The barriers to expansion

Kicking off the discussion, Carlos Cendra, innovation expert at Mapfre, struck an optimistic note to lead discussion on the panel headlined: “Insurtech leading the charge: how insurtechs are breaking into new geographies”.

He said emerging markets such as Latin America are an attractive destination for insurtechs as there is a low insurance penetration.

Insurance penetration is measured by total insurance premium against a country’s gross domestic product.

Cendra said: “Only around 20 percent of the population of Latin America is insured, in general.

“So there’s a huge opportunity there, and it makes a lot of sense that people without that legacy are the ones trying to force a change in this reality and making business out of it.”

The number of insurtechs across the region was growing rapidly.

“Insurtech in Latin America is growing. We’re talking about almost 500 companies right now—just insurtechs. So the gap is there, and the opportunity is there,” he said.

Miro Parizek, founder at Hampleton Partners, said maybe there was a good reason for places in Africa and Latin America to have such a low insurance penetration.

He said: “I’ve seen some fintech companies do acquisitions in emerging markets, but insurance, less so. My thinking is that maybe they have other problems they are solving first before they get overly insured like the German market.

“I haven’t seen so much acquisitions of insurtechs abroad from the mergers and acquisitions (M&A) side. Does that means there isn’t opportunity? There is an opportunity, but I think it has to be developed from within.

“I don’t know how easy it is to enter a new market by saying: ‘I’m just going to target that market and build a new company there with existing technology’,” he added.

Cultural hurdles

Sebastian Banescu, Chainproof chief executive and head of Quantstamp Germany, said cultural barriers had to be considered.

“It is very important that you consider culture, because if you look at certain cultures, they just don’t care about insurance. They’re risk-takers,” he said.

“They might not be interested in buying. We are targeting institutions that have a legal requirement to buy insurance for their principal.”

Jerad Leigh, co-founder and chef executive of Supercede, highlighted a number of questions that could be asked for insurtechs entering new countries.

“It is very evident that there is not what we would call in the technology space, ‘product market fit’ for insurance solutions in geographies.

“Product market fit is a combination of a lot of things. Does the product have a need? Does the product have a price point that people want to buy it at?” he added.

“Is there some validation around the entities you are buying it from? Whether there is a need there, or the product doesn’t solve enough of a pain point or the price isn’t there.

“All we know in those geographies with very low insurance penetration is that insurance has not yet hit a product market fit.”

Consolidating on that point, Parizek said people had fallen into the trap of thinking their insurtech can be exported abroad seamlessly.

“The whole idea of the classic insurtechs going abroad with their existing business model in the US, and then applying it to for example India is not a very easy thing to live up to. Look at what Amazon did in India—it acquired a big target. They didn’t even try to build it from scratch and it’s a very difficult thing to do, to build a whole new culture around a product,” he said.

Insurtech advantages

As well as these challenges, the panel highlighted advantages that insurtechs possess.

Banescu, whose firm Chainproof provides insurance cover for loss of smart contracts, said insurtechs frequently had expertise that traditional insurance lacked.

This made for healthy partnerships between insurtechs and traditional insurers.

“The fact that the remuneration gap you get at a web startup is way higher than you would get at a traditional insurance company, leaves them with a very big gap in expertise when it comes to assessing the risk, processing the claims and monitoring the risk.

“There’s a huge advantage that insurtechs have and traditional reinsurers need to trust these insurtechs—that they’re doing a good job, which involves a lot of technical due diligence from the insurance company side.

“We ourselves have gone through pretty much a year or more of technical due diligence with Munich Re, our reinsurer, before they agreed to partner with us.”

Cendra backed up this point, saying insurtechs should “attack just one vertical”.

Betterfly, a wellness and fitness provider for employees, has just raised $200 million. The Chilean startup was an example of a specialist insurtech doing well, he said.

Ultimately, Leigh said, it is a numbers game for insurtech. One would eventually succeed and blaze a path.

“All we are doing now is overloading these geographies with experiments of what might work. And eventually, something will work.

“We will see an uptick in M&A activity, but we need to wait it out to see what is the right blend of those various things that allow insurance to have the market fit we’ve seen in the West.”