NCFA Fintech Confidential December 2020 (Issue 3)

Our Luge Capital data for Canada, presented
in our Status of the Canadian InsurTech
Landscape report, shows that $1.2 billion of
venture capital has been invested in InsurTech
startups headquartered or operating in
Canada between 2011 and H12020. The
number of InsurTech startups founded in the
last few years has also picked up significantly.
INSIDER VIEW
Figure: InsurTech Startups Headquartered or Operational in Canada by Year Founded
Source: Status of the Canadian InsurTech Landscape by Luge Capital
So why is there so much buzz about InsurTech?
Why are entrepreneurs choosing to dedicate
their resources to build solutions for this industry?
Why are investors bullish on this category?
Some of the key drivers of heightened activity
in this sector are discussed below.
Massive industry
The Canadian insurance industry wrote in
excess of $187 billion in premiums through
Property & Casualty (P&C) 2 and Life & Health
(L&H) 3 in 2019 4 . Together, the P&C and L&H
insurance sectors paid out $144.5 billion in
claims or benefits to Canadians in the same
year. Globally, the industry placed more than
US$6 trillion in premium in 2019 5 . The sheer
size of the industry in itself attracts both
entrepreneurs and investors aspiring to build
massive businesses.
Legacy technology and cost-centre
mindset Many insurers still have legacy core
systems built on monolithic, on-premise
applications. This poses several challenges
including time-consuming maintenance,
lack of scalability and an inability to be fast
and nimble. Today’s customer expectations
demand rapid innovation, and this is
difficult to achieve with siloed databases
and inflexible core systems. In addition,
historically, IT spend has been viewed by
many insurance leaders as a cost-centre 6 .
The industry is being forced to completely
shift its mindset to view technology as
an avenue for faster time to market and
superior customer experience. But this is
not going to happen overnight.
Enter InsurTech startups, who take a
technology-first approach to insurance
and build their software on cloud-based
architectures, allowing them to go to market
fast and innovate quickly.
Expectations of Amazon-like experience
Entrepreneurs have identified an opportunity
to make the process of buying and keeping
insurance suitable for today’s consumers,
who now expect Google, Amazon and
Uber-like experiences. Other entrepreneurs
and investors see the opportunity to help
incumbent players such as insurers and
brokers bring their customer experiences up
to par.
2
2020 Facts of the Property and Casualty Insurance Industry in Canada .
3
Canadian Life & Health Insurance Facts 2020 Edition .
4
Including property, auto, commercial, liability, specialized, accident & sickness, life, health, annuities and segregated funds markets.
5
World Insurance Marketplace by Insurance Information Institute.
6
Insurers Face A Crisis. Now, Innovation Is No Longer Optional.
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