks it is possible to access a simple product that corresponds to the customer's needs. Contracts are digitally signed; products are accessible via smartphones and often the tasks traditionally performed by an insurance broker are carried out by artificial intelligence.

Given the clear advantages and changes in the market, investments in start-ups and companies developing solutions for the insurance industry, both by Venture Capitals and by insurance companies themselves through their Corporate Venture Capital funds, have grown strongly in recent years.

Looking at the industry as a whole, investment has grown by leaps and bounds: from $140 million invested annually in 2011, investment rose to $270 million in 2013 and $2.7 billion in 2015 till reaching $7.4 bn in 2021. During this same period, the most successful insurtech companies have moved beyond seed and venture capital funding rounds into advanced funding rounds.

Through the CB Insights database, we can monitor the evolution of the insurtech sector in Europe with a particular focus on VC backed startups.

Data on the European insurtech sector regarding Equity Funding activity dates back to 2016 and we can see how the sector has grown recently.

In 2020 there were 10 deals totaling $85.31 million. Between 2019 and 2020 investments grew by 128% compared to 2019, while 2021 grew compared to 2020 recording 13 deals for a total of $94.55 million.

As far as the top founded companies as Europe are concerned (as of 29 December 2021) we have:

  • Howden Group Holdings: international insurance intermediary group with insurance broking and underwriting agency arms. The Group has businesses across Europe, Asia Pacific, the Middle East, the USA, and Latin America. The company was founded back in 1994 and has by now raised $187.26M in multiple stages by both VC and PE firms. It has now a Valuation of $5B.

  • Stable: Insurtech company providing price risk management for the food and farming industry aiming to help minimize a businesses’ risk due to volatile commodity prices. This much younger startup was founded in 2016 and has raised by now $52.5M.

  • Descartes Underwriting: jointly works with brokers and (re)insurers to come up with Property & Casualty insurance solutions across a variety of sectors and geographies. The company was started in 2018 and has now raised a total of $20.78M.

  • Instanda: the company offers a management tool that empowers insurers, brokers, and MGAs to build and launch any insurance product within unprecedented timescales, and then distribute and self­-manage it online, globally. The company was founded in 2012 and has now raised a total of $19.5M. Among Instanda investors we have Plug and Play accelerator and Microsoft Scale up.

  • Seyna: a licensed property and casualty insurer operating in Europe providing insurance products much faster than traditional actors and monitoring and adjusting insurance products to customers' needs, on an ongoing basis. The company was founded in 2018 and has now raised a total of $15.52

  • an insurtech startup that develops by-the-moment risk-adjusted insurance pricing for highly utilized vehicles such as rideshare fleets. The company was founded in 2017 and has now raised $13.8M.

  • Tennant: Provider of insurance services. The company provides non-life insurance policies for vehicles, buildings, boats, holidays, and commerce, in Sweden and Norway. The company was founded back in 2000 and after multiple financing rounds has now been acquired by Gjensidige Bank. Tennant has raised a total of $10.53M.

  • BalanceRe: reinsurer company that provides its clients with comprehensive solutions required to transform existing insurance and financial risks into value, supporting growth and capital management. The company was founded in 2014 and has now raised a total of $10M.

  • Pula: an insurance intermediary that implements data driven agricultural insurance. Farmers are able to safeguard their crops and invest in their farms through financial tools that take advantage of mobile technology. The company was founded in 2015 and has now raised a total of $9.1M.

Considering the top investors in the sector, we have different type of players involved, among which in the top positions for number of deals and volumes of financing activities we have Asset Management and Investment Companies, Private Equity firms and Venture and Corporate Venture.

Focusing on VC firms we have that the big players in the European Industry are the following:

Which European countries are most involved in the sector? The importance of Great Britain, which accounts for 42.9% of deals (from 2017 to 2022), is immediately apparent. France follows with 21.4% and Switzerland with 11.9%.

The big role played by the UK depends among other factors on the fact that in some countries regulatory barriers have been lowered. This allows and encourages insurtechs to test their innovative business plans on specific customer segments without the need to comply with the comprehensive regulatory frameworks that apply to incumbents.

Incumbents VS Insurtechs

Needless to say, that incumbents need to keep their eyes open for new entrants using technology to create a strategic advantage, in fact their market share in the next generation of the insurance industry is at stake.

Indeed, insurtechs are growing rapidly and are set to capture an increasingly significant share within a few years. In particular incumbents will have to deal with the much higher level of customer engagement that insurtechs are achieving. Insurers need to analyze the innovation landscape, compare their internal technology capabilities with insurtech solutions and consider their options for moving forward, from digitizing operations to acquiring or partnering with insurtechs

The adaptation that will inevitably follow will bring benefits in many operational areas, as lower costs and better capital allocation will increase the revenue. Lastly the timing is crucial as how fast incumbents adapts to the market changes will determine their market share in the future insurance industry.