Insurtech Global Outlook

2024

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In 2023, Insurtech funding experienced a second consecutive year of decline from the peak in 2021. This is not necessarily a negative signal. In fact, the industry is looking for new highs to face specific challenges in three different periods or waves.

INSURTECH 2024

1. Wave One: Digital Insurance minus

PATH TO PROFITABILITY

Disruptors

Novel standards in customer experience, claims processing, and pricing strategies. Powered by digital platforms and AI technologies, it challenged traditional insurance models in terms of efficiency, accessibility, and customer centricity.

2. Wave Two: Connected Insurance plus

BEYOND CONNECTED ECOSYSTEMS

Enablers

Insurtechs played an enabling role in the insurance ecosystem by leveraging emerging technologies like IoT and data sources to drive innovation and efficiency across various segments of the insurance industry.

3. Wave Three: Generative Insurance plus

THE NEXT BIG THING

Catalysts

Transformation in high stakes insurance, in response to emerging risks and opportunities associated with climate change, generative AI and cyber risk. There is a proactive approach to driving change in industry evolution in the present AI era.

01

Wave One: Digital Insurance

PATH TO PROFITABILITY

Disruptors

Novel standards in customer experience, claims processing, and pricing strategies. Powered by digital platforms and AI technologies, it challenged traditional insurance models in terms of efficiency, accessibility, and customer centricity.

02

Wave Two: Connected Insurance

BEYOND CONNECTED ECOSYSTEMS

Enablers

Insurtechs played an enabling role in the insurance ecosystem by leveraging emerging technologies like IoT and data sources to drive innovation and efficiency across various segments of the insurance industry.

03

Wave Three: Generative Insurance

THE NEXT BIG THING

Catalysts

Transformation in high stakes insurance, in response to emerging risks and opportunities associated with climate change, generative AI and cyber risk. There is a proactive approach to driving change in industry evolution in the present AI era.

Highlights

Highlights

The insurance industry, like many others, has a concentration on the most promising businesses with the largest insurance stakes. This fact inspired this study to separately analyse what happens in the top tier and bottom tier between the period before and after the peak in 2021.

The exploration of insurers' follow-on investments reveals a comprehensive understanding of industry dynamics, emphasising innovation, operational efficiency, and a broader vision of insurance integration.

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CEO Talks

Descartes

Descartes

Tanguy Touffut, CEO & Co-founder: “Addressing climate change is a multifaceted challenge, as there is no one-size-fits-all solution. Parametric insurance, however, stands out for its potential to revolutionize how we navigate these risks. It's not about making assumptions but recognizing a powerful tool in our arsenal.”

Qumata

Qumata

Luca Schnettler, Co-founder & Group CEO: “Revealing Qumata's strategic stance, we explained our conscious decision to steer clear of wellness-related initiatives. This decision was grounded in the perceived low barriers to entry within the wellness space and a growing industry trend where insurers prefer the internal management of such programs.”

LULA

LULA

Matthew Vega-Sanz, CEO: “The introduction of GenAI in insurance is set to transform mundane tasks and reduce overstaffing, marking a significant shift towards more efficient and customer-centric operations. It's a move that enhances, rather than replaces, human efforts.”

Mind Foundry

Mind Foundry

Selim Cavanagh, Director of Insurance: “Grounded in principles of transparency, human-AI collaboration, and continuous meta-learning, is at the forefront of deploying AI in high-stakes insurance solutions. Our focus is not just on innovation but on creating transparent and collaborative AI applications that enhance human work and trust in the insurance sector.”

Bolttech

Bolttech

Stephan Tan Group Chief Strategy Officer and CEO, Insurance Solutions at Bolttech: "We aspire to be the go-to platform for anyone looking to sell insurance, globally. Our strategy revolves around a combination of soft skills, regulatory expertise, technological innovation, and a bold vision for the future. This multifaceted approach positions us to enable global insurance landscape from the outset."

Wave 1: Digital Insurance

Insight 01

Path to profitability

Lemonade has shown a steady revenue growth and gross margin improvement with an increase of 2M customers (+21% than the previous year) and a revenue growth of 55% YoY, demonstrating a great ability to gain more customer base and boost the revenue. This growth has been strongly connected with marketing efforts due to their focus on profitability.

But they have seen higher than expected growth in the first quarter with a clear cost moderating goal. The loss ratio has been a focal point of financial performance, with a reduction of over 10%, standing at 83% compared to 94% in Q3 2022.

HSCM Public Insurtech Index

Insight 02

Implementation Strategy

In the thriving capital markets, hypergrowth was driven by a large amount of capital injection. However, in today's landscape, investors and emerging enterprises are changing their priorities, placing a premium on sustainable and profitable business models.

Public Insurtech companies are restructuring their financial frameworks to increase cash flow, facilitating business expansion. The growth prospects of public Insurtech are fueled by rising revenue streams, expanding asset portfolios, and robust market demand.

Business LineMulti line (P&C + Life)H&LP&C
RevenueSteady GrowthSteady GrowthSteady Growth
Gross MarginSteady GrowthAppears seasonalityVolatile
Cash in holdPeak in 2020Steady GrowthPeak in 2021
Assets turnover rateSteady GrowthH&LRemain unchanged
EBITDASignals of improveSignals of improveSignals of improve
Insurtech enablers

"Over the past decade, we've witnessed a strained relationship between insurers and insurtechs, characterized by a misguided belief among incumbents that technology development is straightforward and a corresponding assumption among insurtechs that insurance is an easily solvable puzzle. This dynamic has created unnecessary tension. To move the industry forward, insurers must recognize the value of collaborating with insurtechs, while insurtechs should actively involve insurers in their initiatives."

Matthew Vega-Sanz, CEO at LULA

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Insight 04

Lessons learned

  • Customer Delight Focus: User-friendly and quick claims processes, enhancing customer satisfaction.

  • Diverse Product Offering: Expanding product offering, diversifying revenue streams. Increase in customers and premiums.

  • Strategic Growth: Focus on growth and marketing efforts, demonstrating its ability to turn profitable.

  • Tech-Driven Approach: Commitment to innovation, fostering industry evolution.

  • Retention Rate: Despite becoming the first insurance company for young customers in the U.S., Lemonade retention rates and higher churn impact long-term value.

  • CAC: Companies still struggle with acquisition costs impacting their ability to turn a profit.

  • Funding Dependency: Relying on external funding raises questions about long-term sustainability. Tech investors could pressure other actors to prioritise growth over profits.

  • Competition: Disruptors now face competition, with more prepared incumbents and other Insurtech players.

1. Digital Insurance plus

Insight 01

Path to profitability

Lemonade has shown a steady revenue growth and gross margin improvement with an increase of 2M customers (+21% than the previous year) and a revenue growth of 55% YoY, demonstrating a great ability to gain more customer base and boost the revenue. This growth has been strongly connected with marketing efforts due to their focus on profitability.

But they have seen higher than expected growth in the first quarter with a clear cost moderating goal. The loss ratio has been a focal point of financial performance, with a reduction of over 10%, standing at 83% compared to 94% in Q3 2022.

HSCM Public Insurtech Index

Insight 02

Implementation Strategy

In the thriving capital markets, hypergrowth was driven by a large amount of capital injection. However, in today's landscape, investors and emerging enterprises are changing their priorities, placing a premium on sustainable and profitable business models.

Public Insurtech companies are restructuring their financial frameworks to increase cash flow, facilitating business expansion. The growth prospects of public Insurtech are fueled by rising revenue streams, expanding asset portfolios, and robust market demand.

Business LineMulti line (P&C + Life)H&LP&C
RevenueSteady GrowthSteady GrowthSteady Growth
Gross MarginSteady GrowthAppears seasonalityVolatile
Cash in holdPeak in 2020Steady GrowthPeak in 2021
Assets turnover rateSteady GrowthH&LRemain unchanged
EBITDASignals of improveSignals of improveSignals of improve
Insurtech enablers

"Over the past decade, we've witnessed a strained relationship between insurers and insurtechs, characterized by a misguided belief among incumbents that technology development is straightforward and a corresponding assumption among insurtechs that insurance is an easily solvable puzzle. This dynamic has created unnecessary tension. To move the industry forward, insurers must recognize the value of collaborating with insurtechs, while insurtechs should actively involve insurers in their initiatives."

Matthew Vega-Sanz, CEO at LULA

image
Insight 04

Lessons learned

  • Customer Delight Focus: User-friendly and quick claims processes, enhancing customer satisfaction.

  • Diverse Product Offering: Expanding product offering, diversifying revenue streams. Increase in customers and premiums.

  • Strategic Growth: Focus on growth and marketing efforts, demonstrating its ability to turn profitable.

  • Tech-Driven Approach: Commitment to innovation, fostering industry evolution.

  • Retention Rate: Despite becoming the first insurance company for young customers in the U.S., Lemonade retention rates and higher churn impact long-term value.

  • CAC: Companies still struggle with acquisition costs impacting their ability to turn a profit.

  • Funding Dependency: Relying on external funding raises questions about long-term sustainability. Tech investors could pressure other actors to prioritise growth over profits.

  • Competition: Disruptors now face competition, with more prepared incumbents and other Insurtech players.

Wave 2: Connected Insurance

Insight 01

Beyond connected ecosystems

Persistent high inflaction, the growing impact of emerging risks and the adoption of new technologies are bringing opportunities in the investment's growth based on new risk management methods, new auto insurance models like UBI, and wellbeing and employee benefits platforms.

These three facts are creating the current platform ecosystem models that are capturing all the market attention.

Main Growing Business on Top-Tier

Insight 02

Winning models

The selected models, stemming from prominent Insurtech and strategic insurance bets, are embracing competitive advantage and innovation, respectively: In the U.S., Telematics is undergoing a significant surge, with a noteworthy 30% of new auto policies sold incorporating telematics capabilities.

Embedded Insurance is a trending topic. Wave 2.0 is pushed by this vertical that is potentially worth $700 billion in Gross Written Premiums by 2030. The emphasis on prevention aligns with the dual objective of delighting customers and minimising costs. Claim(less) solutions are on the rise for top-tier insurtechs.

Smart MobilityHealthy livingHome safe homeBusiness Shield
Beyond Insurance (Tech+Insurance Model)
  • UBI / Connect Car
  • Telematics
  • Embedded Insurance
  • Wellbeing
  • EHR/Wearables/Scoruings
  • Employee Benefits
  • Prevention model
  • Computer Vision
  • Claimless Model
  • Parametric Insurance
  • Cyber
  • Risk Management
Insurtech & New Entrants (Enablers)
incumbent (Winners)
Main Purpose and Business ModelsIncentivise drivers for a better driving behavior with lower claims and better pricesInfluence customers leading healthier lifes preventing illness and building long-term profitabilityEnhance safety and secure peace of mind by leveraging data to tailor converage and elevating insurance experienceEducate customers with simple and transparent products with a faster response and higher resilience