Fintech is booming – but where are the insurance tech startups?

Rob Moffat
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London’s fintech scene has been a profitable hunting ground of late (Source: Matteo Giachetti Photography)
As a technology investor, I spend my days scouring Europe in search of the next big thing.
London’s fintech scene has been a profitable hunting ground of late. With the UK fintech industry generating $20bn in revenue annually, it is not surprising that $5.4bn has been invested in British fintech companies since 2010.
Your daily tube journey is a testament to how rich the scene has become, with the capital’s underground trains now wallpapered with ads for Crowdcube, Transferwise, Nutmeg and other innovative companies.
And this week, London has played host to Fintech Week, celebrating the contribution these firms are making to the capital’s evolving financial services industry.
But where are the insurance tech entrepreneurs? It is frequently and accurately argued that it is London’s birthright to play host to the poster-children of fintech, due to the capital’s impressive legacy and world-leading position in banking.
However, the same can be said of insurance. The concept of modern insurance was solidified in Edward Lloyd’s coffee house in the 1680s, yet there isn’t a day celebrating “instech” or “insutech” – or whichever interesting portmanteau will be applied to “insurance tech” – let alone a week of conferences, events and after-parties.
This is despite the insurance industry, worth $3.7 trillion globally, being of comparable size to the rest of the financial services industry put together.
Digital insurance should be an obvious target for technological disruption, especially as traditional insurers have struggled to adapt to the digital age en masse.
Recent research by Morgan Stanley found that consumer satisfaction with online experience in the insurance industry is well below average, with only real estate and telcos finishing lower in the 16-industry league table.
The big insurance brands have very little contact with their end consumer, due to intermediaries such as offline broker networks, and as a result brand advocacy is often low. Put it this way: when was the last time you raved to your neighbour about your insurance provider?
Technology has the potential to drive effective and worthwhile change in insurance. There are already a few success stories, but only a few.
Insurance comparison engines such as Moneysupermarket, Compare the Market, and Check24 have fundamentally altered how consumers discover their insurance providers.
Black Box Insurance, based on telematics data, has become a mainstream product for young drivers, fuelling the growth of companies such as InsureTheBox and Marmalade.
These are all fantastic firms, but there is not a long list beyond these examples.
So why don’t we see more of this type of innovation? Insurance does have far higher barriers to entry than many other industries.
To simply get an insurance company off the ground, it requires a colossal amount of cash to cover any potential claims.
Additionally, regulation is tough, with good reason. The European Commission’s Solvency II Directive sets a high standard for the capital requirements for insurers to hit in order to be classed as an eligible provider.
This type of money is hard for a startup to find. Having said this, very similar challenges are being overcome in retail banking, with challenger banks such as Metro and Atom obtaining banking licences and putting regulatory capital in place.
The successes that many have encountered in fintech should buoy potential insurance tech entrepreneurs, as should the appetite of venture capitalists to invest in the insurance sector.
I don’t just speak for myself; insurance has excited many colleagues from other funds, especially as the industry is starting to give us some success stories.
Slowly but surely, companies such as The Floow, BoughtByMany and QuanTemplate are demonstrating that technology can validly and successfully disrupt the insurance industry.
London’s centuries-old legacy in insurance has created a talent pool that is, arguably, the best in the world.
Combine this with the strong tech talent in the capital, and you can see that the raw ingredients required to build extremely interesting companies are readily available.
Additionally, certain large incumbent insurers are beginning to show interest in nurturing the capital’s potential insurance tech community.
Axa is a particularly good example, having recently launched Kamet, a €100m accelerator programme aimed specifically at insurance tech entrepreneurs.
The combination of VC appetite, available talent and support from existing players demonstrates that London is a powder-keg of untapped potential.
The only missing ingredients, at the moment, are the world-beating entrepreneurs willing to put their ideas to the test.
Fintech has shown that London can lead the world in industries that are steeped in tradition and ripe for change. It’s time for insurance tech to step out of the wings.

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