More than just money

More than just money

Meet an investment company that helps insurtechs by providing them with the support they need to succeed in insurance

By John Deex

Insurtech pioneers may be poised to revolutionise the general insurance industry, but in most cases good ideas won’t be enough.

Start-ups need capital to survive and thrive, certainly. But they also need access to the market and established industry expertise.

That’s why specialist insurance investor Envest has unveiled a renewed focus on the insurtech sector, with the launch of joint-venture incubator Insurtech Gateway Australia.

Envest was formed in 2016, but the foundations were laid much earlier when Managing Director Greg Mullins, who hails originally from South Africa, was working at South African insurer Hollard.

He built up a “substantial private equity piece” within the insurer’s Australian operation before private investors provided him with backing he needed to set up his own company.

Envest was born, and it has gone from strength to strength. Its current 25-business portfolio includes brokers, underwriting agencies and other insurance investments.

Its first investment was an insurtech – Claim Central – and it has also backed technology-driven underwriting agency Blue Zebra and drone insurance specialist Precision Autonomy.

Each has been successful, so when Envest was approached by former Insurtech Australia chief executive Simon O’Dell about a new project, Mr Mullins was keen to get involved.

“He asked if we’d heard of the Insurtech Gateway in London,” he tells Insurance News.

“We went and met with them and the three of us then formed a joint venture to start the Gateway in Australia.

“It is a genuine insurtech incubator play. We find people with great technology, solutions or ideas. Maybe the idea is not fully formed, but we help them through that process with a very structured four to six month program.

“We put some capital into the business and behind the founders, we get it through that incubation and then if we think it is a go, we put more significant capital behind it and power it into the market.”

But as previously noted, providing the capital is just the start of the story. The Gateway gives access to the mentoring and industry connections that can be decisive factors in securing success.

“That is why I was really excited about the Gateway concept,” Mr Mullins says. “Partnerships are absolutely critical. It’s not just about the cheque any more, it’s about ‘can they help me get from A to B?’

“That only happens through partnership, not people just writing out a cheque and hoping for the best.”

Engaging with the established industry is also vital. Mr Mullins believes insurtechs can do well on their own up to a point, but may never achieve “meaningful market share”. The incumbents – as established insurance companies are designated by the insurtechs – are way too entrenched and experienced to just disappear overnight.

Mr Mullins says industry outsiders who see insurance as “easy pickings” are mistaken.

“There is a perception that this must be an industry that is behind the times, and technology could come in and change things,” he says. “What a lot of these people don’t understand is that this is an industry which has been dominated for a long time by a few players with big market share, strong balance sheets and clever people working there.

“I’m looking for technology that is actually going to enable, not disrupt. I don’t like that word disruption, and I think it is a difficult thing to do in an industry that is as established as ours.”

Mr Mullins says the traditional players are “very open” to working with the insurtech community.

“For them sometimes it’s an easier and cheaper way to get to a better solution for their customers, which is now finally where the real focus is.

“If you take a really experienced insurance executive and you partner them with an innovative young entrepreneurial technologist, you should be able to crack it.”

Mr Mullins says the Gateway will enable Envest to “make smaller bets on more things” and cast its eye over a much broader range of insurtechs.

The project aims to put two or three insurtechs through the program every year, and is in the final stages of negotiating the first two.

“[Insurtech Gateway Australia Chief Executive] Simon O’Dell is building a great team,” Mr Mullins says. “The London gateway has had nine fantastic success stories in the UK so far, and we are leveraging on that team’s experience.

“We don’t have the volume that London does, but there is a lot of good stuff being done here.”

So what should insurtechs be doing to attract the kind of support that Envest has to offer? Mr Mullins says there are some key factors that are always considered – the first of which is the people.

“Do they have the relevant experience in the areas that they say they do? Are they backable? Do you want to spend a lot of time with these people, and believe in them and help them? That’s the first tick.

“The next thing is how commercial the idea is. Do we think that there is a genuine differentiator, is it going to help solve a problem?

“And if that’s a tick then we ask, how easy is this thing going to be to distribute? What’s the revenue model? Financially, is it going to stack up for everybody? That’s the journey we go through when we are looking at these things.”

Unfortunately, this formula highlights a very real problem for insurtech start-ups. Mr Mullins says there simply aren’t enough investors doing what Envest does in supporting genuine ground-level projects.

“A lot of guys in the insurtech ecosystem talk it up; they say they invest in insurtech but actually what they invest in is ideas that are far more along in the process – ideas that have already raised some money and got some runs on the board.

“What would be very, very helpful is more people doing what we do – backing some of these ideas from the beginning.”

On the insurtech side, some businesses don’t help themselves by “over-hyping” their proposition.

“This is a big challenge,” Mr Mullins says. “You hear stories of people raising enormous amounts of money on enormous valuations for businesses that haven’t turned a dollar of revenue.

“We often see an over-inflated opinion on valuation for a business that hasn’t even entered the market yet.”

Regardless of these challenges, Mr Mullins believes the insurtech revolution will march on, and change the industry for the better.

It may, however, be a gradual process “rather than a seminal moment”.

“Insurtech will continue to have an impact, and it needs to, because this is an industry that needs to improve from a customer perspective and a lot of this stuff can happen through technology.

“Claim Central is doing a set percentage of their assessing live now, in real time with the customer, and it’s reducing the lifecycle of that claim by a third and cutting the cost to the insurer substantially.

“That is a sustainable long-term fix to a very old, established problem. And that’s what I love about insurtech.

“I’d love it to all happen faster but it will take time. And if it does take a little more time to come up with sustainable solutions, then that’s better.”

Minority support

Envest started in July 2016 after acquiring nine broker and 11 underwriting agency interests from Hollard.

Six of those have been divested in the three-and-ahalf years since, but the current portfolio has grown to 25 businesses across three pillars: general insurance brokers, underwriting agencies and insurance-related investment.

The third section includes claims, life and financial planning, premium funding and, most recently, the Insurtech Gateway.

Envest always takes a minority stake, and Mr Mullins believes this is a key differentiator.

“If you sell out a majority, it really isn’t your business any more, and we are not in the business of running these things day-to-day,” he says.

“We want to help with capital, we bring a lot of market opportunities to our businesses, we help attract the right people and then fund those people into the businesses.”

The other big differentiator, Mr Mullins says, is Envest’s dedication to start-ups.

“That could be a start-up broker, start-up agency, or start-up insurtech,” he says. “Because we are private we can take a long-term view and be a little bit more patient.

“The listed guys would struggle with that. The payback experience is sometimes long, or never.

“But we can afford to take that risk.”