Digital insurance startups, known as insurtechs, are attracting record levels of investment. But the established industry names aren't worried – they see them as partners in their own modernization.
It’s fitting that the insurance industry, not known for high-octane levels of excitement, is big in Germany, a country not known for, well, its high-octane levels of excitement. Giants such as Allianz and Munich Re are global leaders, and everyone knows how Germans like to insure themselves against pretty much every eventuality.
But it’s unlikely they use a digital platform to do so. Until this year, Germany remained relatively untouched by the digital transformation of the insurance market. But change is rapidly coming, with new records in investment in German digital startups this year.
One Insurance, based in Berlin and Liechtenstein, is one example. A so-called unicorn, it has an estimated valuation of over €1 billion ($1.16 billion), and is the most successful of a wave of digital startups, known as insurtechs, currently shaking up the industry. Worldwide, the sector has seen average annual investment growth of 36.5 percent since 2014.
Interestingly however, there is surprisingly little ill-feeling between the old mainstream and the young upstarts. Insurance companies need technical solutions, which insurtechs can provide, while insurance startups need instant access to a massive customer base. So mutually beneficial relationships are being forged across the sector. Munich Re, for example, holds stakes in no fewer than 25 startups.One to watch
One Insurance is currently raising a second round of finance with the help of its majority owner, the Swiss insurance platform Wefox. The company was launched last year with initial capital of €10 million, some of which came from Hollywood star Ashton Kutcher. Although neither Wefox nor One would be drawn on exact figures, the money raised in its last financing round is rumored to exceed $180 million.
One has a European insurance license, and offers a completely digital product, combining household contents insurance with personal liability cover, all handily manageable on its app. Since its official launch in February, the company has gained 40,000 customers, making it Europe’s fastest-growing insurtech.
The firm is blazing a trail. Three major German insurance techs – Clark, Coya and Simplesurance – have collectively raised $94 million in venture capital this year, with Simplesurance going for two rounds of financing. Much of the capital is coming from overseas.
Experts think the boom will continue. “Investor trust is growing thanks to the increasing cooperation with established banks and insurance companies,” says Simon Nörtersheuser, who reports on insurtechs for industry news source Policen Direct. It helps that there are a lot of seasoned insurance executives moving into insurtechs: One Insurance co-founder Stephan Ommerborn is a veteran manager at Zurich Insurance, for example.
There are now more than 100 insurtechs in Germany, all closely watched by the mainstream industry. Big insurers want to avoid the mistake made by the banks, which initially regarded digital newcomers as threats, not as potential partners. The plan seems to be working: According to a recent study by Capgemini, one third of insurance companies are now actively seeking insurtech acquisitions.
But with venture capital sloshing around the market, this will not come cheap. Coya has received cash injections from Paypal founder Peter Thiel, and Clark has fintech investor Portag3 Ventures and investment fund White Star Capital onboard.
One Insurance, however, is thought to have hit the big time, with rumored future investors including news agency Reuters and Vision Fund, the $100 billion venture capital arm of Japanese bank Softbank.