How has COVID-19 impacted the InsurTech industry?

An Interview with Hermann Fried – Managing Director of bsurance

Hermann Fried has over 30 years of experience in the Insurance industry in Austria. Hermann joined bsurance in January 2019 as the Managing Director and Chief Insurance officer, and is responsible for the overall management of the company as well as managing the insurance team and leading strategic partnerships with major insurance carriers.

Hermann Fried, Managing Director of bsurance

What has been the biggest COVID- related impact on the insurtech sector and why?

Across the board we saw companies investing heavily in digital transformation projects so they could more effectively run their businesses and serve their customers during lockdown. Similarly, many more consumers experienced first hand how fast and easy buying products and services over the internet had become. This trend expanded into the insurance market fuelled by insurtechs offering a range of new digital products that could be easily integrated into a company’s existing online offering. Over the course of a few months, the adoption of digital insurance grew more than it had in the previous several years. Covid has shown businesses and insurers that European consumers are hungry for insurance to modernise by offering easy, self-explaining products and a comfortable purchasing process.

“Over the course of a few months, the adoption of digital insurance grew more than it had in the previous several years.“

What are the most important trends that have emerged from the past two years that will drive the industry forward?

We’ve seen that one of the reasons the insurtech market has struggled to gain traction in some areas is because of the costs involved in selling the products directly to consumers, such as the money incumbents spend on brokers and neo insurers spend on Google and Facebook advertising. Digital insurance sold directly to consumers is hardly going to reach the scale where it will disrupt the wider insurance market because of the simple fact that spendings on advertisement are limited and a low interest product like insurance needs either a good salesperson or truckloads of money for advertisement. What we have seen is that embedded insurance changes this equation. Integrating insurance products directly into a business’ existing offering, at the point of sale, means that it is presented to consumers at exactly the time they are most likely to purchase, and substantially cuts sales cost. In essence, insurance is moving from being sold to being bought. The emergence of this new way of selling will fuel a new wave of insurtech products and drive innovation further.

“The emergence of this new way of selling will fuel a new wave of insurtech products and drive innovation further.“

What insurance lines are leading in insurtech in terms of growth as a direct result of changing market demands driven by the pandemic?

Unlike many other sectors, the type of insurance products people bought were not evidently changed by the pandemic – demand for car and house insurance remained the same. The exception was in travel insurance which remains subdued.

What we did see, as a result of online commerce booming during lockdown, was a lot of interest and investment in insurtech products that could be easily incorporated into a company’s existing online offering. Companies across Europe were looking for value added services that would differentiate them from their competitors. This, together with the fact that more people were buying goods online, meant that services which offered insurance on products as they were bought did particularly well. It is all about availability 24/7, easiness of the buying process and speed. Nobody who is used to the processes of Amazon is prepared to fill out 8 pages of a questionnaire and then wait 14 days to get the policy sent by mail. That is common with many insurers but for less and less people aceptable.

Is digital transformation in the insurtech space complete or is there still a long way to go?

If you compare it to the banking industry, insurance is at least 20 years behind – so there is still a long way to go. The pandemic did supercharge both interest and investment, however, many processes still remain firmly stuck in the past. The last two years have showcased to all the stakeholders in the insurtech industry that there is clear demand for better options, services and infrastructure within the insurance market and this will mean that digital transformation projects will gather pace.

Although the innovation gap between insurance and other sectors may seem quite large, we’ve experienced how fintech, after a slow start, rapidly gained traction over the last through years and is now growing exponentially, resulting in change. Insurtech and the digital transformation it will enable, is likely to follow a very similar path. As a result, I expect that the insurance industry will look radically different in only a few years time.

Name one area of insurtech that you think needs better attention and what needs to be done.

As most insurers in Europe still work on a national level, insurtechs find it difficult to get pan-European coverages. The reason is that regulations differ substantially between countries. We need more standardisation of rules that reflects the necessities of borderless internet trade. PSD2 and other financial regulations are a great example of how, if the legislative framework is in position, the barrier to grow internationally is lowered dramatically.