French Ornikar driving school startup turns insurtech
Ornikar, the leading online French driving and road safety education service provider, has solidified its plans to move into the car insurance sector by raising $120m through it’s Series C investment drive.
The Paris-based company will concentrate on rolling out further services throughout France and Spain. The funds will also be used to enhance a range of competitive car insurance products and services for new drivers.
Disruptive insurtech startup
The disruptive company, which describes itself as an ‘online driving school’ was founded in 2013 in Paris and has proved highly popular with the latest generation of drivers. Over the past eight years, it has expanded its online services that provide online drivers education courses, across Europe.
Ornikar’s services includes online course materials and booking services as well as a network of instructors across 1,000 towns and cities in France, and a business that launched last year in Spain, under the Onroad brand.
To date, an estimated 1.5m people have taken Ornikar’s driving education courses, with another 2m using its driving school. A reported 420,000 new customers also signed up with Ornikar over the past 12 months alone.
According to reports, Ornikar launched its car insurance product in August 2020, when most drivers were reducing their amounts of mileage due to the pandemic. The car insurance product — sold as Ornikar Assurance — is now on track to hit some 20,000 users by August 2021.
The car insurance in France is big business, and is worth an estimated $20bn annually. But it is also reportedly dominated by big players who don’t provide competitive rates to first-time drivers. Ornikar is therefore plugging a large gap in the market and utilising its driver education facilities to market its products.
Benjamin Gaignualt, Ornikar’s CEO, explained, “The bigger companies are not comfortable with user experience. It’s pretty poor and not aligned with expectations of the customers.”
Although Ornikar Assurance counts for a small fraction of the company’s total revenues the uptake so far shows great potential. Gaignault added, “In October we noticed that 80% of our new insurance customers were not coming from Ornikar but from social media, Google ads and other outside sources. That’s why we decided to create a new business unit and explore a business as an insurtech.”
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.