The rapprochement between insurers, insurtech and GAFAMs

Insurers-insurtech joining hands

According to a study conducted by Juniper Research, Ping An, Axa, Munich Re, Humana and Allianz are the traditional insurance or reinsurance companies most engaged in insurtech innovation, investment and adoption.

The same study reveals that the total value of premiums generated by new start-ups is likely to exceed 556 billion USD in 2025, versus 250 billion USD in 2020, that is a 123% growth in five years.

To catch up, insurers have massively invested in insurtech. As an example, we can notably mention:

• Generali France, which recently strengthened its ties with insurtech Advize, to digitalize its life insurance services.
• Hollard Insurance (South Africa) and Yellowwoods, a European-based private equity group, jointly invested 20 million ZAR (1.4 million USD) in the insurtech Naked Insurance.
• Allianz invested, in March 2021, 75 million USD in fintech WeLab, a Hong Kong-based platform for connecting borrowers with lenders in China and Indonesia.
• AXA Spain entered into a partnership with French insurtech "Akur8" in February 2021 to improve its underwriting process.
• Covéa, a French mutual insurance group, launched the insurtech "Appenin" at the end of 2019, operating in digital homeowner’s insurance.
• Munich Re announced in February 2021 a partnership with Sun Capital Partners and Mark Wilson, ex-CEO of Aviva, to launch the insurtech Abacai, a new entity which will initially focus on the UK motor insurance market.

GAFAMs are also collaborating with insurtech, with alliances being forged with these startups to develop data analysis or management tools.

Insurtech-Insurers-GAFAMs joining hands

The example of Amazon

In India, Amazon has obtained a license to sell third-party liability insurance products. In the same country, the group is launching a motor insurance business in partnership with Acko General Insurance, based in Mumbai.

In Europe, Amazon has partnered with Aviva France, which can now use the e-commerce giant's payment platform, Amazon Pay, to purchase homeowner’s and motor policies.

In Germany, Amazon users can purchase travel insurance online. Finally, in the UK, Amazon plans to develop an insurance aggregator.

To tighten their grip on the insurance world, larger-scale tie-ups have also been attempted and sometimes successfully completed. For example, in 2017 Amazon partnered with JPMorgan and Berkshire Hathaway to offer a health insurance package just for the group's employees.

The project had been launched at the beginning of 2018 by three of the great figures of the American business world: Jamie Dimon, the boss of JP Morgan, the billionaire Warren Buffett, head of the conglomerate Berkshire Hathaway, and Jeff Bezos, whose company Amazon employs nearly 1.12 million people.

The goal is to implement a new health insurance system that would increase employee satisfaction while reducing insurance costs, which are very high in the United States.

In fact, the three groups have joined forces to counter the Trump administration's dismantling of Obamacare and consequently the spiraling cost of health insurance.

This project was abandoned in early 2021 without any explanation. However, the three groups said that an informal collaboration would continue.

The example of Alphabet/Google

Alphabet has invested via its Google subsidiary in health insurtech such as Oscar Health (375 million USD), Clover Health and Collective Health and in other insurtech such as Applied Systems which develops software for insurance agents and Next Insurance (250 million USD).

In the summer of 2020, Alphabet took an important step in health insurance with Verily, a unit specialized in the development and commercialization of connected objects in the health sector.

Verily created a new subsidiary, called Coefficient Insurance Company that uses Big Data and analytics tools to offer health insurance solutions to businesses.

The example of Tencent

Tencent, a Chinese company founded in 1998, specialized in Internet services and online advertising, set up the WeSecure Insurance platform only two years after it began operations. This platform has now 25 million users, with a renewal rate of 40%.

Service platforms

All the examples of partnerships show that insurance distribution is not immune to the digital revolution. The most important transformations in the market will come from the service platforms of GAFAMs, which are in contact with millions of users, and not from insurtech.

GAFAMs' strategy for penetrating the insurance market is based on diversifying the insurance offer, which becomes one of many products available to Internet users.

Service platforms such as FitBit, owned by Alphabet, have countless advantages: extensive customer databases, perfect knowledge of all users and continuous contact.

They therefore create value for Internet users in a wide range of areas, without being limited to just insurance products. This extension of cross-selling (cross-selling of complementary products) integrates the value chain that GAFAMs propose to extend the product offer.

In contact with a large mass of Internet users, the platforms have the means to analyze their customers in detail and model their behavior.

Cross-selling platforms target relatively young populations. For example, nearly 80% of people under 35 years old are willing to buy insurance through the major online companies.

The proportion of people willing to buy insurance online from a net giant has been steadily increasing over the past few years. A 2018 study by CapGemini has found that more than 30% of policyholders are willing to buy insurance from a BigTech. In the spring of 2020, this proportion rose to 44%.

Thus, the big net players are not remaining idly. They are slowly advancing their pawns. They are trying to adapt to the norms, rules and obligations of the insurance market thanks to the market players with whom they collaborate.