FRIDAY to expand into the French market
FRIDAY, which currently has an office presence in Paris, Berlin, Luxembourg and Warsaw, was founded in 2017 and has been one of the most disruptive insurtech companies to launch in Germany.
The digital insurance provider claims it was the first German company of its kind to emerge, and is one of the fastest growing insurtechs in Europe, citing its 180-day from conception to launch date as ‘record-shattering’
The cloud-based insurance platform offers a range of innovative products and offers a paperless and entirely digital service. Friday's number-per-kilometre tariff means customers can benefit from insurance cover starting at 1% per kilometre. The pay-per-kilometre fare appeals particularly to low-mileage drivers and second-car drivers.
Insurtech in Germany
Insurtech in Germany is a burgeoning industry. According to data, premiums grew 3% in 2020 despite the pandemic, and are set to grow by 2% in 2021. A study by Fitch Ratings suggests the sector expansion is being "driven by a hardening market in commercial insurance and underwriting discipline in buildings insurance."
Germany is also leading Europe in both fintech and insurtech but is still a long way behind the UK in terms of market development and size.
The move into the French market will provide greater opportunities for FRIDAY to expand on services and offerings. The technology entrepreneur, who has founded two successful insurtech companies, will lead FRIDAY'S French launch.
Speaking about the new venture, he said, "FRIDAY is a role model for the future of the insurance industry. Customers everywhere want a new and straightforward way of managing insurance. In France, the way people use insurance products has changed dramatically due to the effects of COVID-19.
I am delighted to be leading FRIDAY France to success from our Paris office."
Castet added, "The launch of FRIDAY in France is a crucial step in the digital strategy at Baloise. The expansion shows how digital insurance solutions that are firmly aligned with customer needs can not only be rapidly scaled but also easily launched in new markets.
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.