Sparking Innovation

Latin America just saw its first insurtech unicorn, Chile’s Betterfly. What makes the region attractive for investment?

Like any emerging market, there is attractiveness in the quality of development vis-à-vis more developed markets but at a much lower price point. So more recently, you see that we can develop platforms like Betterfly or others that are not that well known just yet. We say “recently,” but we’ve been doing it for a couple of decades now. That’s one angle.

The other angle is, again like many emerging markets, we have a lot more propensity to be innovative by virtue of our volatile economic circumstances. People need to be innovative to solve certain problems that we have. The good news about the Betterflys of this world is that, once someone breaks the glass ceiling, there’s a lot more attention for the people who come behind, and that’s what we’re benefitting from in the last year or so.

Tell us about the insurtech innovation occurring today in Latin America.

We have north of 300 insurtechs already mapped out from almost every country in Latin America. By virtue of the fact that we are emerging economies, many insurtech solutions hover around trying to get more people insured, to try to reach more people through different means other than the traditional distribution channels. We are in a very good stage to reach a tipping point. Led by the big names like Betterfly, and others following, we are likely to get more capital relative to other regions in the world, more commercial development, also internationalizing some of the value propositions, because the region has the benefit of two very large markets in Brazil and Mexico. The state of insurtech in Latin America is one where we have developed quite nicely; we are getting more capital, and I think we’re getting to a state where it’s about to hit an important scale-up in opportunities.

How is the LATAM Insurtech Accelerator planning to boost innovation?

Over the last five years, we have been growing the ecosystem by basically promoting it through the more traditional VCs [venture capital enterprises] in the region, those that invest in more general startups than insurance. Having that learning curve has led to many of the early insurtechs being rejected by the capital providers. The LATAM Insurtech Accelerator is creating the first insurance industry focused accelerator regionally. It’s bringing all actors of the ecosystem to have visibility on the accelerator, not only insurance carriers and brokers, but also third-party administrators, lawyers and anybody who plays a role within the insurance value chain. In doing so, we believe that the insurtechs that participate in the LATAM Insurtech Accelerator will get far greater visibility than ever before. And they will have a natural platform by being alumni of the accelerator to grow organically within [Latin America] and even outside of [Latin America]. Because we are connected to BrokerTech Ventures, which is based in the U.S., and Broker Tech Ventures is linked to the Israeli Insurtech Accelerator, there will be some cross-pollination thanks to the network effect.

How does your collaboration with BTV support those plans?

Number one, BrokerTech Ventures has two years of experience under their belt, so they know how to run an insurance-specific accelerator. We benefit a great deal from those lessons learned, and that allows us to go faster than if we were doing it on our own. The other thing they bring is a network effect that would take us years to replicate. Just the fact that we have people from BrokerTech Ventures having visibility into our accelerator and that being communicated to Israel and through all of the associated companies to BrokerTech Ventures creates an exponential effect for us.

Last but not least, with BrokerTech Ventures as a foundational partner, we will benefit from having today an Israeli presence, a [Latin American] presence, and hopefully a European presence—and why not an Asian presence in a couple of years? That would be a network for insurtech development unlike any other in the world.

What have you gained from working with BTV?

One is it’s a lot simpler than we many times try to make it. Simplicity is a key in how we run the accelerator. Two, it doesn’t require troops of people. It really can be quite an agile and resource-light management process. You just need to have the right talent and the right experience within the team to do so. The third is, you should maximize the ability to reach people through the network that they have. Anything that we may need, if we ask BTV, chances are that they may know someone already who has actually gone through it or done something that can help you. That not only simplifies but accelerates the speed of resolution quite dramatically.

Life, health and distribution seem to be big focuses in Latin America. What kind of startups are you considering?

All of the above? We are not creating any barriers to the type of insurtechs that come in. What we are doing is making sure that these are proper companies, that already are, at least initially, funded, whether it’s friends and family or actual seed funding; that they do have a product that is already operational with a B2B customer that is using the product. Our role in accelerating them would be either to help them polish their value proposition and their approach to market so that we can help them grow within their market or internationally within the region.

We are also looking for different types of value propositions. Latin America, for example, hasn’t been quite famous for having insurtechs catering to specific needs of say, women. We would love to have one of those. More than 40% of our insurtechs in the region are focused on distribution solutions. We want to have some distribution solutions, but we also want to have more things along the lines of claims and servicing, more along the lines of [artificial] intelligence and, for example, fraud management and things of that nature.

Are there specific problems you’re targeting across the region and in specific countries?

We are convinced of the fact that the more people who are insured, the better our economies are going to be. You can correlate the penetration of insurance vis-à-vis GDP, and the higher that ratio is, it correlates with more developed economies. We want to do that. We want to have more people insured to improve our economies.

Number two, we need to simplify how insurance gets distributed. That requires a lot of digitization and collaboration with the channels that can reach the most people which are certainly not the insurance companies. It’s more like banks, it’s more retailers, it’s more different types of entities. It’s probably less about property and casualty and more about health and life, but it is the combination of all those things in the right mix that is going to allow us to get more people and a greater insurance base.

The last bit that’s important in all of this is to make sure we have all the right control mechanisms to make sure insurance is something that truly protects people. There’s nothing worse than for us to get people into the banking system only then to be susceptible to cyber attacks and loss of wealth because of that.

It’s a diverse region with very different regulatory regimes. What challenges does that pose?

You’d be surprised to know that a lot of the main Latin American economies are looking at this insurtech world as an opportunity for them to lead the way in the testing environment of new solutions and new coverages and all that. For example, the regulator in Brazil created a sandbox environment for insurtechs to operate under; the same in Mexico. I’m an advisor in a company in Mexico that does telematic auto insurance, and they operate under the fintech law that includes insurtechs. They can sell direct to consumers. Regulators who might not be doing things yet are looking at the others and seeing what they are learning and adjusting themselves.

What impact does the United States have on the Latin American insurtech scene?

For Latin America, the U.S. has always been a reference for what’s happening here and what’s being done. I think the fact that there have been a lot of learnings as of late as to what are the models that are working—why are they working—and the ones that are not working, why are they not. Also looking at how we showcase what we can do in Latin America without necessarily always having to come to the U.S. to look for that visibility but trying to get the U.S. to come to Latin America and see us on our own turf. That is an important thing, and it’s part of what BrokerTech Ventures brings to the table.