ITC Europe’s Digital Insurance Agenda was back in force at Barcelona. It was exhilarating to visit and spend three great days getting to grips with all the latest developments in the word of insurance technology – even if most attendees and speakers spent much of the time talking about generative AI!
To begin, there was a great mix of over 2,000 InsurTechs, MGAs, and insurers at the event, and so many insightful experts – more than 100 speakers over the three days – that it was hard to take in all the great content.
With that said, there were some clear takeaways that I got from the event to share with you that were both relevant and thought-provoking.
ChatGPT has opened up the AI agenda
Ever since the launch of ChatGPT at the end of last year, discussions about generative AI have dominated every tech event around the world. It was no different here.
There was a real buzz around the discussions; journalists were asking questions, attendees were looking for answers from speakers, and the excitement was palpable.
Taking a step back, it seems that there are few active use cases of generative AI in insurance in the public eye. But the buzz around it has definitely increased awareness of the possibilities and potential benefits. The feeling I got from the event was that industry executives who had previously been hesitant about AI are now much more open to discussions.
In terms of AI on the Novidea platform, Salesforce has its own Einstein GPT – the world’s first generative AI for CRM. Because Novidea is built on Salesforce, we’ll soon be looking into the possibilities offered by this technology and talking to our clients about potential use cases.
According to Salesforce: “Einstein GPT will infuse Salesforce’s proprietary AI models with generative AI technology from an ecosystem of partners and real-time data from the Salesforce Data Cloud, which ingests, harmonizes, and unifies all of a company’s customer data.
“With Einstein GPT, customers can then connect that data to OpenAI’s advanced AI models out of the box, or choose their own external model and use natural-language prompts directly within their Salesforce CRM to generate content that continuously adapts to changing customer information and needs in real time.”
We will be talking and publishing more about this as use cases come into fruition.
MGAs gaining appreciation in the market
MGAs have been gaining more importance and influence within the insurance market for a while now. What was clear from the DIA event was the extent to which MGAs are now accepted as mature market players. It’s not just about disruptive new InsurTechs entering the market with a commoditised offering. Carriers recognise the value that MGAs bring – especially those with niche expertise – as key distribution partners in the value chain.
Munich-based Apinity was one of the sponsors at the event. This impressive company offers an open API marketplace, and it got me thinking about the potential for Novidea to develop something similar for our clients.
We’re always looking to improve our development and delivery processes, and this approach could help us to do just that. Something I was still thinking about on the plane back from Barcelona – watch this space!
InsurTech funding trends
Besides the hype around generative AI, any InsurTech event will of course be dominated by discussions of funding trends, and DIA/ITC was no exception to this as funding is a big topic for our industry.
InsurTech funding hit record-breaking highs in 2021, with 564 deals totalling $15.8 billion – more than the total funds invested in 2019 and 2020 combined.
Yet, even though that was less than two years ago, the narrative since 2022 has been much more negative, with inflation and rising interest rates stymying the traditional venture capital model and cutting off capital flows into the sector. Funding dropped by 50% in 2022.
It’s not all doom and gloom though. Deals are still being done and new startups and scaleups are still attracting investment. It’s all just a lot less exuberant. From the discussions I was privy to at the event, I picked up on a few interesting trends.
VCs are getting choosier about what business models they invest in and why. Funding is getting harder to find of course, but this is not news. It’s been that way ever since Silicon Valley Bank went bust, the listed InsurTechs in the US share prices plummeted and interest rates started rising dramatically.
With interest rates remaining high – and still increasing in some countries – investors are now much more focused on a route to profitability over pure growth, which was the previous obsession.
Apparently, valuations of InsurTechs have gone from up to 20x revenues to more like 2x revenues. This seems exaggerated but it does prove that valuations are way down and that young startups are finding it almost impossible in many cases to get funding compared to two years ago.
On the flip side, InsurTechs with a strong value proposition, top team, and clear route to profit can still get funding. Novidea, for instance, gained series C funding of $50 million earlier this year.
One result of this is that InsurTech MGAs are now becoming more popular investment targets than full stack propositions. This is partly because MGAs are more likely to either already be profitable or be close to achieving profitability, but it’s also because regulation on full stack propositions are seen as too cumbersome. It adds to the costs, it adds to the risk, and it takes longer for those companies to get set up.
The rise of stellar MGA performers internationally, such as ManyPets in the UK or Cowbell in the US, are two clear examples of the huge profitable growth potential for well-run MGAs who really know their niches.
Further, it’s notable that carriers have significant capital to invest, meaning we might expect more partnerships in the InsurTech space as insurers look to increase their return on capital by finding InsurTechs with great potential.
Discussions at the event with insurers suggested that early-stage start-ups are more difficult to integrate with. When they grow, they can struggle with culture, and that pressure leads to their downfall. Execution and culture are likely to play a huge part in which ventures insurers invest in.
For many insurers, the talk was around how many InsurTechs do not invest enough in product development. There was also a lot of discussion around how InsurTechs leverage their assets and customer-base to launch new products that are right for them and help them continue on their trajectory. Some felt that there was not enough of a conversation going on between the product teams and the end-clients.
The other trend discussed at the event was the noticeable increase in digital adoption amongst insurers post-Covid. Now that customers have become more used to relying on digital products and services, insurers are having to respond to this shift in customer demand and going all-in on digital.
What this means for Novidea and our customers
This was a really mixed event for us at Novidea. It’s exciting to know that we’ll be looking into use cases for Salesforce’s generative AI, while also looking into creating our own API marketplace equivalent. At the same time, it’s good to see that digitalisation is increasing across the industry.
Of course, the more carriers that go fully digital, the more onus there is on brokers, MGAs, and coverholders to keep up. Having a best-of-breed IT platform is becoming necessary for doing business with increasingly digitalised clients, partners, and carriers.
If you’d like to discuss your digitalisation or data challenges, feel free to get in touch to see how we could help.