Frankfurt 2021 was not a bad year for young technology-driven companies in the insurance industry. The so-called Insurtechs not only got through the pandemic better than initially feared, companies such as Wefox, Clark and Getsafe even managed to secure larger financing rounds. “The insurtech market has become much more mature this year”, is the conclusion of Thomas Broichhausen, partner and insurance expert at the law firm Linklaters.
Now new topics are on the agenda: “We are assuming that mergers and acquisitions, restructuring and foreign expansion will increase in 2022,” predicts Broichhausen. Dietmar Kottmann, partner at the management consultancy Oliver Wyman, also expects the “internationalization of many Insurtechs to pick up speed” for next year.
Some developments can already be seen in the year that is drawing to a close. For a long time there has been a trend towards cooperation between the insurtechs themselves or between the start-ups and large insurers. What is new is that the young companies no longer dare to only venture into collaborations, but also into takeovers: For example, the digital insurance manager Clark recently announced that it would take over the Finanz Group.
According to Handelsblatt information, the online health insurer Ottonova recently bought KVPro.de – a portal that offers quality and performance comparisons in private health insurance. Ottonova has been working more closely with partners for some time now and continues to look for strategic partnerships and possible acquisitions.
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Some Insurtechs from German-speaking countries have also made progress in expanding into new markets. “Above all, start-ups that help insurers to digitize their business processes have shown that they can be successful internationally,” says Kottmann. Jarowa from Switzerland and Riskine from Austria are now also active in Germany. Due to the manageable size of their home markets, they were forced to go abroad at an early stage.
Adaptation to local conditions is necessary
For start-ups that act as digital insurers and distributors themselves, however, expanding abroad is not that easy, as they have to adapt their business models to local conditions, says Kottmann. But here too there are positive examples. The digital insurer of the Wefox Group started in April in Poland and, according to a company spokesman, in November in Italy. The market entry in Switzerland took place at the end of 2020.
The competitor Getsafe has now established itself in Great Britain. After the financing round in October and with the new Bafin license for the property insurance business, further steps abroad are to follow. The next market will probably be France. A company spokeswoman emphasizes that a specific date has not yet been set. The growth abroad should help to raise the number of customers from currently over 250,000 to over 400,000 next year.
The white label insurer Element, which develops policies that other providers can sell under their own brand, also wants to grow abroad. The start-up, which has gained over 20 new partners this year, is already active in Austria. Above all, Element wants to bring its cloud failure insurance to other countries as soon as possible.
The Head of Insurance at Element, Eric Schuh, says: “Italy and France will follow in the next few months, and another five EU countries over the course of next year.”
The commercial insurance platform, Thinksurance, expanded into France this year. According to company boss Florian Brokamp, Italy, Spain and the Netherlands are now at the top of the list – but Borkamp does not want to give exact dates. The USA could also become interesting for thinksurance in the future. But that is again “another thick board”, emphasizes the manager.
IPOs are becoming more of a focus
Frederik Winter, expert for supervisory law at Linklaters, warns: “An expansion in the USA entails significantly higher regulatory hurdles than an expansion within Europe.” Only start-ups that expect very good opportunities in the market should take this route.
Wefox put its plans to go to the United States on hold shortly after the corona pandemic outbreak, but has now reiterated that the United States and Asia are future target markets.
Many German start-ups are also looking to the USA because some Insurtechs are already listed there – including Lemonade, Metromile and Root. However, their share price development has recently been extremely weak. German start-ups such as Wefox and Getsafe, which can envisage going public in the medium term, will be keeping a close eye on this downward trend. Nevertheless, Broichhausen von Linklaters believes it is realistic that two to three Insurtechs will go public in this country in the next two years.
There will also be larger financing rounds again in 2022: “The financing environment remains extremely favorable for Insurtechs. The interest of foreign investors, especially from the USA and Canada, is high, ”says Broichhausen. Wefox’s mega financing round of $ 650 million will be difficult to beat in the new year.
Despite all the positive developments, things do not run smoothly for every start-up. At the beginning of the year, the financial supervisory authority Bafin criticized the fact that the Insurtechs often plan too little money at the start and make overly optimistic forecasts. “The fear that the start-ups could have problems with financing has not come true,” says Linklaters expert Winter. Nonetheless, his colleague Broichhausen estimates that “in the new year there could possibly be one or the other cessation of business or a takeover of an Insurtech by a large insurer”.
More: New unicorn in the insurance market: Insurtech Clark takes over the Finance Group