How are Israeli start-ups leading the way in InsurTech innovation?

Israel is one of the largest tech hubs in the world and a major hotspot that favors the adoption and development of disruptive industries. InsurTech is one of the best examples of how Israel’s innovation ecosystem has helped tech-savvy entrepreneurs bring to life groundbreaking concepts that improve people’s lives.

A combination of insurance and technology, InsurTech employs the latest tech innovations to improve insurance services radically, boost customer savings, provide customized policies and better analyze customer risks.

The field has reported rapid growth all over the world, with the United States holding the top spot in terms of annual revenue. However, Israel is quickly catching up. A recent report published by Israeli NGO Start-Up Nation Central reveals that the number of InsurTech companies in Israel has grown by 50% compared to 2015. There are now 480 active InsurTech startups based here and many of them attract investments from major multinationals.

This data is backed up by CN Insights, who also revealed that in the top 15 most funded InsurTech companies, five are either based in Israel or have an Israeli founder.

A paradigm shift: the customer-centric approach

Insurance is hardly the field to associate with excitement. For decades, the industry has been synonymous with excess bureaucracy, long waiting times and a lack of customer focus. Customers often had to choose from the same standardized policies that didn’t always match their lifestyles or needs. The dissatisfaction accentuated among the millennial generation, who seeks less paperwork and more relevance in every service they acquire. Wasting weeks discussing with insurance agents is a problem that InsurTech start-ups managed to solve by using the power of Big Data to deliver faster, relevant and customer-focused solutions.

Yael Wissner-Levy from Lemonade, a start-up looking to rewrite insurance policies, explains that InsurTech companies made a fundamental change in the way customers interact with insurance products. If in the past the focus was never placed on the customer, now the customer is at the center of every InsurTech business model. The customer is no longer forced to choose a pre-made policy; in fact, the trend is for companies to develop policies around the customer, based on accurate data and algorithms. In the future, finding the best policy will not cost more than a few clicks, and traditional insurance companies will have to align with this trend, otherwise they’ll risk lagging behind.

Notable start-ups driving growth

The Tel Aviv Stock Exchange Pension and Insurance Hackathon is always a great place to get the pulse of the InsurTech industry and the 2017 edition stood out through some innovative ideas. The winner, HiBob, developed an end-to-end solution that empowers employees by delivering personalized data about their pension and benefit plans, along with automated smartphone alerts that encourage savings.

The second place was occupied by Scanovate, a start-up that developed an authentication tool for verifying the user’s digital identity from their insurance identity card.

Third came, Polywizz, built a platform that leverages the power of Big Data to collect and analyze users’ insurance plans, thus helping them make informed decisions about their financial future.

Apart from these Hackathon winners, the Israel InsurTech sector also features several other promising start-ups that disrupt the insurance industry.

Bambi Dynamic, for instance, allows drivers to turn their auto insurance on and off, depending on whether or not they need it, a feature that was greatly appreciated by ridesharing and car rental users. Others, like At-Bay, tap into Israel’s cybersecurity expertise to develop dedicated tools that offer cyber insurance policies for businesses.

Global insurers are partnering with Israel

The growing influence of Israel’s InsurTech sector is not only felt at a local level, but it’s also beginning to cross borders. Major life insurance companies in the USA are looking at the growth opportunities in Israel and establish strategic partnerships with local InsurTech start-ups. In addition to life insurance companies, some of the world’s biggest financial service firms (including Visa, Mastercard, Citi, Barclays, and JP Morgan) have opened offices in Israel, acquired Israeli FinTech startups or incorporated the services they developed. Another example is Eos Venture Partners, a strategic venture capital fund, which entered the Israeli market to establish partnerships with InsurTech innovators.

There is a growing interest in Israel’s InsurTech and FinTech sectors, which are now 75% funded by foreign venture capital-backed investments, compared to 60% in 2016. Of the foreign companies that invest, 38% are multinationals. The Start-Up Nation Central report also explains that the first half of 2018 gave a record number of investments to Israel start-ups. The 45 deals raised more than $400 million, proving that foreign investors are ready to capitalize on Israel’s InsurTech innovations.

The skyrocketing evolution of the Israeli InsurTech sector is supported by 5 pillars: advanced big data capabilities, small market size, receptivity for early adoption, cybersecurity expertise and a strong blockchain community.