Opportunities within Fintech/Insurtech: H1 2018

In January I posted an article detailing the trends and opportunities I’d seen among Fintech/Insurtech startups in 2017 (you can find it here if you missed it). I now want to follow-up with my observations from the first half of 2018.

In this short article I explain the general FinTech/Insurtech trends, exciting startups doing well in the space and the opportunities that remain unexplored.

Five key conclusions:

  1. Cyber security is old news, let’s start talking about cyber insurance.
  2. Improvements in genetic analysis and the rise of epigenetic testing risk making individuals uninsurable.
  3. Founder credibility is essential when raising money as a blockchain startup.
  4. Startups who mention AI are no longer raising easily. Investors are now more particular due to the wealth of AI startups to choose from.
  5. There are an increasing number of startups targeting digital nomads — however, significant traction is yet to be seen.

New types of insurance

Over the past year we have seen a huge increase in the variety of insurance products catering to different genres. See below for a few example “new” categories and relevant startups.

Opportunities

  • Gaming — the rise of e-sports has led to a rise in the number of gaming related insurance opportunities.
  • Digital nomads — the rise digital nomads eg influencers has created a demand for health insurance, life insurance etc that crosses borders and is more extensive than just travel insurance.
  • Leased goods — Not a new form of ownership but an area where insurance needs to be disrupted.
  • Geo-location insurance — insurance adjusting in real-time to one’s location, this would not only improve underwriting models but could also mean I’m covered for exactly what I need to be covered for. Solutions exist but a sizeable market opportunity remains.

Automating the insurance process

The IoT has given rise to more and more opportunities to automate the insurance process. Geo-location enables insurance providers to push us location specific insurance opportunities, telematics boxes help track our driving styles to reduce underwriting risk and smart-watches incentivise us to do more exercise. In H1 2018 I have seen increased focus on automating insurance pricing and reducing the number of questions needed to generate a policy quote.

Homelyfe is an example of a startup streamlining the policy quote process to under 4 mins. While Shepper use gig workers to check on distant properties/assets on behalf of businesses and insurers.

Opportunities

  • Automating the life and health insurance quoting process by pulling wearables data.
  • Increasing the use of smart contracts in the claims process.
  • Increased use of gig economy workers in the claims process (so claims adjusters need not visit every claims site in person).
  • Increased use of sensors to drive preventative behaviour and thus reduce risk.

Genetics

23&me led the way in using genetic testing to inform ones predisposition to various illnesses. More recently, we have seen a huge boom in startups tapping into this to offer personalised supplements, lifestyle advice and disease management. Insurers are understandably unable to use genetic data to help price risk but the rise of epigenetic startups leads to the regulatory question of whether changeable genetic data can be legally incorporated into insurance underwriting models.

Chronomics is an example of a startup moving the needle to help educate consumers about their epigenetic state.

Opportunities

  • Enhancing the personalisation of fitness and wellness apps.
  • Supercharged “vitality” insurance — enhancing preventative behaviour.
  • Incorporating epigenetic testing into employee benefit packages.

Pensions

LongevityApp and PensionBee are two exciting examples of startups attempting to tackle the growing pension problem. However, I believe significant opportunity remains untapped as pension deficits continue to widen.

Opportunities

  • Increasing pension visibility.
  • Increasing an individual’s engagement with their pension.
  • Adapting pensions to cater to evolving working environments.

Cyber

With the cybersecurity market likely to see consolidation in the near future, I have become less interested in pure cyber-security plays. Instead my interest has turned to the somewhat tricky concept of cyber-insurance (see here for my more in-depth take). Big insurers are starting to approach the cyber-insurance market with trepidation and firms like Aviva (A Founders Factory investor) are actively looking for and working with startups able to help them better underwrite cyber risk across business and personal policies.

The number of startups attempting to tackle this area remain low but Cyence, Senseon, Kovrr and Zeguro can be seen as cyber-insurance startups making strong progress.

Opportunities

  • Accurately quantifying the financial impact of cyber deficiencies
  • Standardising risk and being able to easily benchmark companies/individuals against one another

Robo Advisors

Interest from investors in this area remains, with many new entrants focused on sustainable investing as a way to ensure differentiation from existing players. Nevertheless, customer acquisition costs remain high and I believe this market is becoming overcrowded.

Conclusion

Notable opportunities remain within the insurance industry where fast moving thinkers (most likely startups) could make a significant impact. My favourite areas of opportunity being within cyber-insurance, pensions and genetics/hyper-personalisation. I would love to talk to anyone making progress in the areas I have highlighted above and so please don’t hesitate to reach out on linkedin or apply to the Founders Factory accelerator programme here!