Covid-19 has been hard on insurtechs, which have had to adapt to changing demands from consumers in lockdown. Insurance Times takes a look at how some have weathered the storm better than others and what it takes to make a business pandemic proof

Whether it is funding issues, restructuring or going bust, the Covid-19 pandemic has been a rollercoaster ride for insurtechs.

This is because consumer demand and behaviour has shifted during the coronavirus crisis and insurtechs have had to adapt to meet the ’new normal’.

The beginning of the pandemic amplified funding issues for the sector, as many found that they were not eligible for the Coronavirus Business Interruption Loan Scheme (CBIL).

Some have faced closure, like MGA startup Coverly, while others - such as Digital Risks - have adapted. It rebranded to Superscript to cater more closely to SMEs.

Social distancing affected insurtechs with property-based products. For example, specialist sharing economy insurtech Pikl had to change its focus from insuring Airbnb and short-term rentals to cover motor, as well as launching an MGA, while buzzvault stopped selling UK policies completely.

Meanwhile, By Miles saw sales soar, with many drivers turning to the pay-as-you-go insurance model while using their cars less in lockdown.

But James York, deputy chair of Insurtech UK, told Insurance Times that insurtechs have been affected just like any other business.“It’s like you’re on a beach head – at any time, market forces or unforeseen circumstances can throw you back into the sea. It is a natural part of a startup ecosystem that ideas succeed and fail. This is a numbers game.

“Our aim as a trade association is to broaden the base – bring more numbers in to play. It’s smart that some startups have evolved, even pivoted.”

But what can make an insurtech’s business model pandemic proof? And will the sector come out of the pandemic looking completely different as companies are forced to innovate or be rendered redundant?

Catalyst for change

Insurtechs are no strangers to innovation, but Peter Goodman, chief executive and founder of MGA operating platform Aventus, said Covid-19 has acted as a catalyst for change.

He continued: ”It might have been a blunt instrument that none of us welcomed, but Covid-19 has given insurtechs a clear path in many respects and made it blatantly obvious to those who have been slow to digitise that time has run out – the digital inflection point is here.

“Talk has now turned to action. MGAs and brokers realise they need to prepare for the unpredictable and I genuinely believe that investment in data and digital offers the only true option for long term viability.”

One such change is Direct Line’s acquisition of Brolly. Adam Bishop, SchemeServe chief executive, said: “It’s only natural that a bigger incumbent player will buy that value, as the costs of building such a platform and establishing that all important digital culture could be significant.”

Meanwhile, Ed Leon Klinger, chief executive of Flock, added that insurtechs are doing what they do best – “adapting and innovating”. For example, Flock extended cover to protect empty offices.  

”An unfortunate reality is that some insurtechs will not survive. Those [that] do will be the ones [which] can demonstrate that, despite the economic collapse, they can continue to surprise, delight and retain their customers,” he said. 

Agility and pace

Paul Stanley, chief executive of 360Globalnet, said the pandemic has fast-tracked technology, but only those with “pace and agility” and the ability to pivot will survive.

“What everyone has to look for now is step change. This pandemic has pushed insurers to take decisions now; they have been operating in a rather benign environment for so many years,” he said.

“For insurtechs, those that have money will keep going. When the time comes to refinance, they will struggle. Anyone that makes insurers more money, makes them more efficient, gets them more customers, the obvious things, will survive.”

Elasticity of demand

On a similar note speaking about the type of insurtechs that might be affected by the pandemic, York added that it is about the “elasticity of demand”.

“The likelihood of losses away from the home changed and the necessity to consider a world much changed meant it would have felt rational to hold off on some perceived non-immediate coverages. Given the prevalence of bundling, it’s also possible that affordability came to the fore and caused the insurance gap to widen,” he said.

“Timing is the magic pill for startups,” he continued, giving By Miles and Zego as examples that are enjoying a strong capital position. Equipsme also found itself oversubscribed as the pandemic saw interest around its health proposition boosted.

However, Urban Jungle, which deals with renters’ insurance, managed to get funding during lockdown and saw revenue grow by 20% in July alone.

Travel insurance has also been hit, Bishop added: “The losers will be the ones that are not in tune with their customers or their current requirements.”

The Insurance Times insurtech top five winners and losers of the pandemic

5. Coverly 

Earlier in March, Coverly announced that it was making some redundancies in its Liverpool office as part of a restructure by Bibby Financial Services (BFS) – its parent company. This is in stark contrast to what it had planned at the start of 2020. In January, Coverly had plans to expand its product range and an ambition to become a virtual insurer.

4. Buzzvault

In June, insurtech buzzvault announced on its website that it had stopped writing UK policies as it is restructuring.

3. Brolly 

Contents insurance insurtech Brolly was bought by Direct Line Group (DLG) for an undisclosed sum during July, in what DLG hinted in its H1 financial results would be one of many “inorganic partnerships”. The deal is expected to close in the third quarter.

2. Bought by Many 

Lockdown in the UK has meant more people working from home in a bid to mitigate the spread of coronavirus. Because of this, many people have considered getting a pet.

This is what Bought by Many found; the insurtech saw an uptick in new customers taking out pet insurance policies during this period, suggesting that the pandemic has made customers more aware of the protection that insurance gives their pets.

1. By Miles and Zego 

Pay-per-mile insurtech By Miles saw its policies soar during lockdown as drivers on UK roads used their cars less and, therefore, wanted a more flexible insurance policy to accommodate working from home, driving less and taking shorter trips.

Zego on the other hand are getting involved with insuring e-scooters in the government trials across the UK. 

Read more here.

Survive and prosper

Stanley said insurtechs that enable customers to run their lives via their smartphone will win in the ‘new normal’.

“All the technologies that do that will survive and prosper. If you have technology that’s so flexible you can pivot, it will be fine. Insurtech is all about enabling the incumbents.”

Like Stanley and Goodman, Matthew Grant, partner at InsTech London, said Covid-19 has forced the wider insurance industry to recognise that it must go digital.

“Three or four years ago, people were saying that the underwriter was going to be displaced. Now they are not saying that. If you can get technology to tell you which [risk] falls outside your appetite, the underwriters are more effective.” Grant gave Cytora and Ki as an example.

“The reality is that innovation does not happen in a vacuum and people like safety and security, but you have an external market that is changing dramatically or some regulation that is forcing change,” he added.

Speaking about who might profit, Jimmy Williams, chief executive at Urban Jungle, said: “I believe we’ll see a doubling down in insurtech. Those who have seen early success will pull away from the pack, purely because they’ll have much better access to growth capital.”

However, Williams added that “plenty will be caught short with either a Covid-negative business model, or just a rough period of trading. Startups are hard in normal times, especially in a heavily regulated space like insurance, so it’s likely we’ll see plenty more go over the edge”.