In what sort of a position was the insurtech industry before the Covid-19 breakout?

In contrast to fintechs, Germany is in a leading position when it comes to insurtechs. The first insurtechs in Germany came onto the market in 2010 – almost all with a distribution approach. The startups acted as brokers and worked with traditional insurance companies. In 2015, the industry experienced a real boom, and since then the number of insurtechs has risen steadily. According to management consultants Oliver Wyman, 134 insurtechs were active in the German market in mid-2019 alone – and of course there are many more insurtechs across Europe. The market is now consolidating; and insurtechs need to gain significant market share.

What sort of effect do you think this is going to have on the insurance tech industry and on startups?

Like all companies, startups are also affected by the coronavirus crisis. First, the pandemic affected startups in the tourism, events and mobility sectors in particular. Due to uncertainty about the situation, many people are postponing purchasing decisions or cancelling their plans completely. As a result, the problems are now spreading to other startups as well. Insurtechs – and the entire insurance industry – will feel the economic consequences of the coronavirus pandemic less severely than other industries. Especially in times of crisis, people need insurance. In addition, insurance is a very long-term business model: Customers keep their contracts for many years, often decades. Nevertheless, some insurtechs may fail because they will not have access to risk capital. This is likely to affect insurtechs in particular at an early stage.

What can startups, especially early-stage startups, do to help themselves at this time?

Startups face a particular difficulty in that they are unable to use conventional financing channels because their business models are considered risky. Almost every startup makes losses in its first few years, which is why venture capitalists provide seed capital. But currently they are hesitant to invest, which will put many startups in a difficult position.

The German government has already assured that startups can apply for financial support from the economic stability fund. This is a positive sign, and I hope that the European Union and other national governments will also work on a relief package. There are many startup associations and services that offer help and advice. I sincerely hope that this will prevent startups from dying out on a large scale.

What does the current situation for insurtechs look like? Are they in a better position than some other industries?

As said before, insurance is a long-term business. The financial crisis of 2009/2010 affected insurance companies much less than banks. Fintechs such as Monzo, Revolut, Starling Bank and N26 took advantage of the increasing scepticism and dissatisfaction of customers and recorded high growth rates. In insurance, there is no comparable urgency. The average customer is 50 years old and will continue to pay premiums for 30 or 40 years. Insurtechs that want to disrupt the industry need to be patient and persistent. Digitisation changes customer expectations and user behaviour. It is to be expected that millennials don’t want to interact with a broker or agent. They expect information and services to be made available to them in real time at the push of a button. This generation of customers will buy almost one billion new insurance policies in Europe over the next ten years. This is the greatest danger for insurers – and the greatest opportunity for insurtechs.

Obviously you cannot predict the future, but what do you think this situation will do for the future startup landscape? Will there be a boom?

As in every crisis, there will be winners and losers. In the aftermath of the financial crisis in 2008/2009, we saw lots of innovation coming out of the recession back then. I hope that we can expect that again this time. Governments are already pushing digital solutions as a result of the crisis.

Have you experienced anything like this before? And is there anything we can do to prepare if this ever happens again?

A global pandemic of such magnitude is new for the whole economy. Governments throughout Europe are reacting with different measures, and it seems that there is not just one simple solution out of this severe situation. I hope that we can learn from the Covid-19 outbreak for the future, but the focus right now should be on the current crisis.