The insurtech trend has significantly matured over the past three years. We have seen billions and billions of euros invested in start-ups with an increasingly bigger number of rounds, and we have several insurtech players listed on the stock market with even an index dedicated to the US stocks in this segment. Over the past few months, we have also seen a growing focus on insurtech by SPAC.
We have been pioneers in this approach. We wrote about Archimede SPAC’s ambition for bancassurance protection and insurtech in Business Reporter’s Future of Insurance report in 2018 when the journey was just starting. Archimede was a very specific SPAC: the first dedicated to the insurtech business, presented to the market with an identified target. We presented an industrial approach focused on governing the business combination.
Now – after three years – we want to look back on this journey and share some lessons learned. Archimede’s ‘bancassurance, insurtech inside’ promise has been kept, generating a 42 per cent return to the SPAC investors.
The Net Insurance team – integrated with new executives – has successfully implemented the strategy and achieved Archimede’s targets. In 2020, the Company has served more than 450,000 clients and gross written premiums amounting to €117.7 million, 20 per cent higher than Archimede’s original plan.
Net Insurance’s traditional business increased from €34.4 million on 30 June 2018 to €42.2 million on 30 June 2021, consolidating its leadership in insuring the CQ business. The new protection business – introduced since the acquisition of the old Net Insurance by Archimede at the beginning of 2019 – has already accounted for €36.9 million, representing almost half of the company’s top line on 30 June 2021. Everything has been achieved with attention to the technical sustainability of the portfolio: indeed, the combined ratio stood at 67 per cent net of reinsurance (gross is 87 per cent).
Our business strategy has been based on a transformative approach that is focused on applying digital technologies to protect people, family and SMEs. Insurtech has been embedded inside the whole insurance value chain by assuming a business accelerator role: on the one hand, technology has been a driver in the evolution of internal processes; on the other, it has created the possibility of a new offer of innovative products.
An open innovation logic has been applied to allow the integration of different partners. For example, on the side of the distribution channels, we developed partnerships with Yolo and Neosurance. In the area of claims management, a partnership with MotionsCloud has allowed the company to process claims within 48 hours and assess damages within one week through a video evaluation. All these industrial partnerships have been led by Net Insurance’s equity investments in these partners.
The insurtech initiatives are also building foundations for future growth. A few months ago, a pay-per-use theft insurance coverage was developed for Enel X’s customer base. This embedded insurance initiative is based on the data of the smart home security system sold by this leading Italian utility, and the insurance premium reflects the risk mitigation offered.
Three main lessons can be learned from our journey.
Firstly, underwriting excellence remains a key factor to company performance. It’s more than simply risk selection and pricing; it requires a set of capabilities, critical judgements, forecasting of future industry performances and ability in portfolio management. We learned that all these elements can be strengthened by the application of new technologies, allowing the use of new data sources and decision models. The real challenge now is to transform underwriting, establishing it as an expanded and more exciting role that matches the complexity of today’s world.
The second lesson learned is the importance of building a transparent relationship with shareholders, especially now, in a ‘new normal’ scenario characterised by lower-for-longer interest rates and in an economic landscape marked by the uncertainty of the post-Covid era. Accountability, transparency and engagement are essential for good governance that has a concrete impact on the business and promotes sustainable growth.
Third, there is the opportunity to focus the innovation effort on insurtech initiatives with a substantial impact on the business. Successful innovations must be closely coordinated with the company’s strategy. Innovation involves all areas of the company, spreading its impact over the value chain. It’s important to improve existing business lines, but it’s also necessary to rethink old processes and empower them with insurtech solutions.
Nowadays, insurers are facing a perfect storm of different converging factors: changing customer needs and the emergence of new players. In this highly competitive and fast-changing market, innovation investments represent a critical factor. There are many challenges – culture, regulation, legacy systems – but the forecast is favourable. Insurtech initiatives will be more and more relevant for achieving results in the insurance arena.
by Andrea Battista, CEO, Net Insurance and Matteo Carbone, Director, IoT Insurance Observatory