11 May Chances for Israeli Startups in the InsurTech Sector – How to enter the German market?
In the growing field of Insurtech in Israel today there are about 100 companies. Israel is home to the worlds leading Insurtech companies and has seen mega investment rounds.
Traditional insurance practices can be elevated by using Fintech technology to provide new products and new levels of service, and lower costs across the board. Insurtech introduces a range of products, including cyber, on demand and P2P insurance, and presents such new services as price comparison and risk reduction technologies.
Today, leading Insurtech companies such as Lemonade, Next Insurance, and Hippo dominate the startup scene in Israel – they led to major investment rounds:
Hippo Insurance: a Palo Alto-based company that allows homeowners to receive accurate insurance quotes built on public data sets from municipal building records, satellite imagery, and smart home devices. Hippo was founded in 2015 by Assaf Wand, the company’s current CEO, and Eyal Navon. The company acquired Sheltr, a US-based home maintenance platform, last year. Hippo is valued at over $1 billion (one of 30 unicorn companies founded by Israelis).
Next Insurance: a Palo Alto-based company which provides digital, small business insurance coverage across the US. It offers general liability, professional liability, commercial auto and workers’ compensation coverage with instant, 24/7, online access. Next Insurance was founded in 2016 by Alon Huri, Guy Goldstein, and Nissim Tapiro and is valued at over $1 billion today.
Lemonade: A New York-based insurance provider founded in 2015 by Shai Wininger, also a co-founder of Fiverr, and Daniel Schreiber. Lemonade uses behavioral economics, artificial intelligence and chatbots to deliver renters and homeowners insurance policies, and handle claims quickly for users in nearly two dozen states across the US. It offers renters insurance starting at $5 per month, and homeowners insurance starting at $25 per month.
To further explore the advantages and solutions Israeli Insurtech companies have to offer, the win-win situation that can be achieved from cooperation between Israeli companies and German insurance providers, GINSUM arranged an online event on how to make business in Germany: chances for Israeli startups in the InsurTech Sector.
The target audience for the event were startups and companies from the InsurTech sector as well as anyone interested in the field.
During the event, the audience received an overview of the German- Israeli InsurTech landscape and got acquainted with some success stories and opportunities from within the German market.
Dr. Johannes Becher, CEO, Getsurance emphasized the importance of understanding the great changes the sector went through in the past years, and the adjustments that therefore need to be made within the incumbent companies. First and for most, customer expectations when purchasing an insurance policy are much higher today. According to Becher, “they want to do it online, 24/7, they want to do it with their smart phone“. There is much less need for brokers. Another major issue for incumbents are their “legacy systems”, old computers that need to be replaced and adapted to new regulatory requirements. Furthermore, if in the past, working at an insurance company was in high demand, with stability, job security and a good compensation package, today young professional are looking for more dynamic workplaces, with more impact. All these difficulties, offer a great deal of opportunities for startups in the field.
According to Becher, three major changes and technologies can be identified that are trying to influence the field, even though it is too early at this point to measure their success:
Price comparison websites that provide all the information online (Check24, Verivox, Finance Scout 24)
Digital brokers that can scout through existing policies and offer better ones according to individual needs and requirements (Clarks, GetSafe, Treefin, Knips).
Newly founded insurance carriers, with proper regulatory licenses and big funding from VC’s. (Coya, Ottonova, Neodigital, Element).
Christian Gnam, Managing Director, InsurTech Hub Munich pointed out that additionally to the challenges that technological advancement brought with it, there is a now a new threat to the insurance companies, which are established by players such as Tesla and IKEA, that are pushing into the market and offering new and their own insurance products. So, Insurance companies can no longer rely on their status quo.
Dikla Wagner, Head of Tech Scouting in Israel, MunichRe introduced the audience to the Israeli Insurtech landscape. The ecosystem in Israel is growing very fast and can be divided into many sub categories: Consumer optimization tools, insurance products, advanced underwriting, customer acquisition and engagement, claims management and fraud, back office and analytics but according to the data of MunichRE the section with the largest potential growth is technologies for risk reduction. One of the main goals of MunichRe in Israel is to expose the Israeli startups to these new challenges, to share knowledge with them, and to expose them to the new eco system which is developing. According to Wagner, the major challenge for Israeli Startup companies is to scale outside of Israel, on the other hand, the big win for the Israeli Insurtech scene are the small companies that manages to acquire investments, since it proves the belief in this vertical. Israel‘s strength is on the technology side, and as such it will be able to utilize it to break ahead in the
Till Brennan, Sales Director for Germany, Easysend, in Israeli InsurTech Startup, explained that the first step to success was conquering the Israeli market and establishing the readiness of their product. This added credibility and product readiness. Once Easysend decided to go international, they leveraged a lot of accelerator networks, through which they were further introduced to their future potential customers. They attended conferences, pitching events and eventually opened an “on the ground” representation. The next important step was to acquire a local renowned first customer. Once they acquired one of the big insurance companies, R+V, they were able to prove credibility, which further accelerated the process of growth in the region. Brennan shared that another important help factor was accessibility in the German language. Once they had a local representation, they started advertising in German, hired German speakers, launched a German website, etc. This also assisted them in acquiring further strategic partnerships and receive additional DACH customers.
There is no doubt that cooperation between insurers and startups have many advantages. The insurers side gets access to faster innovation, receive early insight into trends and technologies, and they learn about new ways of working. Startups receive market access and insights into this complex industry of the insurance world. The cooperation sends positive signals to investors and finally, it can help avoid the tough regulations which are inflicted on the industry. Insurtech Hub Munich helps creating such partnerships by bridging the gaps between the two sides for mutual and to make the cooperation happen.
Challenges and Solutions to enter the German market:
According to Brennan, it is very hard to find a first DACH buyer. They are very skeptical and there are a lot of non-comital actions before building a business relationship with the customer. Furthermore, there are many cultural differences that can lead to misunderstandings. Between startups and large insurance companies, there are different priorities, different timelines, and to avoid mutual frustration there is a need for expectation management: “Yes does not mean the deal is closed”.
But the greatest challenge would be Data protection and privacy rules which are a very complex and sensitive topic in the DACH region. Gnam further explained that partnership management involves high efforts which take away resources from other projects. Furthermore, there are many technical and legal barriers and finally, the innovation overload makes it hard for companies to decide and choose. German insurance companies are very critical, they ask many questions, and it is very important to be prepared. Trust is a very important factor, and new Startups must gain their trust and be honest about their capabilities. It is important not to “oversell”. Companies have to come prepared and understand how the other side can benefit from its product and focus on that.
Finally, Becher makes three suggestions for Insurtech companies who would like to enter the German market:
First, become and enabler of existing insurance player by offering them SaaS solutions and API ecosystems.
Second, reinvent distribution and find alternative sales solutions.
Finally, he suggests dealing with Real Disruption. According to Becher, there are currently not many companies in the Re-insurance business, which can be a very interesting niche. There is also a lot of potential in the blockchain technology and smart contracts.
About the author
Jill Wyler held various professional positions in Israel and was until recently the Israel representative of a Washington based independent academic organization which focused on enhancing knowledge about modern Israel at universities in the United States and around the world.
At ELNET she works for the German Israeli Network of Startups & Mittelstand (GINSUM), as the Program Coordinator at the Israel office. Jill has a master’s degree in International Relations, with a focus on diplomacy and foreign policy, from the Hebrew University of Jerusalem