Innovation in both B2B and B2C insurance products ensures investment stability.
InsurTech — a combination of “insurance” and “technology” — is a term used for companies that use technology to disrupt the insurance industry. According to those with the knowledge and operational know-how, including individual and institutional investors, the insurance industry is ripe for innovation and disruption.
InsurTech companies and startups use tech innovations to increase savings and efficiency from the current insurance industry model. They offer ultra-customized policies, social insurance and use big data to price premiums dynamically, according to observed customer behavior.
Impact of COVID-19 on InsurTech Investment
The COVID-19 pandemic, through most of 2020, had a moderate impact on the investment of insurers in InsurTech. Compared to the previous year, the insurance industry maintained its investment volume in InsurTech in 2020.
The pandemic pushed insurers to invest in and implement InsurTech solutions with a renewed focus on customer service, virtual interactions in sales and claims, and reduced operational costs to remain competitive. Furthermore, innovations in Artificial Intelligence (AI), Machine Learning (ML), Blockchain, and Cloud Computing enable real-time tracking and monitoring of insurance customers and the creation of personalized and customized insurance policies.
With continued growth over the last few years, the global InsurTech market size reached approximately $9.4 billion in 2020. It is estimated to reach $159 billion by 2030, growing at an average CAGR of 32.6%. Global funding in InsurTech hit $7.4 billion in just the first half of 2021 compared to $7.1 billion raised for the whole of 2020.
InsurTech in Switzerland: Key Findings
Upward trends and increased demand for easy-to-use insurance solutions have seen Switzerland become the top country by the size of its insurance market.
General insurers, service providers (i.e., actuarial, underwriting, data mining and analysis, etc.), and auto insurers are the main investors in Swiss InsurTech. Chubb, AXA Group, Zurich Insurance Group, Swiss RE, and Vaudoise Assurances are the top five publicly traded companies involved in the development of InsurTech in Switzerland.
According to Aging Analytics, the volume of investments in Swiss InsurTech companies remained stable in 2021. Its report, based on the analysis of over 50 Swiss InsurTech companies, 100 investors, and 7 NGOs, presents economic and financial data, technological trends, and key Swiss players in InsurTech.
Around a quarter of the Swiss InsurTech companies are well-established general insurance companies (GICs) that actively invest in new technology to improve efficiency and broaden the consumer market. These GICs offer a wide range of insurance products from health to property and casualty (P&C) insurance. Companies that provide support to insurers at different stages of insurance production (actuarial software, underwriting, data mining and analysis, producing white label products, help in distribution and promotion, etc.) come under the ‘Other’ category and account for 24% of the market. Auto insurance companies account for 13% of the segment and provide consumers with easy-to-get solutions with customized propositions on smartphones. Among the most notable InsurTech startups in the B2B segment are Riskwolf, Sustema, and TONI Digital’s, while Anivo, Versicherix, and Wefox are notable in the B2C segment.
Emma Brodina, Director of Analytics at Aging Analytics Agency, a Longevity-focused subsidiary of Deep Knowledge Group, says, “Switzerland is a financial hub with one of the largest shares of gross value added produced by the insurance sector. It constitutes more than 40% of the financial sector. The combination of a developed and well-established classic insurance sector and innovative technology solutions creates promising development prospects.”
The report found:
- Most of the InsurTech companies in Switzerland (59%) are concentrated in the business center of the country — Zürich (city) and the surrounding area.
- The other 30% of companies involved in InsurTech are in Zug, Basel, and Bern cantons.
- Only around 8% of the companies are in the South of the country.
- Additionally, most investors in the Swiss InsurTech market (65%) are from Europe, while 24% are from North America, specifically the United States, 9% are from Asia-Pacific, and 2% are from the Middle East.
Opportunities for Growth
InsurTech is a natural response to changing consumer behavior and new needs. It provides simple solutions to consumers in the comfort of their homes with just one click of a button. Deloitte’s Swiss Insurance Consumer Report 2021 highlighted the openness and readiness of consumers to new products and solutions provided by InsurTech. Nearly 77% of respondents would consider buying insurance from a non-traditional insurance provider.
Innovation in Swiss InsurTech means companies can now use predictive analytics to identify fraud risks, triage claims, anticipate trends, and detect customers at risk of cancellation. Automation and ML improve claims processing, extending their applications in the insurance sector to policy administration and risk assessment.
Consumers are willing to share more information in exchange for savings on their insurance policies. Meanwhile, the Internet of Things (IoT) helps automate that data, allowing us to use devices as components of smart homes, car sensors, and mobile technologies to determine better rates, prevent losses, and reduce risk.
Director of Deep Knowledge Analytics