ITC DIA Europe

Insurance and InsurTech in Europe with Klein Blue

Written by Jolijn Schalkwijk on May 6, 2024

We sat down with Salim Echoukry – Founder & CEO at Klein Blue Partners. Klein Blue enables corporates to identify tomorrow’s trends and to construct innovative strategies by bringing the energy of startups. Thanks to the Klein Blue platform, corporates can easily accelerate their calculation process and the activation of collaboration and investment opportunities with future gems. Having interviewed many innovation leaders from across Europe, Klein Blue has created a report showing how the industry is accelerating towards a more digitised future. Let’s dive into the report together with Salim.

Salim, how have neo-insurers performed so far?

“The first observation that we can make is the current flight-to-quality phenomenon. 2 or 3 years ago, not a single week went by without a new neo insurer, raising massive funds or expanding to new markets. But since then, you’ve seen that the market has been more quiet, and it’s because a lot of these actors struggled to meet their product market fit. This is due to three reasons: one is external factors such as inflation, and the rise of interest rates leading to limited access to capital. But also, internal strategic reasons. Many of these neo-insurers relied on costly, massive acquisition of new customers with often a poor risk selection. Third, we witness a cultural gap in many countries. For example, the new insurer wave in Belgium started like ten years ago. But people to this day in Belgium don’t seem ready to do without real human advice when buying insurance. That’s why a lot of insurtechs are smartly shifting their model from a direct-to-consumer, B2B or B2C to an indirect model of distribution B2B2C or B2B2B.

Secondly, the vertical position of neo-insurers is slowly decreasing. Vertical players focusing on specific needs have suffered from limited market depth. Nevertheless, in the meantime, we’ve seen some neo-insurers that have shown a great ability to reduce the protection gap on specific risks, for example, cyber insurance. Because in cyber insurance, the risk is massive, but the assessment of the risk is still really complex. And a lot of companies are under-covered, for example, SMEs.

Insurtechs have revolutionised the way a product is designed and distributed with embedded insurance. It has been growing steadily for several years now, and the embedded insurance market should reach 1/3 of the European P&C market by 2030. Embedded insurance is currently expanding to new kinds of products, not only P&C, with a shift of the moment of acquisition of the insurance products from the point of sale to the point of needs of the customer. Also, in a context where climate exposure has never been so high in recent years together with massive access to real-time data, parametric insurance has expanded tremendously in the last years, with a lot of use cases across commercial and personal lines.

Finally, the explosion of the capacity to collect and treat data has led to the emergence of new kinds of highly relevant value propositions, for example, pay-as-you-drive and behaviour-based insurance products. And even though pay-as-you-drive neo-insurer startups are yet to find their business model and they are yet to find their product market fit, all the signs are there that this trend will continue well into the next years, because customer needs and habits are still evolving, and also the regulatory environment, open insurance or data-act, might bolster these kinds of new use cases.”

What do you see happening regarding tech enablers?

“This overall picture is way better, supported by three main observations. The first is the massive adoption of many of these solutions by traditional insurers. Especially those highly vertically sized AI-powered tech enablers addressing specific insurance issues. Think of Shift Technology, FRISS, Akur8, Bdeo, Tractable and Photocert. The second observation that we can make is the growing field of possibilities opened up further by generative AI. Lots of tech enablers today are extending their offer by embedding state-of-the-art generative AI. Klein Blue believes that the market is far from being saturated for tech enablers as new possibilities are yet to be unlocked thanks to generative AI but also analytical AI. Finally, we see a rise in highly vertical, data-focused enablers, which are insurtechs that support traditional insurers in their effort to master their processing innovation, sharing, data processing, data sharing, data collection, etc. Think of Mitiga in Spain (climate risk) and Spotr in the Netherlands (assessment of P&C portfolios).”

How far have insurers come in their digital transformation?

“Many incumbents across Europe have started massive initiatives aimed at the digital transformation of their processes and their offerings. We work with more than 50 insurance companies across Europe and we’ve witnessed a real evolution of how innovation is perceived by these companies. Today, innovation is more and more seen as a leverage to deliver the overall strategic roadmap, the strategic plan, and insurers are no longer looking for incremental innovation.

We see three ways of adopting innovation across Europe. The first is building a solution mirroring the value proposition of a startup internally. However, it has become clear that insurers can’t do everything themselves. Secondly, we see strategic collaboration; with the emergence of new models that go beyond the simple commercial relationship. For example, venture client models or strategic investments. Finally, strategic acquisition. Insurers are becoming increasingly aware of the value of tech M&A to internalise a key technology or expertise, or to address a new segment.”

Can you provide us with a prediction of what the insurance industry might look like 5 or 10 years ahead?

“Insurers need to have a long-term vision that takes into account the likely effects of new technologies. Our analysis is that new technologies might have two kinds of effects. First, a lot of new opportunities and new possibilities will be created to accurately handle new emerging risks such as cyber risk, social conflicts, climate change, etc. Secondly, if there’s a massive adoption of a technology like augmented reality or virtual reality, it might create new ways of living by the mass market and new ways of consuming that can lead to new standards, new habits, and thus new unexpected risks to cover. Advances in generative AI have opened up new opportunities for insurers to improve the efficiency and profitability of their services, while ensuring greater satisfaction for their insured customers.”

What are the financial trends that you see in the insurance market?

“First, when we look at the cumulative amount raised by country, we can see that the European market is fragmented. It’s concentrated around three regions: the UK, the DACH region and France – these account for nearly 90% of the total amount of rates. Also, there has been a striking slowdown of funding, we guess mostly due to external factors, because this pattern is also witnessed within other startup segments beyond insurtech. Yes, financing momentum slows, but remains strong. In this new realm, it’s interesting to see that a lot of insurtechs are successfully shifting their model from growth to profitability. Finally, in Europe, there have been major acquisitions in 2022-2023. Most of the time insurtechs are acquired by incumbents.”

Who is Klein Blue?

Klein Blue is a Paris based company. They help insurance leaders to skyrocket their innovation strategy to uncover new trends, decipher new trends, new technologies, and provide them with a platform that help them to uncover the best startups to collaborate with or to invest in. Klein Blue serves more than 50 clients across Europe.

Salim Echoukry, Founder & CEO at Klein Blue Partners
Amsterdam 12-13 June

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