Global growth-stage insurtech investing: Who is FinTLV?
Based in Tel Aviv, Israel, the company is a VC investment firm that was founded in 2016. Focusing primarily on insurance and insurtech prospects, FinTLV’s portfolio includes three of the sector’s most exciting entities: , , and - all of them unicorns (valued in excess of $1bn).
Its ability to recognise and target these particularly valuable companies could be attributed to its experienced leadership team, whose skill set includes:
- Decades of investment experience in the US, Europe, China and Israel
- Direct experience as board executives at insurance firms
- Entrepreneurial ability and technological proficiency
Insurance: Undergoing disruption
“The insurance industry is a huge industry undergoing a fundamental disruption. The revenue of the US insurance industry is five times larger than that of the banking industry, yet the technology used by most insurance companies is antiquated. The leading insurtech companies drive this revolution.
“The unique understanding of this market, as well as the rich network with many tens of insurance players around the globe, give us access to the most lucrative investment opportunities in the field.”
Investing for success
Clearly, the events of last year have done nothing to diminish the sector’s attractiveness to investors. And yet, observes Avishai Silvershatz, Managing Partner of FinTLV’s fund, it is far from being a ‘fool-proof’ arena; investment must be guided by a particular kind of savvy that effectively marries insurance and technology expertise.
The same goes for insurtechs themselves: “in order to be a successful insurtech company, [it] needs to have not only great technology but also the ability to cope with high regulatory barriers, to meet capital solvency requirement, to establish relationships with other players in the insurance ecosystem, to build expertise in risk assessment and on-line marketing, to have financial sophistication, to manage M&A activities and more.”
Achieving all of the above will help the prospective insurtech distinguish itself, but it then takes experts like FinTLV to examine and select them specifically for growth. Now that it has secured capital for its next fund, this is what the company intends to do.
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.