Happy 2024!

We’ve reflected on some of Qover’s wins from last year. We rang in the new year with our loved ones. We made some new year’s resolutions that probably won’t last. So now there’s only one thing left to do: make predictions for the year to come. 

I know these 2024 insurtech trends articles can get a bit repetitive, so I’ve decided to break my predictions down into two parts: 

• Boring predictions: aka trends that most industry leaders agree on
• Bold predictions: aka what no one else dares to say

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Let’s start with some you’ve probably seen already.

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Common insurtech trends for 2024:

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1. The rise of AI in insurtech

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Unless you’ve been living under a rock, this is the most obvious trend for 2024. Just look at the year that OpenAI and Google’s Gemini had.

However, this is just another tool (albeit a powerful one) that the insurance industry can harness. Real change won’t happen overnight. Instead, we’ll see a years-long evolution that will bring better automation, technical pricing, risk definition and more. 

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2. A greater focus on ESG

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Environmental, social and governance (ESG) plays an important role at every possible level, particularly within the insurtech world.

After all, I often say that insurance is, at its core, about caring. By making insurance more accessible, we help build a global safety and a society as a whole where everyone is protected no matter their circumstances.

This is inextricably linked to ESG initiatives, particularly how we impact our community, support inclusion and uphold ethical business practices.

Increased focus on ESG is spreading through many organisations from the bottom-up, as employees seek to add meaning to their jobs and hold companies accountable, but also from the top-down as it becomes mandatory at a board and investor level.

While Europe is clearly leading the charge, we’ll continue to see a broader expansion of ESG principles as more and more companies prioritise these values and begin to assess their partners and suppliers the same way.

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3. Increased insurance regulation in the European market and beyond

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We’ve seen this as a general trend in post-Brexit Europe and around the world. Now that Brexit has been fully implemented in the insurance industry, pan-European players have to cope with both European and UK regulators, significantly upping their costs and administrative burden.

While I firmly believe that regulations create opportunities and are designed to better protect consumers and build a better world, I also fear that this post-Brexit world will incite insidious competition among regulators.

For example, one might impose stricter regulations in order to prove that they’re ‘better’ than the other – either to help the UK justify Brexit or to make the UK regret it.

This trend will also continue in the US and particularly in the Asia-Pacific (APAC), where they’ll see players as representing a kind of systemic risk and therefore need better regulation.

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4. An auto insurance revolution

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Auto insurance will see the biggest shake-up in 2024 – so it’s actually more of ‘boldish’ prediction. It will shift from insurers and/or large brokers leading insurance programs for big Original Equipment Manufacturers (OEMs) with a local approach to OEMs taking control of their own insurance programs on a more global scale.

OEMs, and particularly electric vehicle OEMs, are becoming software-driven companies. This enables them to build a more connected experience for their customers, which facilitates adding insurance as a fully embedded service.

So in addition to offering insurance online or through dealerships, they can also integrate insurance directly into their app or the car’s computer – increasing the likelihood of adoption. As EVs start to capture more data, there may be even more opportunities to push insurance at the right moment.

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5. Continued adoption of embedded insurance

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I’ve said it before and I’ll say it again: embedded insurance – and specifically embedded insurance orchestration – will continue to rise as the winning model of the insurtech industry.

I don’t just say this because Qover is leading the embedded insurance orchestration space, but rather because it’s a logical consequence of long-established trends we’ve observed over the last decade and that will continue into the next.

Businesses are becoming more digital and more global – or at least regional and multi-country – leading to untapped opportunities to integrate insurance into their value proposition. 

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Bold insurtech predictions for 2024:

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6. Insurtech bankruptcies

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2024 will be the year of insurtech bankruptcies.

In reality, many insurtechs have already failed. Yet, for most of them, this has largely stayed under the radar. Whether it’s in the form of official bankruptcy or a purchase of assets by a risk carrier, many of our peers are now zombie companies.

My prediction is that this will all become more public in 2024.

Let me be clear: this is not a cause for celebration. Not only do I have immense respect for my fellow insurtechs, but I’m also rooting for us to revolutionise the insurance world. And these types of failures do not bode well for the industry.

Why has this happened? Traditional venture capitalists (VCs) have failed to truly understand insurtechs, which is why we were the first to suffer from a lack of capital and VC money in late 2021. Two years of navigating this tumultuous environment – it’s only natural that many didn’t make it.

Not to mention those that failed to recover from technical losses or suffered from an unclear business model (more on that later). 

At the same time, the few that did survive will emerge as the true insurtech champions and will become the big players of tomorrow. 

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7. Strategic investors taking over insurtech funding

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Strategic investors will take over the funding market from VCs for the insurtech space. Insurance is a very slow business and a complex one. Yet it is also robust and resilient. 

While it’s true that the cost of acquisition – mainly for D2C insurtechs – is very (too) high, we should always keep in mind that the true value of an insurance business is the snowball effect of its portfolio.

Insurance contracts renew. And if you assume that 80% of insurance contracts are renewed on an annual basis, the size of the portfolio will grow for multiple years until it reaches 5 times the annual sales.

Only fools wouldn’t invest their money in such a savings account, right? Well, only the ones that don’t really understand insurance.

Even though this compounding effect is true, insurtechs also need to have strong technical foundations and results. If those aspects aren’t under control, it could have disastrous consequences.

That’s why I predict that in the coming years, strategic investors who are more patient and have a better understanding of the insurtech world will invest more and more.

Not only that, but they’re getting in the game at the right moment, investing only in the few champions that survived the crisis. VC investors, on the other hand, will have to write off many of their insurtech investments that failed, causing them to most likely turn away from this difficult vertical and join the AI gold rush instead.

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8. The first insurtech scandal…or at least increased scrutiny

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Every vertical faces their own major scandal or scam: Enron for those who recall in the energy sector, Theranos in the pharma industry or most recently Wirecard or FTX in the fintech space. So the question is: could we have one of those among the so-called insurtech champions? 

‍Maybe I’m being a bit hyperbolic, but I do think a story could emerge from increased scrutiny by regulators – particularly when it comes to unethical insurtech practices.

One such example is insurtechs that pay extremely high commissions to its partners while denying most claims. 

To avoid reporting an abnormally low loss ratio – the best metric to show how much value you create for society – such insurtechs might prefer to report their loss ratio as claims over net premium (NP) instead of claims over gross written premium (GWP). GWP includes the commission while NP does not. So by reporting the loss ratio as claims divided by the NP, you basically hide the commission level you pay.

In my opinion, regulators should ban companies that pay more than 40% commission (there are rumours that some even pay up to 70%), and their investors should be given an immediate red card revoking their investment activities.

After all, this type of activity is in direct violation of any investor’s basic code of conduct as well as any ESG principles. Embedded insurance should be about creating a global safety net to protect people rather than strictly about making a profit.

We could also see insurtechs with unbearable technical losses exposed. These players might have amazing growth metrics and lots of capital, but they’re simply raising capital in order to offset their technical losses – resulting in a vicious cycle with no real winner.

And in a similar vein to insurtech bankruptcies, we could see stories around companies that grew very fast, but have a business model that’s too fuzzy or chaotic. In short, businesses that raised a lot of capital but without a real product market fit, using aggressive funding to hide this major design flaw.

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READ MORE: For my full breakdown on the state of insurtech business models, check out my previous column → 

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So there you have it. I’m sure that most of my ‘safe’ predictions will come true, but only time will tell for the daring ones.

No matter what happens, 2024 is set to be an exciting year.