Can European insurtechs live up to the hype?

European insurtechs have the potential to become a €200 billion market by 2030. How can they turn this opportunity into reality?

August 30, 2023Despite a recent period of disruption, the European insurance industry has remained stable. Insurers recovered quickly from the short-term profitability hit caused by COVID-19, and the outlook is positive: we project about 3 percent annual premium growth and 8 percent growth in profits by 2025.

This relative economic steadiness is an asset. But when it comes to digital transformation, is the insurance industry resilient in the face of change, or is it resistant to it? The past decade has seen multifaceted technology trends emerge in the industry. Some shifts, such as the adoption of digital channels for claims notifications, have accelerated because of the pandemic. Others have remained stagnant for years: for example, adoption of direct and digital distribution has hovered at 18 percent in the European property and casualty (P&C) market. (For information on the research presented in this article, see sidebar, “About the research.”)

The current value proposition of insurtechs

Insurtechs know how to reap the benefits of digital: they create simple, intuitive journeys and products for the end customer, with a high degree of transparency and fast processes in claims and customer service. It can seem nearly impossible for traditional incumbents to achieve the same level of customer-centricity, transparency, and speed.

While insurtechs are no doubt transforming the industry, incumbents and distributors may view them as enablers or challengers, depending on the insurtech’s business model: B2C, B2B, or B2B2C.

Insurtechs are shifting their focus to intermediated distribution

Five years ago, “insurtech” meant direct online distribution. Recently, especially in Europe, insurtechs have been shifting their focus to intermediated channels to capture share among the majority of consumers who still prefer to purchase insurance policies from an agent or broker. Indeed, the traditional direct-insurance model remains challenged by factors such as complex product offerings that require explanation, customers’ preference for personalized advice, and the difficulty of building relationships solely through digital interactions. The direct-insurance model has been stagnant in North America and Europe since 2018, and has yet to reach 15 percent market share globally, according to data from McKinsey Global Insurance Pools.

New and emerging risks are filling the underinsurance gap

McKinsey analysis of the European market finds a considerable insurance protection gap, especially in nonmotor insurance lines—where the gap accounts for approximately €300 million in missed premiums. The share of uninsured individuals and companies tends to be highest in product areas that cover new and emerging risks, including cybersecurity and climate change. The race is on for insurtechs developing new products—using data analytics, AI-driven underwriting, and flexible policy structures—to address new risks and close the underinsurance gap by providing comprehensive coverage that aligns with the evolving needs of individuals and businesses.

Insurtechs are harnessing the power of generative AI (gen AI)

Gen AI¹ offers transformative opportunities for insurers through use cases such as automating underwriting processes, detecting fraudulent claims, and predicting customer behavior. At the conference, start-ups and incumbents showcased various applications of gen AI, including personalized risk assessment, claims management, and customer engagement. Unencumbered by legacy technology, insurtechs can use their agility and flexibility to rapidly iterate on gen AI use cases that could unlock new opportunities.

The insurance industry continues to face numerous challenges, including expensive distribution, an expanding landscape of unknown risks, slow adoption of technology, and tightened access to risk capital. Despite the volatile market of the past 18 months, insurtechs are in a favorable position to tackle those challenges and scale their businesses, potentially in partnership with incumbents.

#insurance #loan #EuropeLoans #EuropeanInsurances #loans #usainsurance #findinsuranceplans #lifeinsurance #usaloan

#americaninsurance #americanloans