" class="no-js "lang="en-US"> Invest in the US: A European Insurance Venture - Fintech Finance
Tuesday, September 26, 2023

Invest in the US: A European Insurance Venture

The US has attracted billions in assets and funding for its insurance companies, and has the largest customer base in the world – in both life and motor insurance. Insurtechs big and small can be found in every state, for all types of cover.  

Though a meta-ecosystem all on its own, there are many similarities between the US and Europe in the way they approach and deliver insurance. “There is not a marked difference between Europe and America, ” said Ron Rock, the Senior Director of Insurance/Insurtech at homegrown investment organisation, JobsOhio

“(With all insurance) the customer has an asset they want to insure, that asset has a certain value, and they’re going to pay a premium on top of it.”

Rock has had a storied career in the insurance and financial services industry, starting in the very core of insurance as a financial analyst for Nationwide Financial, and trying his hand in marketing with Bread Financial. He has since returned to a more “exciting” insurance environment at JobsOhio. 

“My previous job was in fintech [Bread Financial] where we were developing creative payment solutions. I saw that fintech had taken a stronger hold in people’s daily processes whereas Insurtech is more slowly adopted. It is still very young and I know many people want to develop innovative solutions. From my perspective, if you’re a company and you aren’t pursuing some type of insurtech solution, you’re going to be behind. Similar to skipping a training day, your competition will pass you by.”

Insurance is no longer an antiquated arena for straightforward actuarial jobs, the industry has expanded and exploded with the embrace of technology and more concern around the customer and user experience. Looking at Dealroom.io’s scrupulous database on insurtech funding, a record $15.1 billion of VC funding was invested into the industry in 2021, from pre-seed to 250+ mega-rounds. Unsurprisingly, US insurtechs are leading the way, with Devoted Health, Sure, EIS Group and Corvus. 

What is most insightful is the distribution found outside of the coastal kingdoms of Silicon Valley and Tampa Bay. 

Returning to the data collected by Dealroom.io, new unicorns have germinated out of all four corners of the nation. Ohio in particular has developed an ecosystem for insurtechs to thrive. JobsOhio’s extensive catalogue of start-ups boasts the likes of Beam Dental, Branch and Bold Penguin, proving the state to be an ideal test market for insurance. 

Just this June, Branch secured $147 million in a Series C funding round, hiking its valuation to $1.05 billion, proving that Ohio is home to one of the nation’s biggest financial services sectors. 

“If you think about the Midwestern US, it’s a great region to test the market. From a weather-related catastrophe perspective, they are less frequent than on the coasts where you have a higher frequency of hurricanes and wildfires. Loss ratio is a significant factor in starting up an insurance business, said Rock. 

The old notion of the Midwest being stuck in the past, especially with insurance, is long gone due to its investment in technological solutions. When you look at a game plan like this, it’s difficult to find the difference between the way insurance is done in the US, to how insurance is done in Europe and the world over. 

As insurance companies are becoming more international and globalised, with European titans like AXA and Allianz already making waves in the states, similarities begin to burgeon in terms of customer preferences and business models.

European VCs and businesses are pouring funds into US insurtechs. 

One of the biggest insurtechs to come out of the US, Next Insurance, can boast the backing of industry giants Munich Re and Global Founders Capital in their portfolio. On the flip side, more European insurtechs are gaining funds from US investors and making the moves to expand overseas. 

Insurance software provider INSTANDA is pursuing a $45 million venture, expanding its business across the US. The move will see the insurtech address the regulations found state by state and bolster its marketing operations and 114-person workforce. “As an insurer, it can be incredibly difficult to expand your offering into a new state,” said Greg Murphy, INSTANDA’s Executive Vice President for North America. 

“Some states are stricter than others, but rating requirements, billing and donning timeline rules, policy forms and documents, and data protection rules can all vary from state to state. Insurers must know the differences between states and ensure they have flexible technology that can support these requirements.”

On the L&H side, London-based startup YuLife, which recently secured $120 million in their Series C funding round, is also planning to jump into the US next year. With the banking from prominent European VCs like Creandum and Target Global, the insurtech will also be increasing its workforce by around 20-30 roles in both the UK and US. 

Sam Fromson, the COO and Co-Founder of YuLife spoke on the expansion: “The US insurance market is affected by many of the same industry pain points, such as low levels of engagement and trust, that YuLife set out to resolve in the UK. Additionally, there is a strong broker infrastructure in the US, meaning that new players in the US insurance market can benefit from a soft landing if they identify the right partners.”

Most prominently, European heavyweight wefox, which saw its valuation increase by 50% to $4.5 billion, plans to expand into the US and Asian markets by 2024. The scale-up will see wefox distribute access to their digital insurance platform to a wider pool of US brokers and customers.

“The US is the largest insurance market in the world,” said Tomaso Mansutti, the Head of International Partnerships at wefox. “The US represents a huge opportunity for wefox to deploy our indirect distribution model backed by our technology. Given the significant growth, wefox has enjoyed in Europe with more than 100% year-on-year growth, we feel we can achieve similar results in the US.”

Channels and connections are being made across continents as insurance companies realise that their market demands are not so different. 

Rock breaks it down like this, “know your market based on your strategy. An insurtech can’t be all things to all customers. The first step is knowing who your target customers should be. Once you know that, you can determine what partnerships will work best. Knowing the insurance market is important in Europe and America regardless of the technology. If you don’t have one eye on the insurance business you’re not set up for success.

“That’s the difference between an insurtech company that will be here long term versus gone next year.”

Perfecting user experience is the defining KPI of insurance companies today, regardless of where they are used. 

Modern, digitally connected consumers are becoming more interested in digital channels and more lines of communication with their insurers. A recent report from software provider Lightico found that just under 70% of insurance customers expect their insurers to provide digital services, with the remnants of COVID playing a big factor. Customers want to retain that communication with their insurance companies, with the option of multiple avenues. 

“I saw a company in Europe, who had a similar business model to another company in the US, but they had a social aspect to it, they were not thinking about just one side of the solution, they were thinking about differentiation from other competitors. They added the social aspect to take care of the person, not just the car, based on conditions like driving habits, road conditions, and weather.” 

PwC’s 2020 survey of 6000 American consumers found that 41% were likely to switch providers who lacked digital capabilities.

A further 15% considered that the topmost challenge when interacting with insurers. The survey also showed that younger people (18-24) were the most engaged with digital channels when buying insurance. The need for digital modes of communication and interactivity is almost obligatory in the US market, which is what makes it a perfect customer base for European insurers. 

“I find no fundamental differences in the business models, being able to incorporate social interactive features and prioritise factors like ESG is crucial. It is a common link I find between businesses from both sides of the ocean.” 

What links the US and Europe together is a common interest: how do we do insurance better whilst keeping the price low? Looking at the number of partnerships and investments moving across both regions is thus a consequence of an ever-evolving global hub committed to using technology to optimise the customer experience. With the visionary models exercised at insurtechs like wefox and INSTANDA, and the insatiable customer bases found across the states, expanding into the US market is both imperative, and obvious.

Read all about the technology moves made by insurance companies, in the Insurtech section of our website!


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