Scale-Ups and Insurance: The Great Divide

Rodolphe Strauss
October 4, 2022

"All we wanted was an offer with a good price. Easy to claim. Easy to buy.", shares Roberto Pereira, former Insurance Manager at the German neo-bank N26. But easier said than done. One of our key objectives at Spotlight is to shed light on use cases that will trigger the discussions that will help insurance move forward. This week, we spoke with Roberto to investigate why so many scale-ups fail to reach their insurance goals.

The backstory

Pereira was the insurance manager at N26, a neobank headquartered in Germany. After analyzing customer data, he believed there was a market for electronics insurance for things like laptops, watches, and smartphones. Even better, it met his criteria for a “simple” place to start before progressing to more complex products like travel and health insurance. 

“We saw that a lot of customers were looking for insurance products with us, so after taking a deep dive into our customers’ needs, we decided to start small and do it ourselves,” Pereira says. 

After testing the new insurance product for viability, N26 managed to launch its first insurance product in three European markets. So far so good. But then came time to scale it homogeneously across all 23 markets. And that's when things got rough.

The unexpected barriers

For domestic players, launching a new insurance product is very accessible, as long as you have the right operational support.

N26 customers wanted a clear, simple product, something easy to understand and easy to file claims without a lot of fine print and restrictions. To enter their target markets, N26 needed a partner to replicate its cover across 23 European countries. But such a partner quickly proved surprisingly difficult to find. 

“Some partners didn’t want to launch a particular market or product, others made a point of including terms and conditions we didn’t want, or they wanted restrictions in a certain market. Others didn’t have the capacity to support the languages we were working in—in Greece, for example, you must provide customer service in Greek, so finding an insurance center with a call center operating in Greek was no picnic,” Pereira says. 

Making matters even more complex, there was no central repository for all European and country-specific regulation the company had to comply with. While regulatory issues are relatively consistent across the European Union, several countries had small variations unique to themselves. 

“In Italy, customers still need to sign paper documents, they haven’t updated their system in 80 years,” Pereira says. “In Belgium, you have to separate the premium into risk premium, commission, and tax and show it to the customer before purchase. You have to hire lawyers in each country because there’s no central place for these regulations. It gets very expensive and time-consuming for small players.”

The tech divide

Surprisingly, Pereira says that when it comes to selling insurance, technology is the easy part. New platforms and the abundance of APIs make developing a new product and distributing it to customers a relatively quick and painless process. The problem is using that technology to adapt the product for different markets. 

“For us, the technology challenge was understanding the customer journey across all our markets and figuring out how we could comply with all the country-specific regulations with just one app,” Pereira says. 

That’s when it became clear that the issue was the backend technological legacy. Underwriting, document creation, claims, and customer service technology is still stuck in the 20th century for the most part. 

“There is a lot of tech around for shiny front ends, but for the back, it is all old insurance companies with old technology and old ways of thinking,” Pereira says. “Selling is the easy part, it’s all online, but underwriting is still really old, with document creation, you have to send an email, they are still manually reviewing documents. The selling part is there, it’s the rest of the customer journey they need to update.”

What would Pereira do differently?

Looking back, Pereira has one big word of advice for anyone looking to scale up an insurance business: Take the time you need to find the right partner. 

Pereira cautions that partnering is not only a matter of finding a risk-carrier. It’s about finding a partner with good technology for both the front and back-end processes and an openness to doing new things. 

“Don’t take the first, second, or even third option,” he says. “If you want to launch a multinational program, you need a partner who can offer operational excellence and automation. Look into the processes—you don’t want a partner who relies on an old insurance company with old restrictions and ways of doing business. You want new technology behind all of the processes.”

Because when it comes down to success from a business and financial perspective, it’s all about the operational part. If the goal is to offer the same product with the same pricing in multiple international markets, it’s expensive and impractical to negotiate with different partners in each. One possible solution could be to partner with players who are willing to carry the risk and also have the ability to easily integrate with different back-end bricks. 

Pereira’s predictions for the future

Pereira says the future is parametric. “I think parametric insurance will revolutionize the industry,” he says. “Why? Because it’s easy to buy and you don’t need to claim it, the payout is automatic and you get it instantly. The customer service part is gone—this is key to erasing the barriers to insurance.” 

He continues, “I think having more companies doing insurance, not just the distribution but also the underwriting and claims part, would be an amazing development. Right now, 80 to 90 percent are focused on selling and distribution, so it’s a great experience for the customer to buy, but the operational and customer service experience has to improve. Imagine the impact on customer service if we invested similar amounts in back-end technology. I believe insurance would become much sexier.” More competition, more investment in technological advances, moving from distribution to a more complete insurance experience will ultimately change people’s minds about the industry.

Seyna is hiring

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nec diam eu ut posuere duis lacus. Suspendisse est.

View open positions

Related articles

View all
Arrow to see all stories about Seyna