Hi folks,
This is Romain, Product Manager at Direct Assurance. Every week, I’ll share with you some of my weekly readings and thoughts around insurance and technology topics, from industry insights and news to fund-raising activity. Feedback is more than welcome!
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📗 To start off this week’s newsletter, some insights from the industry
Very insightful interview of Wefox’s CEO Julian Teicke on LinkedIn. For those who don’t find the time to watch it, here are a few ideas and key points you must take away - 📰 Full interview on LinkedIn
Recap of recent Wefox announcements: Wefox has had a hectic last few months, announcing it reached profitability in Germany, it would unite all its businesses under the Wefox brand, and launch a new technology-/sensor-based risk prevention product with the assembling of a dedicated AI team in Paris.
Going beyond insurance, Wefox considers it Prevent product as a new business line: on the latter announcement, Teicke made clear that Wefox’s risk prevention product will be a new business and revenue stream for the company. It should be a subscription-based product sold by Wefox advisors (=agents), with a commercialization in sight some time in 2022.
Beyond recent announcements, Teicke shared his vision and tips on how to reduce costs across the value chain: there are a few great moments in the interview in which he highlights how Wefox reduces loss ratios through data analytics, better business mix and underwriting sophistication, sales costs through upselling, and admin costs through automation (he claims that 80% of all customer processes are fully, 100% automated), a central product factory and shortened time to market for new products. Overall, he claims that Wefox can offer insurance prices 5% lower than the market, have loss rations 10% lower, and still grow fast.
Direct insurance distribution is the most difficult to disrupt - it’s a smaller market than traditional insurance (~10% of the insurance pool in Europe), it attracts customers that have higher loss ratios and lower loyalty, it’s expensive to acquire new customers online (costs of acquisition are huge). All of that forced Wefox to try direct distribution and then to shut it down: “We tried it, we failed miserably.”
Teicke expects a “Tesla moment in insurance”, whereby newcomers will start to seriously challenge incumbents and the big brands. Out of newly created Insurtech, he expects on one hand a group of a couple of Insurtechs to become real challengers, and the rest to be instrumental at helping traditional insurers digitize the insurance value chain.
Large and successful Insurtechs like Wefox are better partners to the rest of the Insurtech ecosystem than are traditional carriers/incumbents. Probably because they have the same DNA and bias for innovation, speaking the same language!
Good read from PwC France on Blockchain’s future in insurance. The authors highlight 6 use cases in insurance (smart contracts, peer-to-peer insurance, index-based insurance, reinsurance, etc.) and the technology’s potential benefits (automation, fraud and theft, KYC costs, pricing, etc.) 📰 Pwc France
Deloitte France released its annual Insurtech Trends report (in French, apologies!). Deloitte highlights frou structuring trends: the shift to B2B2C distribution (embedded insurance again 😜), the imperative for incumbents to pursue digital transformation, the need to anticipate big regulatory changes linked to the Solvency II Directive for European carriers, and the imperative to put in place a strong CSR policy. 📰 Deloitte France (in French)
Nice read from Daniel Schreiber, CEO at Lemonade, on the equity imperative in insurance prices 📰Insurtech Insights
Swiss Re released its Natural Catastrophe report for 2020. Global economic losses from natural catastrophe events in 2020 were $190 billion. Insured losses from disaster events around the world were $89 billion, the fifth highest on records. Swiss Re’s Group Chief Economist warned: “Climate change is a systemic risk for the whole world. Unlike the COVID-19 crisis, it does not have an expiry date” 📰 Swiss Re
🚀 More news from the industry on M&A, partnerships, new products and collaborations
Lovys, the French mobile-first Insurtech that provides auto, home, pet and smartphone insurance, announces new B2B2C partnership with French neo-bank Ma French Bank. Lovys will provide home and smartphone insurance to Ma French Bank’s 280 000 customers. Interesting to see more and more D2C players extending distribution to B2B2C. 📰 Argus de l’Assurance (in French!)
This week’s also seen a flurry of partnership activity and product launches. One notable partnership was announced between cyber insurance startup Corvus Insurance and Skyward Specialty Insurance Group to sell the former’s Smart Cargo + Cyber product. 📰 Insurtech Insights
Trov, the US Insurtech, just announced a first wave of UK companies leveraging its tech solution to embed renters insurance in their digital applications. New UK brands include Lloyds Bank, Love To Rent, Moovshack, OpenBrix, Utilita and Movinghub, with more brands and products joining the platform in 2021. Founded in 2012 among the very first Insurtechs, Trov first started as D2C Insurtech providing on-demand insurance for single items, before pivoting (twice). It sunsetted its D2C on demand insurance platform, turned into a provider of data and real-time analytics to cover new risks, before seemingly taking another turn to become a B2B tech player in the embedded insurance/B2B2C distribution space, a hot area at the moment. 📰 Trov
Uber’s former Head of Insurance EMEA is joining UK Insurtech Collective Benefits as Chief Underwriting Officer 📰 LinkedIn
Zurich completes acquisition of MetLife P&C in US. Zurich subsidiaries Farmers Group and Farmers Exchanges have completed the acquisition of MetLife’s property and casualty business in the US for a purchase price of $3.94 billion. The acquisition was announced on on December 11, 2020. 📰 Coverager
Some home 🏡 insurance news
Hippo Insurance continues its US expansion by opening in Vermont. 📰 Hippo
Porch Group, the US home service software provider, closed its acquisition of managing general agent Homeowners of America, becoming a major Insurtech in the home space. Porch hopes to combine its vast access to home buyers and property data with HOA’s pricing and claims experience. For 2021, the joint entity should reach $270 million pro forma GWP ($405 million in GWP for Hippo in 2020, $213 million for Lemonade). 📰 Insurance Business America
Good read from from Kin’s founder Sean Harper on the massive opportunity to seize on the US homeowners insurance market. He puts forward four reasons why this is a great market 📰 LinkedIn
The competitive bar is low, with most incumbents being inefficient and carrying high expense ratios.
Good unit economics, mostly thanks to a low churn of homeowners, especially in comparison with renters and auto.
Higher likelihood of cross-sell
No near-term existential threat like semi-autonomous and autonomous vehicles coming to upend homeowners insurance.
Some car 🚗 insurance news as well
Loop, a US car insurance startup started in July 2020, wants to bring more equity to auto insurance underwriting. Instead of using credit score, income, marital status, and education to create auto insurance rates, Loop wants to use two (fairer) metrics to give customers a price: state of the roads and driving behavior. Loop’s founders argue that bad practices in the auto insurance industry disproportionately hurt historically disadvantaged groups; like African-Americans, who pay higher auto premiums on average. The app will use impartial factors like age, driving record, and location to price people at the beginning. From there, rates become more personalized as users share data with the company. The Loop app will launch in Texas in the summer of 2021 and then to 10 more US states. 📰 NextAdvisor
Assurant finds that UK drivers are increasingly happy to share vehicle data. 📰 FleetNews
Will self-driving cars disrupt car insurance? Cool read from Forbes on the changing risk landscape that self-driving cars will bring. While car autonomy will most certainly make the liability pool shift from personal to commercial in nature, with driver liability turning into product liability with AI at the wheel, the effect of self-driving vehicles on the industry’s size are harder to predict. 📰 Forbes
💲 And last but not least, some exciting fund-raising news
Global venture funding hits all-time record high $125B in Q1 2021. All lights are green for global VC funding in 2021, including for the Insurtech space, which looks on track to beat last year’s funding record. 📰 Crunchbase
Digital health continues to attract funding in the wake of the COVID19 pandemic, with the industry raising a record $7.1 billion across 99 deals in Q1. Late stage deals exploded, topped by virtual care company Ro’s $500 million Series D. 📰Mobihealth News
PolicyBazaar, the Indian Indian online insurance platform, plans its Mumbai IPO before the end of the year, with the goal of raising $500 million. The listing could be done at more than $3.5 billion valuation. Softbank Group, Tiger Global Management and Temasek among its investors. Its online portal hosts 100 million visitors/year and sells 400,000 policies each month. 📰 Bloomberg
NYDIG, a provider of technology and investment solutions for Bitcoin, has raised $100 million of additional capital from Starr Insurance Companies, Liberty Mutual. Why is that important for insurance? After raising money from New York Life and MassMutual to bring bitcoin innovation to the life insurance industry, NYDG wants to provide bitcoin-powered solutions for P&C insurers. To be continued! 📰 Coverager