As we have written about frequently here, the financial services industry is set for radical change due to new technologies that are driving new possibilities. One sector that we haven’t mentioned is InsurTech. In Germany, this sector is growing rapidly with start-ups continuing to expand and attract more funding.
A newly released study from EY (Ernst and Young) shows InsurTech as a new rising star in the FinTech community. While other segments of the FinTech scene have been growing for several years now, InsurTech is still in its infancy.
According to the study, only a handful of companies are focused on the insurance industry, and the entire sector attracted only $4.63 b in funding globally between 2008 and 2015. In Germany, InsurTech companies raised €53.52 million between 2012 and the first quarter of 2016. This suggests that momentum on the sector is picking up and that the segment is likely to see change in coming years.
Some German InsurTech companies worth noting, include:
These companies have raised the majority of funds in the sector. The main drivers which are pushing the expansion of InsurTech are connectivity and data, the consequences of the financial crisis with the resulting pressures on interest rates, and customer dissatisfaction with interest rates.
The study further explains that InsurTechs in Germany and abroad have not been able to develop stand-alone business models, partially due to regulatory factors. However, the InsurTech market is still in its relative infancy leaving any ceiling still undefined. Many business models existing abroad have yet to be replicated in Germany. EY identified three areas they expect new business to grow from:
- Big Data and analytics
- data driven products
- back office-supporting functionalities
This points to the need for all companies in the sector to build and develop capacity in digitalisation and in-house capacity, such as Innovation Labs and Accelerator Programs to provide a platform for innovative and flexible testing of new business models.
The study is available for download on the EY website.