The Insurtech Landscape in Latin America: Hugues Bertin, CEO, Digital Insurance LatAm

Digital Transformation, Insurance Industry News & Views - June 11 2020

Hugues Bertin is CEO of Digital Insurance LatAm and an insurtech advisor at HCS Capital Partners. Hugues has more than 20 years of experience in insurance in various roles including Digital Transformation Leader, Chief Financial and Risk Officer, Sales Manager, Consultant, and Broker. We caught up with Hugues to ask a few questions about how insurance companies operating in Latin America – and the insurtech ecosystem that serves them – are responding to the COVID-19 crisis, the pace of digital transformation in the region, and what comes next for the insurance industry.

Hugues, on a recent LinkedIn Live Show with Dr. Robin Kiera, you noted that Latin America is 2 to 3 years behind the US, Europe and China when it comes to insurtech investment and adoption. Can you provide a sketch on what is happening with insurtech in Latin America today, and what particular challenges – and opportunities – exist for insurtech companies in the region?

Leaving out the Brazilian insurtech ecosystem, which alone encompasses over 100 insurtech companies, our last radar displays 144 insurtechs from Monterrey in Mexico to Ushuaia in Argentina.

12% of insurtechs are challenging current insurance business models – 4 of these insurtechs are full stack, some are providing telematics solutions or embedded insurance. For example, we can mention Iunigo (ARG), a full-stack insurtech company born from a spin-off of San Cristobal Seguros, a traditional carrier from the insurance cooperative sector. Another example is Zenda.la (MEX) that is displaying a very original freemium business model in the healthcare sector.

56% of insurtechs are redesigning distribution models from an MGA model or multi-carrier model, especially in P&C. A large number of them are traditional brokers that are moving from a physical channel to a digital channel or a hybrid physical-digital channel. In the life insurance sector, there are some interesting insurtechs that are focusing on a very new UX/UI experience. For example, Klare (CHI) was just formed a few weeks ago – they are tackling the hard job of digitizing health declarations in the underwriting process. Another example is Mango Life in Mexico with a very modern and glamorous distribution experience.

31% of insurtechs are providing what I would call “services to insurers and intermediaries.” In this group, insurtechs are delivering new digital proposals aimed at improving the internal and external value chain of insurers. For example, Jooycar from Chile is delivering an add-on model of telematics for insurers in Chile first, and now in Peru, Mexico and the US. Another example is Leverbox (ARG) that is digitizing the whole process of car claims repayment for insurers in Argentina, Mexico, and Colombia.

In every country in LatAm, insurtech solutions exist. The breakdown is as follow: Mexico – 34%, Argentina – 31%, Chile – 19%, and Colombia – 12%. But there Insurtech companies in Bolivia, Uruguay, and the Dominican Republic too.

Picture1_Hugues Bertin

The main challenges for insurtechs ecosystems are:

  • Measuring and communicating how they provide added value for insurers or clients
  • Redesigning more and more components of the insurance value proposal and business model
  • Scaling up in every country in the LatAm region, and especially in Brazil

The main opportunities are:

  • The market opportunities are large and mostly untapped because the LatAm insurtech ecosystem is only just emerging in an early stage.
  • Corporate Venture Modeling with insurers provides opportunities to be funded by established insurance companies.
  • In some business lines, the opportunities are a sum of infinite blue oceans: Cyber, SME, Home, and Parametrics, for example.

Insurance distribution channels in LatAm have up to now been quite traditional, relying on local brokers and agents. How has COVID-19 and social distancing impacted the way policies are sold, and do you think the current coronavirus crisis will compel insurance companies to invest in new digital distribution channels?

Carriers and their traditional way of selling policies have been drastically impacted by COVID-19. In bancassurance (banking point of sale, and retail point of sales) or in traditional distribution (via intermediates), the major part of the business line has decreased by 90%.

In the new normal world, retailers and experts are talking about a walk-in decrease of 60%. We observe a large part of traditional intermediaries that are accelerating their digital transformation. In the case of carriers, some are freezing every investment in order to concentrate on tactical tasks (a short-term view), while others are investing in order to be well prepared for the post-crisis. Carriers in the second category are especially focusing on the digital channel (direct or embedded), for example, initiatives to improve UX/UI, or to develop new digital channels. The crisis has convinced every stakeholder to put “digital sales in insurance” at the top of the agenda.

Even in the midst of a global pandemic, there is some good news in the world for insurtech: large growth for GetSafe (Ger); +40% for Policybazaar (India), Alan (FR) announced its expansion to Belgium, and Zhong An has seen a +30% premium increase when the average insurance market has observed flat or 0% growth.

LatAm insurtech in the distribution landscape is suffering because consumers don’t buy insurance, but the level of sales has stayed pretty much the same, and we are seeing some encouraging case studies:

  • A new “Pay As You Drive” offering by Falabella with Sura and Jooycar in Chile
  • RUS launching a Digital Life Product with Mecubro in Argentina
  • 123Seguros (ARG) joining forces with Chubb in SME business line

On the other hand, carriers are suffering more with decreasing sales. On a positive note, carriers are becoming more customer-centric than ever before:

  • Some carriers are offering Telemedical platforms for their insureds
  • Others are including COVID-19 coverage in their products
  • In Argentina, carriers are discounting car insurance by up to 80%
  • In Colombia, carriers are being more flexible for the payment policy period

You’ve made the point that even before COVID-19 lockdowns, traditional insurance distribution channels were under pressure. What other trends and factors are leading insurance companies toward digital channels?

In our point of view, digital transformation is designed in 8 pillars. Some of them are tied to trends:

  • Digitization of the intermediary channel and rethinking the Bancassurance market.
  • Connection with digital platforms and building out the first ecosystems.
  • Investment in artificial intelligence and analytics (San Cristobal Seguros in Argentina and Sura in Colombia are among the best-in-class examples).
  • Improvement in the digital culture in order to attract and retain talent. For example, meaningful digital transformation requires a new definition of the organization’s purpose and a new value proposal.

In your conversation with Robin Kiera, you remarked that, “The insurance ecosystem has taken a dive into the digital transformation swimming pool, and now it’s time to sink or swim.” Can you expand on that point and discuss how the insurance ecosystem is responding to this unprecedented moment?

Definitely, COVID-19 has been like “diving directly into a pool of digital transformation.” The good news is that it’s a pool that the majority of insurers could swim successfully.

For example:

  • Teleworking is the real success story of the crisis. The question is: “In the new normal, will insurance executives move work back to the office?” The new opportunity with teleworking is to include intermediaries or agents, located far from the headquarters, working in agile cells.
  • Using digital signatures (DocuSign, Adobe Sign, Signatura) is emerging as a new normal way to formalize agreements.
  • Going paperless: Definitely, carriers have proven during this crisis that they can work with less paper than before
  • Some points of digital culture are being improved like “digital empowerment” and “test and learn” approaches

New digital tools and channels aside, insurers are confronting a new challenge: “Are traditional leaders ready to be relevant in the new normal world?” Generally, insurance leaders today are 50 years old, and many of them are quite far removed from the digital tool and digital culture needed to effectively manage millennial teams. On the other hand, millennials are living a double crisis right now: The 30 years crisis (when people are thinking about a change of life, and are at increased risk of depressive disorders) and the COVID-19 crisis. This double crisis will impact insurance organizations for a very long time to come.

There’s a vibrant insurtech ecosystem in Latin America that has tended to fly a little under the radar outside the region. If I put you on the spot, can you name one notable homegrown insurtech success story in LatAm that you believe should be better known in the rest of the world?

This question is for me the most difficult of all because, in my opinion, they are a LOT of success stories, but if you’re asking me to pick only one, I would like to mention Jooycar again, a telematic platform formed in Chile in 2014 with two amazing founders: María Paz Gillet from Chile and Emilio Figueroa from Mexico. The whole market knew them, and they pitched a lot in front of many carriers, but it seems that PAYD was a business proposal too disruptive for the market to ignore – PAYD for car insurance means a policy in which the price depends how many kilometers are driven by the insured.

After a long run, they began to work at scale with Sura in Chile. They bootstrapped their start-up for a long run and in 2018, HCS Capital funded Jooycar. They reorganized themselves with a new CEO, Rodrigo Labbe, and they have expanded their insurtech business, working with the largest players in Peru, Mexico, and now in the US.

One month ago, Falabella, a major car insurance broker in Chile, announced a PAYD solution for the market with Sura and Jooycar. This demonstrates that the COVID-19 crisis has been an accelerator of PAYD solutions.

If you look behind the curtain at the commercial insurance back office, there is still an incredible amount of paper pushing and time-sucking manual work. As the industry has had to move to working remotely due to COVID-19, paper-based processes have proven difficult to adapt to virtualization. Do you think the current crisis will accelerate digital transformation initiatives and bring a new focus on improving the efficiency of processes?

Definitely, customers will put increasing pressure on insurers to become more digital. On the other hand, internally a lot of insurance executives who have suffered over excessive “paperization” in the industry will no longer accept working with a lot of paper documents and physical signatures.

Because the insurance P&L is under pressure, we can expect to see massive investment in order to reduce administration cost. For a lot of C-levels, COVID-19 is an opportunity to test a “paperless and digitalized world” and to jump over traditional hurdles to make digitization a reality.

Based on your experience, what are the secrets to a successful insurer-insurtech partnership? 

Magicians don’t give away their secrets, but we can mention:

  • Reach agreement among every player about the value that will be created for the clients and for the insurers
  • Be pragmatic, starting with a small and measurable test for a very short-term period of time. Decide with the board beforehand under which conditions the test/POC will be scaled-up.
  • Create a collaborative way of working between internal intrapreneurs and disruptive external start-ups.
  • Be accompanied by an intermediary who can understand the insurer’s pain and internal culture and, on the other hand, can guide insurtech entrepreneurs to be more patient and more relevant to C-level insurance execs.

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Hugues Bertin is CEO of Digital Insurance LatAm, a strategic consultancy specializing in innovation and digital transformation in the insurance industry, and an insurtech advisor at HCS Capital Partners. He is the academic director of Innovation and digital transformation at the Chilean insurance school and teaches at the Universidad Austral (Arg), the Argentine Catholic University and the University of Chile. Hugues has more than 20 years of experience in insurance in various roles including Digital Transformation Leader, Chief Financial and Risk Officer, Sales Manager, Consultant, and Broker. He has held senior positions with BNPParibas Cardif, Mercer and PwC in both Europe and Latin America. He has also been vice president of BNPP Investment Partner Argentina. Hughes graduated as a French actuary at the Statistical Institute of Paris (France) and the Senior Management Program of the IAE (Argentina).

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