The $20m Simplesurance funding shows how Berlin is becoming an InsurTech hub

berlin

The news is here ($20m in this round, $33m total funding).

We missed Simplesurance in our roundup of InsurTech by amount of VC funding. Thanks to those who gave us a heads up (they are now in the table).

Back to Simplesurance, the fact that Berlin is doing well in Insurtech is significant, because Insurtech is what VCs want to invest in. Two years ago, when we first started tracking the nascent InsurTech scene (see this post for what we found in March 2015), the action was mainly in London. Today we are seeing action all over the world. Berlin, where Simplesurance hails from, is one of those places that is picking up some of the jewels from London’s crown (after some careless politicians dropped the crown on the floor in June 2016).

In this post we look at why Simplesurance is getting traction and why that traction is happening in Berlin.

Product Insurance at Point Of Sale

Have you ever had a store clerk put on the hard sell for insurance after buying some electronics gear? The reason is simple – the margins on insurance give the store more profit than from selling the product.

So the sales person is given a lot of commission.

There is no human sales person in an e-commerce transaction.

That is where Simplesurance comes in. If you operate an e-commerce service, you can offer insurance at the Point Of Sale via Simplesurance. That is a massive market with a simple value proposition.

That is why a company called Rakuten led this funding round. Rakuten is a global e-commerce company, focused on electronics, headquartered in Japan.

One of the themes we track on Daily Fintech is that “bits don’t stop at category borders that were created in the analog age”. The categories created in the analog age get blurred as digital entrepreneurs solve pain points that cross over these category boundaries. We have chronicled how payments and e-commerce are becoming blurred. The Rakuten funding for Simplesurance shows how insurance and e-commerce are becoming blurred.

Driven by strategic investors

The narrative favored by VCs has been that most strategic investors are at best “the useful idiots” who will overpay on valuations. In that narrative, the best strategic investors morph into financial investors. The oft cited example is Intel Capital.

The Simplesurance funding story reveals that this conventional wisdom could be wrong.

We got this wrong when we saw the Simplesurance round by Allianz.

However by bringing in Rakuten, Simplesurance and Allianz are taking this to the next level.

Any financial VC worth their salt will have companies like Allianz and Rakuten in their rolodex. The normal route was for financial VCs to invest early at a low valuation and then use their rolodex to bring in strategic investors in a later more expensive round.

This Simplesurance round indicates that the Strategic VCs may be getting rid of the middle man. It makes sense that this would happen first in a market such as Germany where financial VCs have not been that strong. It also makes sense that this would happen first in InsurTech as this is a market segment where the incumbents became active very early in the development of the market.

Berlin and InsurTech

Berlin does not have a big network of top tier Financial VCs. There are some exceptions of course, but compared to Silicon Valley, New York and London, Berlin looks second tier when ranked on amount of Venture Capital.

Yet in InsurTech, Berlin has two very active and agile Insurance incumbents.

There is of course Allianz who did the earlier round for Simplesurance.

However, buried in the funding story was the fact that Simplesurance uses Munich Re to actually underwrite the policies. Although Munich Re is based in Munich, about 5 hours by car from Berlin, they share language, culture and regulation with Berlin.

We profiled the Munich Re InsurTech partnerships here.

WeFox, who we profiled last week, is also from Berlin.

Image Source

If anybody is inspired to write weekly on how technology is changing Insurance, please read this and get in touch.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

As Simplesurance is another InsurTech success story from Germany we asked Karl Heinz Passler (initiator of InsurTechTalk.com) to translate this article into German (as he did for last week’s story about WeFox).

Die Finanzierung über 20 Millionen US-Dollar in Simplesurance zeigt wie sich Berlin zu einem InsurTech-Hub entwickelt

Die Gesamtfinanzierung von Simplesurance erhöht sich (inkl. der 20 Mio. US-Dollar dieser Finanzierungsrunde) auf insgesamt 33 Mio. US-Dollar. Hier die Schlagzeilen.

In unserer Übersicht der InsurTech Startups mit den höchsten Finanzierungsrunden hatten wir Simplesurance nicht aufgeführt. Danke für den Hinweis, wir haben die Übersicht um Simplesurance ergänzt.

Zurück zu Simplesurance. Der Fakt, dass sich die InsurTech Szene in Berlin gut entwickelt ist wichtig, da sich VCs auf der Suche nach Investments in InsurTech Startups befinden.

Als wir vor zwei Jahren mit der Beobachtung der InsurTech-Szene begannen (siehe diesen Beitrag über das was wir im März 2015 entdeckten), war der Schwerpunkt vor allem London. Heute sehen wir auf der ganzen Welt Aktivitäten. Berlin, woher Simplesurance stammt, ist nun einer jener Orte die den Londonern einige Zacke aus ihrer Krone herausbrechen (nachdem sorglose Politiker die Krone im Juni 2016 aus den Augen ließen). In diesem Beitrag geht es um die Gründe, warum Simplesurance so stark wächst und warum dieses Wachstum ausgerechnet in Berlin stattfindet.

Produktversicherungen direkt am Point-of-Sale

Hatten sie jemals das Erlebnis, das ihnen ein Verkäufer nach dem Kauf von Elektronikartikeln eine Versicherung andrehen wollte? Nun der Grund liegt auf der Hand, die Gewinnmargen der Versicherung sind höher als die des ursprünglich verkauften Elektronik-Produktes. Also erhält der Verkäufer auch eine entsprechend hohe Provision für den Verkauf der Versicherung. Bei einem Online-Verkauf gibt es keine Verkäufer. Das ist der Augenblick an dem Simplesurance auf den Plan kommt.

Wenn Sie einen Online-Shop betreiben, können Sie mit  Simplesurance sehr einfach Versicherung direkt am Point-of-Sale mitverkaufen. Ein riesiger Markt mit einem einfachen Nutzenversprechen, Sicherheit für den Kunden.

Dies ist der Grund, warum ein Unternehmen namens Rakuten diese Finanzierungsrunde anführte. Rakuten ist ein globales E-Commerce-Unternehmen, das sich auf Elektronik spezialisiert hat und seinen Hauptsitz in Japan hat.

Eines der Themen über das wir auf Daily Fintech schreiben ist, dass “Bits und Bytes nicht an den Grenzen von Sortimentskategorien halt machen, die im analogen Zeitalter festgelegt wurden”. Die damals entstandenen Einteilungen fangen nun an zu verschwimmen, da neue Startups Probleme lösen die diese alten Grenzen überwinden. Wir haben in einem Artikel aufgezeigt wie im Bereich der Zahlungen und des E-Commerce die Grenzen verschwimmen.

Das Investment von Rakuten in Simplesurance zeigt anschaulich, wie die Grenzen zwischen Versicherungen und E-Commerce immer mehr verschwimmen.

Getrieben von strategischen Investoren

Eine bekannte Weisheit der VCs besagt, dass die besten strategischen Investoren im besten Fall “die nützlichen Idioten” sind, die sich in ein bereits überbewertetes Investment einkaufen. Demnach entwickeln sich die besten strategischen Investoren zu Finanzinvestoren; das oft zitierte Beispiel ist Intel Capital.

Die Erfolgsgeschichte der Simplesurance sagt uns, dass wir mit dieser Binsenweisheit falsch liegen könnten. Die Finanzierungsrunde der Allinaz in Simplesurance scheinen wir falsch eingeschätzt zu haben. Denn mit dem Einstieg von Rakuten schalten Simplesurance und Allianz in den nächst höheren Gang rauf.

Jeder VC der sein Geld wert ist, pflegt Kontakte in Unternehmen wie Allianz und Rakuten. Bisher war die normale Vorgehensweise der VCs frühzeitig bei einer niedrigen Bewertung zu investieren um dann die Kontakte zu nutzen strategische Investoren in spätere teurere Runden reinzuholen. Das Beispiel der Simplesurance Finanzierungsrunden zeigt auf, dass die die Dienste des Mittelsmanns anscheinend nicht mehr gebraucht werden.

Dass dies zuerst in einem Markt wie Deutschland passiert, liegt auf der Hand, dort VCs weniger stark vertreten sind als üblich. Es ist ebenfalls nachvollziehbar, dass dies zuerst im Bereich von InsurTech geschieht, da etablierte Versicherer bereits sehr früh in diesem Markt aktiv wurden.

Berlin und InsurTech

Berlin bietet kein großes Netzwerk von erstklassigen Finanziers und VCs. Natürlich gibt es einige Ausnahmen. Aber wenn es um das Volumen von Venture Capital geht ist Berlin im Vergleich zu Silicon Valley, New York und London weit abgeschlagen.

Jedoch bietet Berlin InsurTech Startups zwei sehr aktive und agile Versicherungsunternehmen. Zum einen die Allianz, die die frühere Finanzierungsrunde mit Simplesurance durchgeführt hat. Wenn man dann noch etwas tiefer gräbt sieht man, dass Simplesurance die Münchener Rück als Rückversicherer nutzt. Zwar sind die Büros der Münchener Rück in München (ca. 5 Stunden Autofahrt von Berlin nach München), dennoch scheint dies nur ein Katzensprung.

In diesem Artikel haben wir die Münchener Rück mit ihren InsurTech Partnerschaften profiliert.

Über WeFox, die ihren Sitz auch in Berlin haben, hatten wir bereits letzte Woche berichtet.

Bildquelle

Simplesurance ist eine weitere InsurTech Erfolgsgeschichte aus Deutschland. Daher hat uns Karl Heinz Passler (Initiator von InsurTechTalk.com) bei der Übersetzung dieses Artikels ins Deutsche geholfen.

 

 

 

The WeFox #insurtech story is about augmenting rather than replacing agents

Insurance-Agent

When we did our roundup of the top InsurTech ventures by money raised, we missed WeFox (fka FinanceFox) and their $28m Series A in September 2016 (the news as reported in Techcrunch is here).

This week we dig more into the WeFox story. When a venture raises a big round from some smart VCs, they are probably doing something right. You don’t get $28m for a story, they must have serious traction.

Our research reveals that one bit of conventional wisdom about InsurTech maybe wrong. It also tells us more about the reality of the European venture scene.

Conventional wisdom says Insurance Agents are fading.

In one sense this is literal. The average age of an insurance agent or broker has steadily increased from 37 years in 1983 and is now 59. They will be retiring soon, are not digital native, built their business pre digital and see no reason to change now. In this post Amy Radin, outlined the pain very well when she wrote:

“The Agents have a poor survival rate: only 15% of agents who start on the independent agent career path are still in the game four years later. Base salary is negligible and it’s an “eat what you kill” business. This is a tough, impractical career path for most, and has become less attractive over time.”

So who would want to build a business catering to those dinosaurs? That is what WeFox is doing. They are clearly getting traction, so maybe conventional wisdom is wrong.

Conventional wisdom says replace agents with a digital system. That might be as simple as a comparison engine – which is doing well in emerging markets where first time insurance buyers need a lot of help- or as complex as a Robo Agent.

There are two reasons – other than WeFox traction – to indicate that conventional wisdom may be wrong:

  • A lot of the momentum in AI is in human augmentation, rather than in human replacement. When the stakes are high human augmementation is often more sensible – think driver assistance rather than driver replacement or doctor assistance rather than doctor replacement. This may also be true with insurance agents.
  • “Relationships are the one thing you cannot commoditize” (quote from Wikinomics). You want your agent empowered to offer better, faster, cheaper service. An App can simply leave you doing the hard work – and you might also like your agent.

What WeFox tells us about the European venture scene

WeFox is a Swiss company, founded in 2014. But they are based in Berlin (as per their Crunchbase profile. That is not even all in the European Union.

This trend to multi-location startups (which we first wrote about here) is one sign of closer integration within Europe. Moving from Zurich to Berlin may soon be no more remarkable than a venture moving from Kansas to New York. Culture and language ties will beat the simple mechanics of regulation.

This shows that the post Brexit landscape is becoming decentralized. There is no single hub. Instead we are seeing networks emerge with each node in the network serving key functions. In this emerging reality, corridors become key. These corridors such as between Zurich and Berlin as illustrated by WeFox, are more important than individual hubs.

Switzerland and Germany share a language (as does Austria). The WeFox site is all in German. At this time there seems to be no desire to sell to English speakers. My German is not good enough to write my posts in German, but was happy to have Google Translate do the job. Even better was that  Karlheinz Passler (founder of InsurTechTalk.com), offered to do the job properly and translate this article properly. Danke Karl. Check out what Karl is doing at InsurTechTalk.com.


BEI DER WEFOX #INSURTECH STORY GEHT ES DARUM VERSICHERUNGSVERMITTLER ZU UNTERSTÜTZEN, NICHT ZU ERSETZEN

Als wir unsere Übersicht der InsurTech Startups mit den höchsten Finanzierungsrunden erstellten, haben wir WeFox (ehemals FinanceFox) mit seiner im September 2016 durchgeführten 28 Millionen US-Dollar Series A Finanzierung vergessen (Techcrunch berichtete darüber).
In dieser Woche schauen wir uns die WeFox Story mal genauer an. Wenn ein Startup eine so große Finanzierung von mehreren etablierten VCs erhält, wissen die Investoren wahrscheinlich genauestens was sie tun. Für eine reine Luftnummer erhält WeFox keine 28 Millionen US-Dollar. Die müssen schon was ernsthaftes vorzuweisen haben.
Unsere Untersuchungen zeigt auf, dass unsere bisherige Einschätzung bzgl. InsurTech falsch sein könnte. Die Ergebnisse zeigen uns interessante Einblicke in die Praxis der europäischen Finanzierungsszene.
Die allgemeine Meinung ist, dass Versicherungsvermittler an Bedeutung verlieren werden

Ein Argument für diese These ist offensichtlich. Das durchschnittliche Alter der Versicherungsvertreter und Makler hat sich kontinuierlich von 37 im Jahr 1983 auf nun 59 Jahren erhöht. Da diese Vermittler nicht digital affin sind und bald in den Ruhestand gehen, haben sie auch keine Veranlassung ihre Agenturen zu digitalisieren. Im folgenden Beitrag von Amy Radin skizziert sie diese Probleme folgender maßen:
“Vermittler haben eine geringe wirtschaftliche Überlebenschance: Lediglich 15% der Vermittler, die diesen Karriereweg beginnen, sind vier Jahre später noch mit dabei. Die Basiseinnahmen sind so gering, dass es gerade zu Beginn der Tätigkeit darauf ankommt Abschluss-Provisionen zu erzielen, um das eigene Überleben zu sichern. Dies ist für die meisten ein zu harter und wenig attraktiver Karriereweg, der in den letzten Jahren weiter an Attraktivität verloren hat.”
Welcher Investor will diese Dinosaurier am Leben erhalten? Nun, WeFox tut es. Sie scheinen erstzunehmende Ergebnisse vorweisen zu können. Anscheinend liegen wir mit (unserer) allgemeinen Einschätzung bzgl. #Insurtech falsch.
Die langläufige Meinung ist, dass klassische Vermittler durch digitale Prozesse und Systeme ersetzt werden. Das kann zum Beispiel mit einem relativ einfachem Vergleichsportal – was in Wachstumsmärkten gut funktioniert, wo Erstkäufer noch relativ viel Hilfe benötigen – oder mit Hilfe von deutlich komplexeren Robo-Advisors umgesetzt werden.
Jedoch gibt es zwei Gründe – anders als bei der WeFox Traktion – die aufzeigen, dass die herkömmliche Einschätzung falsch sein könnte:
Eine Schwerpunkt im Bereich der künstlichen Intelligenz (AI) liegt in der intelligenten Unterstützung von Menschen, statt diese zu ersetzen. Wenn es um wirklich wichtige Dinge geht ist die Unterstützung der handelnden Personen sinnvoller. Wir denken dabe an Fahrerassistenz-Systeme als an Fahrerlose Systeme oder die Unterstützung von Ärzten, statt deren Ersatz. Dies kann durchaus auch für Versicherungsvermittler gelten.
“Soziale Beziehungen kann man nicht programmieren” (Zitat von Wikinomics). Sie möchten, dass Ihr Versicherungsvertreter und Makler dazu im Stande ist einen besseren, schnelleren und preiswerteren Service anzubieten? Eine entsprechende App kann ihn dazu befähigen diese anspruchsvollen Aufgaben besser durchzuführen.
Was WeFox über die europäische Venture-Szene verrät

WeFox ist ein schweizer Unternehmen das 2014 gegründet wurde. Mittlerweile ist es in Berlin ansässig (gemäß ihrem Crunchbase-Profil; Anm: Schweiz ist nicht einmal Mitglied der Europäischen Union.)
Der Trend, dass Startups mehrere Niederlassungen nutzen (was wir hier geschrieben haben) zeigt den hohen Grad der europäischen Integration auf. Ein Umzug von Zürich nach Berlin ist für ein Startup bald nicht bemerkenswerter als von Kansas nach New York. Die starke kulturelle und sprachliche Verbundenheit überwindet somit die Hürden der nationalen Regulierungen.
Schweiz und Deutschland haben eine gemeinsame Sprache (wie auch Österreich). Die WeFox-Seite ist zur Zeit ausschließlich auf Deutsch. Aktuell scheint es kein Wunsch zu sein im englischen Sprachraum zu vermitteln.
Dies zeigt uns deutlich auf, dass die Post-Brexit-Landschaft in Europa dezentraler wird. Es gibt keine zentralen Drehkreuze mehr. Stattdessen sehen wir zunehmend Netzwerke mit Knotenpunkten die wichtige Funktionen für das gesamte Netz übernehmen. In dieser neuen Welt nehmen Korridore eine Schlüsselrolle ein. Diese Korridore wie z.B. zwischen Zürich und Berlin (Aufgezeigt durch WeFox) sind wichtiger als bisherige Drehkreuze.
Da mein Deutsch ist nicht gut genug ist, um meine Beiträge auf Deutsch zu schreiben, habe ich Karl Heinz Passler (Initiator von InsurTechTalk.com) gebeten diesen Artikel für mich zu übersetzen.

 

Image Source

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

The Top InsurTech Ventures by Capital Raised

Venture-Capitalist.jpg

InsurTech is in it’s Cambrian explosion phase with lots of funding action. So we thought it was time for a snapshot.

The amount of capital raised is only one predictor of success. The startup world is full of klunkers that raised a huge amount and bootstrappers who created $ billions in value. In this list alone, Zenefits is clearly having a lot of trouble having raised half a big one.

Nevertheless, the amount of capital raised is a reasonable proxy of value based on the wisdom of a savvy crowd (VCs).

Thanks to all who contributed to this research, here is an updated list:

Venture Region $ Segment 1
Zhong An Asia 900 Full Stack
Oscar America 727.5 Health
Zenefits America 583 Lead Engine
Metromile America 205 Auto
Accolade America 163.34 Health
Collective Health America 125 Health
Bright Health America 80 Health
Lemonade America 60 P2P
Trov America 46.27 Product Insurance
Cyence America 40
FinanceFox Europe 33.5 Misc
Justworks America 33 Lead Engine
Simplesurance Europe 33 Product Insurance
Huize Insurance Asia 31 Lead Engine
namely America 30 lead Engine
CXA Asia 25 Health
PolicyGenius america 21 consumer
Knip Europe 18.3 Robo Agent
Finanzchef24 europe 17 SME
Friendsurance Europe 15.3 P2P
Praedicat Europe 12 Catastrophe
QuanTemplate Europe 10.25 Tech
Bought By Many Europe 9.14 P2P

Takeways

  • America still leads by number of ventures and total $ raised.
  • Asia leads by the most raised by a single venture.
  • Health Insurance is the big driver in America

If I have missed any that should be on that list ie have raised more than the $9.14m, please tell us in comments and we will correct.

Image Source

If anybody is inspired to write weekly on how technology is changing Insurance, please read this and get in touch.

If you want to see these insights before your competitors, join over 17,000 of your global peers who subscribe by email and see these trends reported every day. Its free and all we need is your email.

 

We interview Joe Taussig to learn whether insuring the unpredictable is the big InsurTech disruption

4-layer-insurance-stack

Our thesis was that InsurTech works through a 3 layer stack:

This post explained the thesis

On Monday we interviewed somebody in Zurich who helped us see that it is really a 4-layer stack.

Most people understand layers 1 and 2. This is where you interact as a customer. The agents are being replaced by digital automation. This is the simple comparison and matching function that Fintech is ideally suited for. The question is how you build value before the Internet giants (GAFA and BAT) move in?

Therefore, the limelight has been on P2P Insurance and whether that is a game-changer. For a debate on that subject, please go to this thread on the Fintech Genome.

Sitting down to talk with Joe Taussig in Zurich on Monday brought out the possibility that the disruption is in Catastrophe Bonds aka Cat Bonds. Indeed, this interview made me revise the 3 layer stack thesis. It really is a 4 layer stack, with the Capital Markets as layer 4.

Joe Taussig is the founder of MultiStrat Holdings.

Lots of people understand layers 1 and 2. A few people understand layer 3. Only a really small number of people properly understand the intersection between layer 3 and layer 4.

Joe Taussig is one of those few people. .

It was an honor to talk to Joe. Talking to the smartest people in the market is one of the privileges of what we do at Daily Fintech.

How MultiStrat Holdings works

Their customers are Hedge Funds. Hedge Funds have an asset liability mismatch problem. Investors in Hedge Funds want liquidity, yet Hedge Funds invest in assets that have long term liabilities and place bets that may take a while to pay off. Getting redemption demands is a problem for Hedge Funds.

Joe Taussig saw how Warren Buffet used Reinsurance and then Insurance (Geico) to get a low cost of capital and permanent capital (there is no redemption demand in equity) and used that knowledge to offer a service to Hedge Funds. Without going into the mechanics of how they do this (check this video if interested) suffice to say it involves using Reinsurance and Insurance.

Redrawing the stack with 4 layers

Below Reinsurance in the stack are the Capital Markets. This takes one back to the early history of Insurance when Lloyds “names” were individual investors who got great returns in return for offering unlimited liability.

That worked great…until a catastrophe happened. From this were born Cat Bonds (Catastrophe Bonds) and Insurance Linked Securities (ILS). In layman’s terms a catastrophe is an event that statistical modelling did not predict properly – think fierce weather, cyber attacks, terrorism etc.  We have touched upon this subject here. In this post we looked at how Blockchain is being used for Catastrophe Swaps.

As seen from the Insurance layer of the stack, MultiStrat Holdings is using the deep resources of the capital markets to lay off the risk of these events. Seen from the capital markets layer of the stack, MultiStrat Holdings is offering permanent capital.

The Reinsurers are well capitalised, but are nothing compared to the deep pools of the capital markets. Savvy investors know there is no such thing as bad risk, just mis-priced risk. So capital markets offer deep capital pools and risk pricing.

Understanding Insurance as a 4-layer stack is key to understanding how and when disruption will hit this huge business.

If you want to see these insights before your competitors, join over 16,900 of your global peers who subscribe by email and see these trends reported every day. Its free and all we need is your email.

This week in InsurTech shows how fast the market is globalizing

global-insurance

It is hard to sip from a firehose and the InsurTech innovation pipeline in 2017 is a major gusher. As we parse this week’s news stories, one theme jumps out and this theme goes a long way to explain why the InsurTech innovation pipeline is such a gusher.

The theme is globalization.

5 InsurTech stories this week illustrate the globalization theme:  

  • Digital Fine Print goes from Seed to Asia via America and London
  • Australian insurer IAG establishes an Insurtech hub in Singapore
  • Youse is the very first Brazilian InsurTech brand
  • The first InsurTech conference in Quebec City
  • The first InsurTech VC fund in flyover country

Digital Fine Print goes from Seed to Asia via America and London

The news: the story broke on CrowdFund Insider. This one is as global as it gets. An American Insurance Company (MetLife) partners with an early stage London based InsurTech startup (Digital Fine Print) to move into Asia.

This story also shows the capital efficiency value of Incumbent partnerships and social media. Digital Fine Print is going into Asia having raised only $400k. Conventional wisdom was that you should wait until your $400m round before going global. However if you can use the back end platform of an incumbent and use social media at the front end, it is time to challenge that conventional wisdom. (Daily Fintech is totally global, with subscribers in 130 countries and we have not yet raised any outside capital).

Australian insurer IAG establishes an Insurtech incubator in Singapore

The news: It will be called Firemark Labs and was reported in multiple venues, here is one. IAG = Insurance Australia Group. It underwrites over $11.4 billion of premium per annum and is active in many Asian countries. The incubator (do we call them “hubs” or accelerators today?) has the usual job of scouting for innovation.

Score another one for Singapore – see here for our story about CXA. This story also illustrates the value brought by the very proactive Monetary Authority of Singapore (MAS) and its Chief FinTech Officer, Sopnendu Mohanty.

This is an inter Asia story – no American or European ventures. The Australia Singapore nexus makes sense as the Australian economy is tied to Asia.

The Incubator has access to cash through IAG’s $ 75 million venture fund.

The trend looks clear. MetLife already has an active Singapore-based innovation center called LumenLab. One can envisage each global insurance company having an InsurTech incubator in the 20 or more global cities with an active Fintech scene.

Youse is the first Brazilian InsurTech brand

The news: It is really only a “we are here” announcement with a lot of big picture data about how big InsurTech is.

Youse was created by Grupo Caixa Seguradora as a digital venture within a big company. We have seen some of these become successful in banking (see our Pirates With Ties interview series for some good success stories), even though cultural mismatch kills most intrapreneurial ventures.

Nubank in banking is a Brazilian specific example of a digital Neobank (but VC funded unlike Youse).

The first InsurTech conference in Quebec City

The news: InsurtechQC is the first conference dedicated to Insurtech in Quebec City. It takes place on April 3rd and has both local and international speakers.

The first InsurTech VC fund in flyover country

I know, I know, I should not refer to flyover country. It’s an old habit from living in New York and flying a lot to California. It sounds elitist and I apologize for that. The significant trend is that the Silicon Valley model of innovation has gone global and global does not just mean places like London, Zurich and Singapore. It also means places like Des Moines, Iowa.

The news: A Des Moines, Iowa-based VC fund called ManchesterStory Group backed by a consortium of insurance companies is looking for Insurtech deals.

“The new firm said it cannot disclose the insurance carriers behind it until the fund closes.”

They have company in Des Moines.  The Global Insurance Accelerator was launched in 2013 with backing from seven insurance companies and has since added 3 more.

Closer to mainstream customers and lower cost base sound like good ingredients for venture success.

Image Source

If you want to see these insights before your competitors, join over 16,800 of your global peers who subscribe by email and see these trends reported every day. Its free and all we need is your email.

CXA Group $25 million Series B shows the maturing of InsurTech and future of Innovation Capital

 

Screen Shot 2017-02-10 at 13.02.26.png

Closing a Series A round is tough (the “Series A Crunch”), but closing a Series B is even tougher. You have to show great metrics at all levels. Series B is the “show me round”.

So when we see a big Series B round in the white hot InsurTech sector we pay attention.

In this post we look at the trends and insights behind the news that a Singapore-based health InsurTech venture called CXA Group has closed a $25 million Series B round from Facebook’s co-founder Eduardo Saverin’s B Capital Group and Singapore’s EDBI.

This news illustrates 6 major themes:

– Innovation Capital goes where it feels welcome

– Innovation capital goes where there is opportunity and that is shifting to Asia

– Singapore just scored a goal in the Fintech Hubs Global Tournament.

– The UHNWI Super Angels will shake up the “permanent aristocracy” of top tier VC Funds.

– The role of Government in building Fintech hubs

– This could be Zenefits done right

Note on terminology: we refer to Innovation Capital as the combination of cash + connections + know how that has historically been called Venture Capital. For reasons explained later, the historical term – Venture Capital – has outlived its Sell By Date.

Innovation capital goes where it feels welcome

This is not complex. Countries with zero capital gains tax on long term investments will attract a lot of Ultra High Net Worth Individuals (UHNWI aka Family Offices). Eduardo Saverin is an example – a Brazilian who famously renounced his US Citizenship in 2011 to take up residence in Singapore.

What is new is the blurring of lines between these UHNWI Super Angels and traditional Institutional Venture Capital. More on that later.

Innovation capital goes where there is opportunity and that is shifting to Asia

Asia is the 21st century growth story.

This statement wins the “Captain Obvious Award”. What is interesting is the time lag between when the growth shifts and when the innovation capital shifts. For a while, Innovation Capital in the middle aged world (America) and the old world (Europe) knew how to invest and saw the growth shifting to Asia. It was American VC money flowing into Asia. The next iteration, happening now, is when Asian VC money flows into Asia. This deal illustrates that shift.

Singapore just scored a goal in the Fintech Hubs Tournament.

This deal demonstrates that Singapore is becoming a major Fintech Hub, leveraging smart regulation and its position at the heart of the Asia growth story.

The UHNWI Super Angels will shake up the permanent aristocracy of top tier VC Funds.

The lead investor is credited as “Eduardo Saverin’s B Capital Group”. If the PR said “Eduardo Saverin” then this would be classed as an Angel round. Whether B Capital Group has other investors is not that important because a single UHNWI individual or family has plenty of capital to deploy.

For a long time, we had Angels who led the way by investing early and then politely inviting the big funds to invest. This led to what the Ivey Business Journal describes as a permanent aristocracy of top tier funds.  The Super Angels with an institutional fund, such as Eduardo Saverin’s B Capital Group can give that permanent aristocracy a run for their money. Some of the partners of those top tier funds are now also setting up as Super Angels and just investing their own money. Like Hedge Funds that become Family Offices, they no longer manage other people’s money, they just invest their own money. This is partly driven by tax, as people see the political writing on the wall that signals the end of carried interest fees being taxed as capital gains.

This is why we see the term Venture Capital as past its sell by date and prefer the term Innovation Capital. What we normally think of us VC – funding early stage innovation – is being done by Angels and too many VC Funds have become part of the asset management industry  focussed on AUM fees and short term exits.

The role of Government in building Fintech hubs

Co-Lead on the deal was the corporate investment arm of the Singapore Economic Development Board call EDBI. This post looks at the increased role of governments in Fintech regulatory competition as governments calculate the economic return on innovation. Whether direct investment (“picking winners”) is the right way is debatable, but expect to see more government activity in Fintech.

This could be Zenefits done right

CXA is going after the employee benefits industry (pegged at $100 billion in Asia) with a free SaaS platform monetized via lead generation. If that sounds familiar, think Zenefits, the hyper-growth success that hit the speed buffer (for reasons described here).

CXA goes to the next level by helping employers unlock wellness through prevention and disease management.

The health InsurTech opportunity is no longer only about America.

Image Source

If you want to see these insights before your competitors, join over 16,500 of your global peers who subscribe by email and see these trends reported every day. Its free and all we need is your email.

 

Reinsurance As A Service

insurance-stack

A major thesis at Daily Fintech, outlined in our first post on 29 June 2014, is that we are witnessing a  transformation driven by Fintech that is similar to when the PC stack replaced mainframes. We moved then from vertical integration (mainframe vendors controlled the whole stack) to horizontal layers (Intel, Microsoft, PC Manufacturers, Applications). 

In Fintech we are moving from vertically integrated banks, brokers and insurance companies that control the whole stack to a horizontal stack with services at the application layer by consumer facing born-digital ventures.

Despite the historical parallel to the Wintel stack, we see little chance that any one or two companies can control the bottom of the stack like Microsoft and Intel did in that era.

This big shift is happening even faster in Insurance than Banking thanks to Reinsurance As A Service.

Reinsurance As A Service

The insurance industry works through a 3-layer stack:

  • Layer # 1: Brokers. Their job is to gather premiums from customers.
  • Layer # 2: Insurance Companies. They take in premiums via brokers, invest the cash flow and pay out claims when needed. Their primary job is claims processing.
  • Layer # 3: Reinsurance Companies. They are the payers of last resort. They insure the insurance companies. Their job is to have enough capital to pay out claims, even if the models did not predict the volume of claims.

Reinsurance companies have five things needed to become an insurance platform:

  • Capital.
  • Regulated status.
  • Global footprint.
  • Domain experience.
  • Data and models used to price premiums. 

MunichRe Partnerships 

Let’s move from theory to practice.

Other Reinsurance companies are also active, but MunichRe is ahead of the pack so we analyze their portfolio first.

MunichRe created Digital Partners (DP) in May 2016 as an intrapreneurial startup within MunichRe to connect with consumer facing InsurTech startups. DP has a global mandate and operates across all retail and small company business classes from offices in London, Cincinnati & Palo Alto.

MunichRe have announced partnerships with 8 exciting InsurTech ventures:

This is interesting as they target niches within commercial insurance such as Commercial Photographers and Personal Trainers. Risk data is domain sensitive, so a niche by niche strategy makes sense. Before Reinsurance As A Service it would have been hard to imagine the economics of this niche by niche strategy working out. Look at the explosion of innovation at the Application layer on  top of platforms such as Microsoft and Apple App Store.

This is another example of a niche play on top of a platform. They focus on flight interruption insurance with a value proposition around real time resolution, claiming to proactively alert and rebook your flight at no cost if cancelled/delayed. As there is no claims process, the issue can be resolved in real time. They get  distribution through travel partners looking for ancillary revenue.

We have profiled Bought By Many here. Again, this is about niche segments, in their case enabled through collective buying power. Examples include pet insurance for rare breeds and travel insurance for people with medical conditions. The company claims over 250,000 users and year-on-year revenue growth of over 100%. They use customer feedback via social media to co-create products.

We profiled Simplesurance here. It is interesting that their lead investor is Allianz. These are clearly non-exclusive relationships.

Slice Labs focus on insurance for the sharing economy, because on-demand workers, such as those that work for ride share companies, are typically uninsured or underinsured. They are still in private beta. The level of product complexity, mixing disciplines from consumer and commercial insurance, would be tough for a startup without a platform and the level of agility to go after new markets like this tends to defeat incumbents.

So-sure is short for social insurance. You can “introduce your friends and benefit when they and you look after your items: the less you and your friends claim, the less you pay.”. An example is iPhone insurance. Again, imagine doing this without a sophisticated data and models to price the risk properly.

We have profiled Trov here. They focus on on-demand insurance for single items for whatever duration they want, such as sporting equipment, jewelry and valuables.

Wrisk is in stealth mode.

Conclusion

2016 was a year of Cambrian explosion for InsurTech. Investors all agree that InsurTech is the space to be. We could take an Eeyore view that it is all a bubble, but we incline to the Tigger case that we are just getting started. A big reason for optimism is the level of support for pricing risk properly that Reinsurance As A Service offers. A classic Eeyore comment would be “all this cute mobile stuff is all well and good but pricing risk is hard and needs a lot of experience and data and you need the capital to back that up”. Reinsurance As A Service fixes that.

If you want to see these insights before your competitors, join over 16,500 of your global peers who subscribe by email and see these trends reported every day. Its free and all we need is your email.