After a first InsurTech-Hype, a recent study puts the industry to the test: A second wave of InsurTech startups must specifically target high-potential market segments. This requires more expertise than before.
A study by Oliver Wyman and Policen Direkt identified more than 1,000 InsurTech startups. The authors examined the potential of individual segments of the insurance market and compared it with the activity of InsurTechs. Nikolai Dördrechter, Managing Director of Policen Direkt and co-author of the study, says:
"Hardly anyone underestimates InsurTechs these days. The more interesting question: Where do they overestimate themselves?"
InsurTechs need more industry knowledge
Dietmar Kottmann, Insurance Partner at Oliver Wyman, believes that many European insurance startups are operating out of touch with the market:
"European InsurTechs are particularly strong in offering situational and community-based products – yet neither of these areas is particularly profitable."
The supply and sales business areas, in particular, are overstaffed. This is likely also related to another finding of the study:
“Today’s first wave also included startups that had little industry knowledge,”
says Kottmann. And these non-specialist startups focus on areas they already knew from other industries, such as e-commerce. Dördrechter predicts:
“A second wave of significantly better-positioned InsurTechs will come – with more industry knowledge and smarter approaches.”
Opportunities lie in the niche
He expects that European InsurTechs in particular will fill existing gaps and sees investors as having a responsibility:
"It will be exciting to see how they react to the first defaults. And to what extent they are willing to participate in the upcoming, more expensive financing rounds."
Co-author Kottmann sees attractive opportunities in startups that digitize operations. This applies to technologies that support sales, facilitate claims processing, and optimize core insurance processes.
