- In 2010, Berlin-based Friendsurance was among the first companies to embrace technology in the insurance space.
- In India, establishing PolicyBazaar was the beginning of the InsurTech revolution in 2008, though at that time it came under the FinTech industry as InsurTech as a separate industry was not established until the 2010s.
- Today, there are close to 3,475 InsurTech companies globally. With the pandemic, more people shifted to digital methods of buying insurance. The pandemic has also changed how people think about insurance.
In India, FinTech is widely accepted in the financial landscape. We adapted to FinTech much faster than other countries, making it a fertile ground for InsurTech to mature and grow. A subsector of FinTech, InsurTech, or insurance technology, is a term used to refer to technology that is designed to improve and enhance operations of insurance firms and the industry in general.
So, what prompted the InsurTech revolution? What has its evolution been like? In this blog, we’ll delve deeper into the history and rise of InsurTech around the world and India.
Since the 2000s, the insurance industry in India has grown phenomenally when the government allowed private sector investment in the industry up to 26 per cent. Before that, private insurance companies were under the Life Insurance Corporation of India (LIC). Since privatisation, private companies began playing a greater role in the market, while LIC began showing a decline.
Since the insurance industry in India is not a high capital cost industry, unlike telecommunications and oil, it led to continued growth.
At this point insurance in India had remained the same for many decades, with differences in the products. In the 2000s, insurance had low penetration and density rates which revealed the large sections of populations that were uninsured. Rural participants of insurers were very low at that time.
In 2008, insurance was still offline. Common problems for the customers was lack of products knowledge, lack of trans[arency and a high rate misselling. Customers wanted to compare policies and have access to all of them.
PolicyBazaar came into the picture in 2008. They brought in the concept of an insurance marketplace, wherein consumers could find transparent information about insurance products, research and compare products and buy what they felt was the best for them. They had a huge impact on how insurance was distributed.
Today, they have emerged as the largest digital insurance marketplace with a market share of 93.4 per cent, according to a Frost and Sullivan report.
It was the beginning of introducing insurance technology in India, though at that time it came under the FinTech industry as InsurTech as a separate industry was not established until the 2010s.
In 2010, Berlin-based Friendsurance was among the first companies to embrace technology in the insurance space. This start-up founded the first Peer-To-Peer (P2P) insurance. Other players in the InsurTech space at this time were price comparison aggregators CoverHound and on-demand property insurer Trov.
So far, in InsurTech, these sectors have been established: health insurance, usage driven insurance, brokerage, e-commerce insurance, spot insurance and P2P insurance.
In India, the payments revolution was building up customer expectations. It emerged as an offshoot of financial technology or FinTech. Some common types of InsurTechs during this time solved for reducing friction in insurance processes, such as navigating the piles of paperwork, time is taken to fill out an application etc. Other InsurTechs sought to improve back-end functions such as claims management etc.
At this time Lemonade insurance, a Netherland based company also changed the game on a global level. Using intelligent systems and chatbots they made insurance more welcoming to a common person.
Across India, in 2020, aggregators and policy management comprised the largest chunk of startup funding in the InsurTech space at over 48 per cent. PolicyBazaar and CoverFox were some of the highest funded startups in the segment in 2020.
In the 2010s, venture capitalists also began looking at start-ups that were reinventing the way people buy insurance. A PwC report found that annual investments in InsurTech start-ups around the world increased five-fold between 2013-2016 with total funding reaching close to USD 3.4 billion.
In 2019, the global InsurTech market was valued at USD 5.48 billion and is expected to touch USD 10.14 billion by 2025.
Even at this time, policy purchases were still happening through offline methods and managing customers was still tedious.
To solve this, InsurTech firms worked on expediting the issuance of coverage, use of blockchain technology for claims management, improving digital security systems etc.
Funding in the InsurTech space reached USD 2.24 billion in the first half of 2019. In March 2019, InsurTech funding reached USD 694 million. However, the number of new InsurTech firms in 2019 dropped as compared to 2018. In India, between 2016 and 2019, InsurTech grew steadily at a three-year compound annual growth rate of 225 per cent to reach USD 376 million in 2019.
In 2020, owing to the pandemic, funding in the Indian InsurTech sector contracted but there have been signs of recovery in 2021. US houses nearly half of the InsurTech start-ups in the world, followed by the UK and India and is known to be an avenue for 63 per cent of investments.
Today, there are close to 3,475 InsurTech companies globally. The industry also raised USD 3.5 billion in venture capital funding last year. Forty-four per cent of all InsurTech companies globally are based in the United States.
In India, PolicyBazaar and Digit Insurance are the most funded to date in the InsurTech space at USD 627 million and USD 244 million respectively.
With the pandemic, more people shifted to digital methods of buying insurance. The pandemic has also changed how people think about insurance. Before 2020, only 10% of India’s population was interested in buying health insurance. Today, it is close to 70 per cent.
Moving ahead, InsurTechs will play a key role in the push to embed insurance technology into every financial and retail transaction. Experts predict there will be more collaboration across spaces and consolidation of existing resources. There will be more focus on customer service, AI-driven claims processing, high levels of data security and privacy etc.
InsurTech is set to revolutionize the financial industry. In fact, many tout it as the new FinTech revolution. Following global trends, India’s InsurTech space will continue to mature over the next decade.