An analysis report was recently published by two researchers from the Institute of Insurance Economics at the University of St. Gallen in Switzerland, in cooperation with Swiss Re. They are Alexander Braun and Florian Schreiber. This 194-page report is titled “ The current insurtech landscape – Business models and disruptive potential “. The reputation of the university and the support of Swiss Re give some clues about the quality of the report in question!
The aim of the report is ambitious and triple:
- Establish an inventory of insurtech environments around the world, and understand which categorizations are used;
- Propose a more relevant categorization that makes the business model issues appear better
- Study the potential for disruption and possible reactions of traditional insurers.
Inventory of Insurtechs
The authors review the main presentation methodologies of the insurtech panorama in the world, with several identified axes. For example: funding, more or less arbitrary categories (7 for startup boot camp, 14 for Venture Scanner, or 8 for CB Insights).
Overall, they make a statement without appeal: None is really satisfactory.
To sum up, several classification schemes for InsurTech startups already exist, none of them is precise enough for a reliable differentiation of the extensive, confusing, and fast-moving InsurTech landscape. Ultimately, an exclusive focus on products, insurance lines, or technologies rarely captures the core characteristics of a business. In order to address this issue, we would like to introduce a clear-cut taxonomy of InsurTech startups that gives full consideration to their business models.
Note: I do not persist on the description of this part, but those who need to put a few numbers or examples of startups in their mind could go and have a look at it.
Proposal for a new categorization
Introduction to BMN
The report wishes to propose a new presentation oriented around the question of business models: the Business Model Navigator. Indeed, they quote Gassmann (the reference used): the BMN is an action-oriented methodology that allows any company to break the dominant model of its industry and bring an innovative business model.
Indeed, 4 axes are taken into account at this level:
- Who are the customers?
- What does the company offer these customers?
- How does the company propose its products?
- Why does the mechanism allow the company to make money?
The BMN provides 55 distinct models that can be observed. Combinations of these 55 models can account for nearly 90% of the global market. This makes this modeling relevant for judging the perimeter of insurtechs.
To support their own presentation, 9 categories were selected.
Each of these categories contains at least 2 types of business models.
Note: At this point, we already see
- interesting points to take into account the perimeter: the distinction of the first 3 bricks in particular;
- more questionable topics: #6 may be questionable.
Types of business models
The heart of the report lies in these pages (p61 to p76), and this is what deserves to be presented in more detail.
In particular, they make an interesting distinction to a recurrent difficulty (which I myself have been confronted to): the separation between distributers, risks carriers and technology.
Subsequently, they present each of the business models that, according to them, make sense, in the form of a one-pager. These pages are to read absolutely! In summary:
- Affiliation : “Your success is my success”, for example with Get Safe and Knip;
- Aikido : “Convert Competitor’s Strengths to Weaknesses”, for example with Tröv or Metromile;
- Cash machine : “Coining Money with Negative Working Capital”, like Oscar or Inshared;
- Cross-Selling : “Killing Two Birds with One Stone” “, like massup or simple;
- Digitalization : “Digitalising products dedicated to physical distribution”, again like Oscar or Inshared;
- Direct sales : “Avoid intermediaries”, with the same examples;
- E-commerce : “Online sales”, with for example Check24, Knip, Simplesurance, InShared and Tröv;
- Niche players : “Provide niche expertise” like Check24 or Comparis;
- Exploit user data </strong>: “Use what you know” like Withings and Nest;
- Licensing : “Sell Intellectual Property”, like Eris or Everledger;
- Pay-per-use : “Pay as you go”, like Tröv and Metromile;
- Peer-to-Peer : “Allow transactions between individuals”, like Friendsurance or Bought by many;
- Subscription : “Take a seasonal subscription to a service”, as with BigML or Eris;
- White label : “Successful brand without the brand”, like massup or simplicity;
2 tracks of evolution for the future are evoked:
- Recombination of business models: here we reach more the limits of the models (and the principle of boundaries of categorizations which are imperfect), than real innovative models as the authors want us to present it. It does however talk about mass customization, vertical integration or customer loyalty.
I move quickly to the part where the report focuses on the difference between a breakthrough innovation or an incremental innovation.
What is more interesting are the different possible behaviors of a traditional insurer facing this current insurtech landscape. 5 answers are possible, like so many strategies:
- Observe : All insurtechs with breakthrough innovations and low capital available are just to be seen first;
- Compete : When innovation is incremental, but means are available
- Invest : Startups that offer real services or innovative goods but lack capital, deserve equity participation;
- Develop : When startups are real disrupters, it is often too late to apply an investment strategy, it is better to transform to preserve its market positions;
- Ignore ! If you think the barriers to entry are too big
The report closes with the presentation of an empirical survey that I will not detail here.
Conclusion of “current insurtech landscape”
It’s a very (maybe too much) big topic!
The starting premise is a point that I share: the only categorization on the amount of funding is insufficient and the choices made are often random or imprecise, and do not reflect the real relevance of market solutions. </ Em>
Overall, the report leaves a lot to be desired about, especially the one I’m advocating concerning the business value chain and the relevance of use cases. However, do not hesitate to find a report, overall, very good! </ Em>
If you want to find my own insurtechs panorama, it’s happening here !