The insurtech ecosystem in Israel: “Our aim is to lead the change”
Israel is home to a very fast-growing insurtech ecosystem and to the world’s leading insurtech companies. Munich Re’s Tech Scouting Team for Israel, based in Tel Aviv, builds bridges between Munich Re and the Israeli insurtech scene. Its objective: Developing strong relationships and creating successful and effective collaborations. Topics spoke with Dikla Wagner, Head of Tech Scouting for Munich Re in Israel.
You’re the Munich Re expert on the Israeli insurtech scene. What’s your task?
Dikla Wagner: First of all, tech scouting means seeking out new technologies that can immediately be used by Munich Re, its subsidiaries and its clients. But it includes even more: We are keen on knowing how to build new business models and revenue streams for ourselves and for our clients. In addition, Munich Re leads venture building to meet future challenges and shape emerging industries.
Scouting is here to support business building in insurance and beyond. Our asset is our deep understanding of the insurance world and of the start-up scene – but also of complex technologies. That leads us beyond insurance or, better to say, pushes the boundaries of insurance because we identify innovations that will change or expand our industry, for example AI or cyber. We couldn’t have imagined the current tech shift in the insurance industry even just a few years ago. Now it is reality. Our aim is not only to support, but to lead that change.
What does the current Israeli insurtech ecosystem and its investment situation look like?
Dikla Wagner: The insurtech ecosystem in Israel is growing very fast. Currently we have around 100 active companies in this field. Israel is home to the world’s leading insurtech companies and has seen mega-investment rounds.
According to Munich Re data, Israeli insurtech raised over US$ 1.3bn in 2020. Let me mention some of the most impressive investments: Lemonade, which digitally provides insurance for homeowners, renters and pet health, completed its initial public offering last year. It raised US$ 319m at a market capitalisation of approximately US$ 1.6bn. Next insurance, a commercial insurer for SMEs in the US, successfully went through two US$ 250m investment rounds, one of them led by Munich Re. And: the P&C homeowners insurer Hippo raised US$ 350m led by Mitsui Sumitomo, which also provided the reinsurance treaty.
But the big wins in 2020 are the early-stage investments and smaller investment rounds. They really reflect that the market believes in Israeli insurtech and its growth.
I’m convinced that the Israeli insurtech scene will further enlarge thanks to the talent, hunger and drive of Israeli entrepreneurs. And the start-ups will become more and more sophisticated with their solutions by leveraging tech capabilities and advantages in their business use cases.
Where do you see the greatest potential for growth in insurtech?
Dikla Wagner: I’m sure that the greatest potential lies in the area of technologies for risk reduction. We are identifying additional companies in the Israeli market that can develop solutions for risk mitigation and reduction. Those companies have not addressed insurance companies yet, but their technology is highly attractive to us. We believe it is only a matter of time before these companies join the insurance sector and develop offerings for carriers.
By the way, this is a large part of our role here in Israel: to expose start-ups and players to opportunities and to develop new use cases with them.
This leads us to the next point: In innovation partnership is crucial. What does that mean for Munich Re?
Dikla Wagner: In the field of innovation, collaboration and partnership plays an indispensable role. In insurtech, having an eye on the whole ecosystem is important to move forward. Collaboration means working together with start-ups because of their dynamic and fast cutting-edge tech, but also with other giants, and being on the move in several strategic fields. My experience in innovation is that 1 + 1 = 3. The power of combining two different sets of expertise outweighs the value of both. Partnership also means developing more than a core product – it means evolving the ecosystem around the core proposition.
In Israel, Munich Re acts as an initiator and leader of a series of innovation projects, mostly because we have a deep understanding of market and client needs. Our ambition is to think five years ahead and not only of the present. In one sentence: We believe in the power of innovation – for the short and the long term.
Regarding current trends: Which have the greatest relevance for insurance?
Dikla Wagner: The speed of digitisation and the new variety of distribution channels. We are facing an incomprehensible change in the buying behaviour of customers, because even people who have previously been unfamiliar with digital tools now make use of them. For insurance, that means we have to adjust and accelerate digital-product development and building. And carriers as well as brokers need to rethink their distribution strategy, because they can no longer rely on one or a few distribution channels. They have to adapt them to the various players along the value chain. It is a cross-industrial impact.
Overall and especially against the background of our experiences with the pandemic, my recommendations for the insurance business are: Be innovative and stay updated on different technology trends and the latest developments in the market. The whole insurance industry has to prepare for the future by seeking out new solutions. Munich Re is highly committed to finding ways of becoming more resilient. And be sure: The Tech Scouting Team in Israel does all it can to contribute to this.
Finally, your assessment: How will the Israeli insurtech landscape develop during 2021?
Dikla Wagner: Global insurtech started this year with an all-time high and the Israeli insurtech scene plays a significant role in this development with over 15 deals at the beginning of 2021 alone.
Our groundbreaking insurtech unicorns give inspiration to many other Israeli entrepreneurs and there is available capital in the market, which makes investors feel more comfortable to invest and explore use cases in the field of insurtech. This dynamic drives the ecosystem and supports it. So we are really optimistic.