Insurtechs: What they are and how they impact the insurance market

Do you know what insurtechs are ?

These startups came to revolutionize the insurance market, with a proposal similar to that of edtechs (education), healthtechs (health) and fintechs (financial market).

Given the demand for reducing bureaucracy in the segment, many insurtechs work side by side with traditional insurers, in order to provide simpler services at lower costs .

The result is innovative models such as on-demand and pay-per-use health plans, covering life, health and various types of material goods.

If you want to know more about when they started, how these startups work and the impact of their actions on the market , this article is for you.

See the topics we’ll comment on from now on:

  • What are insurtechs?
  • When did insurtechs appear?
  • How do insurtechs work?
  • How is the insurtech market in Brazil?
  • How do insurtechs impact the insurance market?
  • What are the benefits of insurtechs?
  • What are the main insurtechs in Brazil?
  • What are the insurtech trends for the next few years?

If you are interested in insurtechs, be sure to follow this text to the end.

What are insurtechs?

Insurtechs are startups focused on the insurance market that, in general, offer solutions to improve the customer experience.

The word insurtech was constructed from the combination of two English words:

  • Insurance
  • Technology (technology).

Adding the suffix tech also indicates that the group belongs to innovative companies , as startup can be defined as:

“A group of people looking for a repeatable and scalable business model, working under conditions of extreme uncertainty.”

If you have already contracted an insurance company in a conventional way, you know the need to simplify the process .

It is usually full of documents, complex terms, signatures and conditions that are difficult for those unfamiliar with the dynamics of asset protection to understand, which can lead to misunderstandings and problems when using the service.

It also usually impacts relatively simple activities, such as canceling the service or consulting contractual conditions.

With an eye on these issues, Brazilian and foreign entrepreneurs found ways to end the bureaucracy in the service provided by companies in the insurance market: the creation of startups focused on this demand.

Using creativity and flexibility, these entrepreneurs have been able to bring about significant changes in the sector, streamlining processes and working on customer-centric modeling .

When did insurtechs appear?

There is no specific record that points to the emergence of insurtechs.

Not least because they represent a movement towards innovation in a sector that, until a few years ago, was restricted to traditional and bureaucratic processes, with almost nothing new in relation to products and customer service.

However, the digital age has triggered transformations in all market sectors and, sooner or later, it would reach insurance.

One of the biggest signs was the disruption experienced by the financial market, another quite traditional field and, until then, dominated by large banks and financial entities.

With few options to optimize processes and add benefits to customers , the area needed a remodeling, which has been successfully carried out by fintechs such as Nubank.

All these changes became evident in the 2010s , both in the financial area and in the insurance market, strongly influenced by the success of fintechs.

How do insurtechs work?

How do insurtechs work?
How do insurtechs work?

Most insurtechs work by connecting insurance, technology and consumer through technological tools such as artificial intelligence, machine learning and blockchain.

Typically, its services are concentrated on digital platforms, such as applications and websites that have a user-friendly interface, that is, simple to be used, even by non-experts.

In addition to insurance policies, insurtechs offer added services , prioritizing the customer experience to gain their loyalty and maintain good profitability.

Intermediation on the part of these startups provides agility, practicality and ease in the use of insurance products, allowing, for example, the user to contract the package that he/she likes most, change packages or cancel.

How is the insurtech market in Brazil?

The insurtech market in Brazil is booming, with the number of companies in the segment increasing 47% between 2018 and 2019, as revealed by a survey carried out by KPMG in partnership with the District.

Released in March 2020, the study counted 113 startups in the insurance market in the country, which operate on 4 main fronts:

  • Solving efficiency problems (47.8%)
  • Products and distribution (31%)
  • Comparison (14.2%)
  • Additional services (7.1%).

The Southeast Region concentrates the majority of insurtechs (74.3%), with 52% located in the state of São Paulo.

Then come the South regions with 17.7%; Midwest with 4.45%; Northeast with 2.7%; and North with 0.9%.

More than half of them (66%) are still in the initial stages , with presumed sales of up to R$ 5 million.

Only 15 of the 113 insurtechs reach R$25 million in sales.

Dominated by small companies , 70% of the sector is made up of organizations with fewer than 20 employees.

As for the representativeness of Brazilian insurtechs abroad, a study by Digital Insurance LatAm showed that the Brazilian ecosystem corresponds to 37% of the Latin American market .

The survey also found that 56% of national insurtechs work under a collaborative dynamic with traditional insurers, improving their services.

How do insurtechs impact the insurance market?

Insurtechs provide flexibility and practicality to clients, who are given autonomy to control the contracted services .

Instead of having to hire a broker to perform simple actions, they can access an app or platform themselves, via login and password, to monitor their policy and added services, make changes, answer questions or request support.

This digitization of processes , common in other areas, has revolutionized the relationship between insurers and consumers, with gains for both.

After all, insurance companies are now providing a more humanized and personalized service to meet the main wishes and needs of customers, whether individuals or companies.

They also adhere to data intelligence to collect, compile, store and compare numbers extracted from customer activities, using automation to extract insights and transform data into strategic information for the company.

But not everything is perfect.

A not-so-positive effect for insurers and brokers is the rapid changes spearheaded by insurtechs, which require rapid adaptations to keep businesses and services from becoming obsolete.

In this scenario, those who do not prioritize digital transformation , which places technology at the center of the company’s operations, may be harmed and remain out of the market in the next decade.

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