5 key insurance industry trends in EMEA region according to Plug and Play

5 key insurance industry trends in EMEA region according to Plug and Play

Published: 23-01-2023 13:50:00 | By: Pie Kamau | hits: 89 | Tags:

Insurance industry trends over the past year have been significant, especially across Europe, the Middle East, and Africa (EMEA) region. 2022 was a unique year, marked by uncertainty and scarcity, following a record-breaking and prolific 2021, where global insurtech investments reached new heights.

(1) Moving toward an insurance ecosystem

As foreseen in Plug and Play's 2021 insurance industry trends article, insurance trends 2022 can be characterized by a significant increase in ecosystem adoption. The emergence of new online insurance services has led to the development of more diverse and multifaceted offerings allowing users to meet a range of needs through a single, integrated experience. This shift has enabled innovative insurers to develop disruptive distribution and engagement models, creating insurance ecosystems that enhance personalization and customer experience.

Three major trends have emerged in the insurance ecosystem market:

  • The continued evolution of technology enablers has allowed incumbent insurers to easily access a variety of new internal and external capabilities in a seamless manner. Socotra, a startup that raised a $50m funding round in 2022, offers an app marketplace that gives customers access to 30 app publishers, allowing them to eliminate lengthy and rigid integration projects and add new features and services quickly
  • The rise of ecosystems focused on specific lines of insurance, such as health. Daccado, an insurtech that specializes in supporting the digital transformation of insurers through health risk quantification and digital health engagement platforms, exemplifies this trend. The company partnered with Digital Insurance Group, aka DIG, this year to offer lifestyle-based products to life insurance customers, enriching the insurer's offerings and providing tangible benefits to its customers
  • The emergence of ecosystems targeted at a specific population segment that shares common characteristics, such as people over the age of 50. Restless, a startup that recently secured €6m for its platform catering to this age group, offers a digital community, advocate, and advice platform for individuals over the age of 50 who are seeking to make changes in their lives, such as exploring new hobbies, trying new jobs, and meeting new people

 

Overall, the adoption of ecosystems in the insurance industry has allowed the creation of more diverse and personalized offerings, and has enabled insurers to create new distribution and engagement models. These trends will likely continue to shape the industry in the coming years.

(2) Innovation insurance products

With the changing needs of customers and businesses, Plug and Play saw new products from insurance companies emerge to better offer tailored solutions to customers. Based on Plug and Play's corporate partners’ areas of interest and new product offerings, three product areas that saw the most growth in 2022 were identified:

Cyber insurance

As the reliance on technology and the internet in both personal and professional settings increases, the risk of cyber-attacks and data breaches has also risen. Cyber insurance helps cover the costs associated with these events, including the cost of recovering from a data breach, legal fees, and compensation for customers affected by the breach. The demand was also backed by venture capital when Eye Security, a Dutch cyber-insurance startup, raised €17m. Another example is Helvengo, which provides insurance solutions tailored to SMEs in the DACH region, raising €4m in a seed financing round to bring technological advancement into SME insurance with a major focus on cyber insurance.

Pet insurance

This year, Plug and Play has witnessed exponential growth in the interest for pet insurance both from our partner requests and from the number of new insurtechs and funding focused on this segment. Some key offering bundled in pet insurance coverage were online consultation with vets, full coverage of the cost of medical treatment for illnesses and injuries, and routine care such as vaccinations and preventative care. Pet wellness was also seen as an upcoming trend where pet owners can use services for pet well-being all using one platform. One pet insurtech startup providing a transparent, end-to-end digital service for pet owners and veterinary clinics is Napo.

Parametric and weather insurance

This became a trend in 2022 as more insurance companies wanted to offer weather protection products to their customers, mainly driven by climate change and unforeseen natural hazards. This type of insurance can provide protection for businesses and individuals who are vulnerable to weather-related risks. Parametric insurance also saw a technological advancement with machine learning models and the use of real-time weather data. Startups like Climatica, are offering parametric insurance products based on machine learning solutions and real-time weather monitoring to offer fast, simple, digital weather insurance to insurance customers. Another example is the SaaS platform, Mitigrate, which enables banks and insurance companies to understand the impact of climate change and help to reduce the physical climate risk to their assets and properties.

Due to the increase in new products on the market, Plug and Play has observed a corresponding increase in demand for insurance product builders. Product builders are platforms or software that allow insurers to design, build, and launch new insurance products quickly and efficiently. Tigerlab, which is an insurtech offering an end-to-end insurance platform product builder working with top insurance companies, has seen growth in demand from insurers in the past year. They even were amongst the few insurtech startups selected for Plug and Play Batch 9, all based on votes from the insurance partners. Even insurtech startups and MGAs, or managing general agents, collaborated with product builders to build fast and sophisticated products and then add their marketing magic. Dalma, a pet insurance startup, collaborated with Seyna, a french product builder to roll out pet insurance products with dynamic pricing giving Dalma a competitive advantage amongst its peers.

(3) Predictive modeling in insurance for prevention

Preventive analytics is a promising approach for the insurance industry, as it allows companies to identify and predict potential risks before they occur. By using data analysis techniques, insurance companies can take proactive measures to prevent losses and improve risk management. Many European incumbents have recently teamed up with insurtech firms to develop predictive models that help minimize policyholder risk exposure. These models are transforming the industry by shifting it away from a reactive "fix and repair" model to a proactive "predict and prevent" approach.

Insurtech startups are competing to offer the best solutions for the shift towards a more preventive approach to insurance. By providing policyholders with services that help avid claims from happening and proactively address potential issues, insurers can improve the customer experience and reduce costs. Some examples are:

  • Insurance companies can leverage data analytics to anticipate the likelihood of certain types of claims, using sources such as weather data and policyholder health information. Startups like Thryve, Binah.ai or HealthCaters utilize passive or active health data tracking to assess emerging risks and provide insurance companies with insights for risk assessment. Medicus AI, Holly Health or Second Nature offer solutions to help incumbents by offering remediation actions. In the P&C sector, startups like Enzo use data-driven techniques to prevent household damage and improve home safety proactively. Another example is Gocleer which utilizes data analysis to empower drivers to improve their behaviors and reduce the risk of accidents
  • Insurance companies can use data on past claims and policyholder behavior to identify patterns or deviations that may indicate fraudulent activity, and take action to prevent it from occurring. There are startups that use behavioral biometrics, such as V2verify and ForMotiv, which rely on proprietary datasets that are effective at predicting a user's "intent." By analyzing and understanding these behaviors, insurance companies can more effectively prevent fraud

 

(4) A financial literacy app with specific customer segmentation

Silver economy

The segment of the population where the economic activities and opportunities are related to the aging population (50+ years old). As people live longer, healthier lives and continue to work, travel, and participate in leisure activities, there is a growing market for products and services geared toward seniors. Insurance companies, with a growing part of the customer base falling into the category of the silver economy, benefit from exploring this market and offering specialized insurance products beyond health and life insurance. Plug and Play also saw a rise in startups like Heimkapital and Wertfaktor, which assist the mainly silver economy population in partially selling their properties and living a financially stable life after their retirement.

Generation Z (Gen Z)

Another customer segment which attracted interest from Plug and Play's insurance partners was “Generation Z,” or those born between the late 90s and early 2010s. Gen Z, are a demographic group that grew up with technology and the internet and uses online platforms to research and purchase products and services. Insurance companies can target Gen Z customers by offering tailored insurance products and services. However, to effectively reach these customers, a focus on their financial literacy is the first step that needs to be taken.

From Plug and Play's projections, Gen Z would be a loyal customer to the brands they would associate themselves with until they feel valued and the brand can help them create financial well-being for themselves and has a strong purpose/impact. Plug and Play also saw fintechs primarily focusing on financial management and literacy for Generation Z customers, like the app Quirk, which offers smart budgeting features for the customers, while educating them on how to save their money in a better way. Customers can first take a "money personality" test to better understand which category of learning they fall into.

Gender-focused segmentation

There's been a significant focus on financial literacy and education for women. Finmarie, a startup from Berlin, is working closely with companies and communities to foster financial education and the well-being of women. The company does this through its app where women can access financial knowledge and assistance for investments and money management.

(5) Acquisition as a driver of insurance innovation

In 2022, acquisition became a key driver of innovation in the insurance industry. There were several notable examples of this trend as traditional insurance companies turned to acquisitions to access new technologies, expertise, and markets. This trend was driven by three key factors: corporates acquiring insurtechs, insurtechs acquiring other insurtechs, and further development of corporate venture capital, or CVC, vehicles.

Some examples of traditional insurance companies acquiring insurtechs are:

  • Allianz's acquisition of Simplesurance, a German insurtech that provides extended warranty and insurance coverage for consumer electronics and other products.
  • Munich Re’s acquisition of Apinity, a startup that supplies API solutions for the insurance industry
  • Chedid Capital’s acquisition of BuyAnyInsurance.com, a leading online insurance platform in the UAE

 

These strategic transactions allowed the companies to access new technologies and expertise, and use them to enhance their operations and offerings.

Startups acquiring other startups is another example of acquisition driving innovation in the insurance industry. In 2022, the insurtech +Simple announced six acquisitions, including InnovAction, which specializes in insurance coverage for heavy trucks, and MG Denzer, which offers insurance for interpreters and hotel restaurants. Lemonade also performed the acquisition of the insurtech Metromile, whose intricate sensors and AI technology have been used to monitor billions of miles of driving and accurately assess risk, by cross-referencing data with claims. By integrating these models into its platform, Lemonade aims to make its car insurance offerings more competitive, precise, and fair.

This year, the insurance industry has also embraced even more the use of CVC to drive innovation. According to a report by Bain & Company, CVC-backed investments now make up over 20% of global venture capital, a significant increase from the 11% recorded a decade ago. Insurance companies are leveraging CVC as a tool to scout for promising startups and potential acquisition targets, often targeting early-stage investments and treating CVC as a form of traditional M&A. CVC has proven to be an effective strategy for insurance companies looking to stay ahead of the curve and navigate the rapidly evolving tech landscape. As the value of CVC-backed investments continues to rise, we can expect to see more insurance firms embracing this approach in the coming years.

Overall, the latest trends have proven to be a powerful tool for insurance companies to drive innovation and stay competitive in a rapidly changing industry.

Challenges and opportunities for insurance trends

Challenges facing the insurance industry:

  • Claims inflation
  • Weak equity markets
  • Geopolitical tensions

 

Opportunities for the insurance industry:

  • Increased risk awareness (especially in health and life insurance lines) due to the pandemic
  • Increased demand for insurance products in times of uncertainty and instability
  • Increased investment income for insurance companies due to rising interest rates

 

What to expect in the insurance industry: 2023 and beyond

This is a year of transition for the insurance industry as it navigates complex economic conditions. As well-funded players look to acquire weaker insurtech companies, there is increased M&A activity in the startup space.

As climate change and sustainability become more pressing, there may be greater demand for insurance covering environmental risks like natural disasters, pollution, and resource depletion. Additionally, the insurance industry is expected to continue developing products and underwriting solutions to address new technological and cyber risks that may arise due to the rapid pace of technological change. These efforts will likely shape the direction of the insurance industry in the coming years.

Beyond 2023

Web3 and non-fungible tokens, or NFTs gained significant interest from insurance partners. This year, Plug and Play has been providing education and workshops to its corporate partners about these technologies. Plug and Play received requests from partners around the area of blockchain technology, digital assets, metaverse, and NFT usage in insurance, and most requests were based on educational focus. The partners wanted to better understand the basics of blockchain technology and its implications for insurance.

However, the volatility of digital assets makes it challenging for traditional insurers to fully grasp the risks associated with providing coverage for Web3. Insurtech companies are therefore working to identify more concrete opportunities in this space, despite the lack of a clear legal framework.

As the market evolves, Plug and Play expects to see more incumbents implementing solutions in this space or partnering with insurtechs to stay competitive. The future of insurance is closely intertwined with the growth of Web3 and NFTs, and companies that are able to navigate this complex landscape will be well-positioned for success. Blockchain, the metaverse, and digital assets can play a vital role in different areas of the insurance value chain in the long run, it can be considered as a trend in upcoming years, dependent on the maturity of the space.

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