Large insurance companies from around the world are increasingly popping up as visitors to the Israeli tech ecosystem. Aviva plc, a huge UK-based insurer recently brought a delegation of top executives to meet with local insurtech, fintech, and cybersecurity startups. AmTrust Financial Services, a Nasdaq listed multinational property and casualty insurer ($2.5B market cap) earlier in February sent its COO, CIO, and CMO to sign agreements with three Israeli startups that could help it integrate AI into its services. Last November Japanese insurance giant Sompo (founded in 1887) opened an innovation hub in Tel Aviv.
So, what's going on? Why the sudden surge in multinational insurance corporations to our shores?
The big picture is that insurers these days, like all other financial institutions, are scrambling to reinvent themselves before new tech-based business models make them irrelevant (see how banks like UBS and Lloyds are experimenting with their own blockchains).
But unlike the Banks vs The Fintechs, today's rising insurtech industry is perceived by the incumbents as more of an opportunity than a threat. Many startups, for their part, are happy to oblige as they can count on the trust, market reach, and brand recognition of the old guard –in Israel only 5 large companies control 90% of the insurance market (Harel, Psagot, Clal, Phoenix, and Menorah). So what's being worked out is a model in which the large insurers carry most of the risk, and the startups provide them with new tech products in a short development time.
This could explain why the Israeli insurtech market has tripled over the past four years. According to Start-Up Nation Finder, in 2014 there were 28 active insurtech companies in Israel offering new insurance technologies and business models. Now in 2018 there are 66, with 90% of them adopting b2b models.
Some of these startups offer new underwriting models like real-time risk analysis; some develop personalized insurance products like usage-base insurance, on-demand insurance, micro-insurance, and peer-to-peer insurance.
Bambi dynamic, for example, offers drivers the ability to turn their car insurance on or off so that they pay only when they need to be covered. This could be very useful for ridesharing and car rental.
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Others are deeply rooted in Israel's traditionally strong cyber expertise.
This growth in the ecosystem, and these new innovations are what foreign multinational insurers have taken notice of.
Funding into the local insurtech sector however hasn't grown in real terms compared to the growth in number of companies. In 2017 Israeli insurtech companies raised $199M, representing 7.5% of worldwide private investment in the global insurtech sector. But $120M of that was the investment in Lemonade, an Israeli insurtech startup who was the first to sell digital home and rental insurance in the US.
About Start-Up Nation Central:
Start-Up Nation Central is an Israel-based non-profit that serves the Israeli innovation ecosystem, and acts as the world’s gateway to the ecosystem. An authoritative source on and GPS to the Israeli innovation ecosystem, the organization leverages its in-depth knowledge to help identify the best solutions for demanding corporate and government challenges.