Insurtech Market in France : Challenges and Opportunities

Our newsletter aims to offer valuable insights, news, and analysis tailored to private market investors, enabling them to comprehend trends within the Financial Institutions Group (FIG) and optimize their investment strategies accordingly.

The Juice - FIG’s Key insights

Insurance

• Solvency II could unlock billions in capital, according to Insurance Europe In a publication on July 25, Insurance Europe once again addressed the EU regarding the revision of Solvency II. The European federation highlighted various positions, including one aimed at reducing the risk margin for insurers.
• Life Insurance: The Best Semi-Annual Net Inflows Since 2010 Figures published by France Assureurs show that net inflows "remained high for the sixth consecutive month." In June, net inflows remained positive at €2.8 billion, but euro-denominated funds are still slightly in the red.
• Massive IT Outage: Limited Impact on Insurers, According to Fitch Ratings Insured losses related to the global outage affecting millions of Microsoft computers will primarily stem from claims and litigation.

Wealth Management

• The AMF Tightens Oversight of Sustainable Finance The Autorité des marchés financiers (AMF) has made strengthening its actions in favor of more sustainable finance a priority in its 2023-2024 supervision plan, focusing both on financial products and their marketing.
• Benefiting from the slowdown in institutional fundraising and new regulations, wealth management firms, private banks, and multi-family offices are structuring their offerings in private assets—some even going so far as to include around forty funds—with a particular focus on private debt, secondary markets, and buyouts.
• CG Patrimoine acquires a Paris-based wealth management firm.
• Crystal announces the acquisition of three wealth management firms for its Laplace private management division.
• Olifan Group acquires the firm Verney Conseil.
• 64.37% of stock market predictions for 2024 from top TikTok videos turned out to be accurate, according to a study on Gen Z investment trends conducted by BestBrokers.

Payment and Lending

• London-based fintech giant Revolut finally secured a UK banking license — more than three years after making its application.

Wholesale Banking

• Banks Revise Their Forecasts After Joe Biden's Withdrawal Joe Biden's withdrawal from the U.S. presidential election reduces the chances of a complete Republican victory, making the previously popular "Trump trades" much less certain.

Private Equity

• Ardian is close to finalizing the raise of its $20 billion mega secondary fund Sovereign wealth funds and pension funds from around the world have responded to the call of the Vendôme-based firm, which has already raised $18 billion.
• SaaS Growth Stagnates in H1 2024 According to ChartMogul, Growth in the SaaS sector remains sluggish through the first half of 2024, continuing the trend from 2023

Video of the week

Video on Insurtech

Christopher Frankland is an award-winning influencer in the InsurTech space, and the Global Head of Product & Innovation at Cover Desk. He has been serving in this role since April 2021. With a rich background in the InsurTech industry, Christopher has founded InsurTech360. His expertise extends to mentoring roles in various organizations, including Lloyd’s Lab, Hartford InsurTech Hub, gener8tor, and the Global Insurance Accelerator. Cover Desk, under his leadership, aims to lead global innovation efforts, including new product and service development, and identifying new market opportunities. This aligns with cultivating a culture of innovation across Cover Desk and the insurance industry.

Q2-24 PE's deals  in Europe

In Q2, PE dealmaking picked up in value, increasing 27.3%sequentially and bouncing back from what was one of the worst quarters in recent years for European PE. Monetary easing has gained momentum in Europe with the ECB finally pulling the trigger on a rate cut in June, decreasing interest rates by 25 basis points to 3.75%. A

Figures of the week

Cleantech, as part of the wider energy sector, is pacing for a record year in Europe after numerous large deals closed in H1. Following a strong Q2, cleantech and climatetech PE deal value aggregated €15.4 billion in the first half of 2024 overall, already making it the third-best year for the vertical. This included three out of the top 10 deals in Q2. French renewable company Neoen announced plans to be taken private by Brookfield Asset Management in a proposed €3.5 billion public-to-private deal.

Insurtech Market in France Review: Challenges and Opportunities

The French insurtech market is rapidly evolving, presenting a dynamic landscape ripe for investment. With a growing market size driven by digital transformation and technological advancements, key players like Alan, Shift Technology, and Lukoare leading the charge. The market is characterized by innovative solutions such as telematics, AI-driven fraud detection, and digital health platforms. Regulatory support from bodies like the ACPR and the introduction of initiatives like regulatory sandboxes have further facilitated the growth of this sector. While there have been notable successes, such as Alan's unicorn status, there are also cautionary tales like Luko, which faced significant challenges. This makes the French insurtech market a compelling opportunity for private equity investment, offering both high growth potential and the need for strategic risk management.

Current Market Size and Investments in the French Insurtech Industry

Market Size

French insurtech market is part of the broader European insurtech sector, which has been growing at a rapid pace. The European insurtech market is projected to register a compound annual growth rate (CAGR) of over 15% during the forecast period of 2024-2029.

Mapping of Insurtech key players in France

Investment Amount

In recent years, the Frenchinsurtech sector has seen significant investment activities. This funding helped accelerate its growth in France and other European markets. Overall, the insurtech investments in Europe, including France, have been substantial, with various startups raising millions to fuel their growth and technological advancements.

Number of Deals

The French insurtech market has been vibrant with numerous deals and funding rounds. Notable investments included:

• Luko: €50 million
• GetSafe: USD 93 million in Series B funding
• Wefox: USD 650 million, leading to a USD 3 billion valuation

According to the InsurTech Radar2021, France had over 131 active insurtech companies, indicating a diverse and dynamic market with numerous opportunities for investment and growth.

The French insurtech market is expanding rapidly, supported by significant investments and a growing number of innovative startups. The sector's attractiveness for private equity investors is bolstered by its robust market size, impressive investment figures, and numerous successful funding rounds. With continuous technological advancements and a supportive regulatory environment, the French insurtech industry offers investment opportunities.

The chart includes two lines representing the average revenue multiples for insurtech (9.7x) and SaaS (8.1x) companies.

Market Segmentation of Insurtech in France

Understanding the different segments within the French insurtech market can help identify growth opportunities and key players. Here are the primary segments and companies within each:

Growth Segments

• Health Insurance: Driven by increasing demand for personalized and transparent health coverage.
• Property Insurance: Propelled by innovations in IoT and smart home technologies.
• Auto Insurance: Growth due to advancements in telematics and usage-based models.

Key Insights

The health insurance segment, led by companies like Alan, is growing rapidly due to the increasing need for personalized and efficient health services.

Property insurance, with innovators like Luko, is expanding as consumers adopt smart home technologies for better risk management.

Auto insurance is evolving with companies like DriveQuant using telematics to provide more accurate and fair premiums based on actual driving behavior.

Key Technological Innovations Brought by Insurtech in France

1. Artificial Intelligence (AI) and Machine Learning (ML)
2. Blockchain Technology
3. Telematics and Usage-Based Insurance (UBI)
4. Digital Claims Management
5. Data Analytics and Big Data
6. Internet of Things (IoT)
7. Digital Distribution Platforms

The French insurtech sector is at the forefront of technological innovation, leveraging advancements in AI, blockchain, telematics, digital claims management, data analytics, IoT, and digital distribution to transform the insurance industry. Companies likeZelros, Stratumn, DriveQuant, Shift Technology, Alan, Luko, and Lovys are leading these innovations, offering enhanced services, personalized insurance products, and improved operational efficiencies. These technological advancements not only improve the customer experience but also provide significant opportunities for growth and investment in the insurtech sector.

Success Stories and Case Studies in the French Insurtech Market

Successful Exits

1.    Alan

Growth Trajectory: Alan started with a focus on providing a simple, digital health insurance solution. It quickly gained traction due to its transparent and customer-centric approach. The company's growth was fueled by continuous innovation and expansion into new markets.

Challenges: Alan faced regulatory challenges and the need to build trust in a traditionally conservative industry. However, its commitment to transparency and customer service helped overcome these barriers.

Success Factors: Alan's success factors include its digital-first approach, strong customer engagement, and ability to adapt to regulatory changes.

Success:Alan, founded in 2016, has grown significantly and raised over €125million in funding by 2020. The company is valued at over €1 billion, making it a French unicorn in the health insurance space.

Reasons for Success: Alan's success can be attributed to its user-friendly digital platform, transparent pricing, and focus on customer experience. It has also benefitted from the increasing demand for digital health solutions.

2.    Shift Technology

Growth Trajectory: Shift Technology rapidly expanded by providing a clear value proposition to insurers – reducing fraud through AI. The company's technology was well-received, leading to quick adoption and significant growth.

Challenges: Shift faced challenges in integrating its technology with existing insurance systems and proving the accuracy of its AI models. Continuous improvement and successful pilot projects helped mitigate these issues.

Success Factors: Key success factors include a strong focus on innovation, effective partnerships with insurers, and a scalable business model.

Success: Shift Technology, which specializes in AI-driven fraud detection for insurance companies, has raised over $100 million in multiple funding rounds. The company has expanded its operations globally and secured major insurance clients.

Reasons for Success: Shift Technology's success stems from its innovative use of AI to solve a significant pain point in the insurance industry – fraud detection. Its technology provides substantial cost savings and efficiency improvements for insurers.

3.    Luko

Growth Trajectory: Luko aimed to revolutionize property insurance with smart home technology. The company initially gained attention and funding due to its innovative approach. Challenges:Luko encountered challenges such as high operational costs, regulatory compliance issues, and difficulties in achieving sustainable growth.

Lessons Learned: Luko's experience highlights the importance of understanding regulatory environments, managing operational costs, and the complexities of scaling innovative technologies in traditional industries.

Failure:Despite raising over €50 million and being one of the promising insurtech startups in France, Luko faced significant challenges.

Reasons for Failure: Luko's issues included regulatory hurdles, intense competition, and difficulties in scaling their IoT-based property insurance model. Additionally, the company struggled with high operational costs and the complexities of the insurance market.

Emerging Trends in the French Insurtech Market

1.    Telematics in Auto Insurance

Trend Description: Telematics involves using GPS and onboard diagnostics to monitor driving behavior and vehicle usage. This data is used to tailor insurance premiums based on actual driving habits, promoting safer driving and fairer pricing.

Key Player: DriveQuant: This company provides telematics solutions to insurers, enabling them to offer usage-based insurance (UBI) products. DriveQuant’s technology assesses driving behavior to personalize insurance coverage.

2.    Usage-Based Insurance (UBI)Models

Trend Description: UBI models calculate premiums based on the policyholder's usage patterns. This is particularly popular in auto insurance, where premiums are adjusted based on how often and how well the policyholder drives.

Key Player: YouDrive: By integrating telematics, YouDrive offers insurance policies where premiums are directly linked to the insured's driving behavior, promoting safe driving and offering potential cost savings for low-risk drivers.

3.    Digital Health InsurancePlatforms

Trend Description: Digital platforms in health insurance streamline the customer experience by offering online enrollment, claims processing, and telemedicine services. These platforms often leverage big data and AI to provide personalized health plans and proactive health management.

Key Player: Alan: A pioneer in digital health insurance, Alan offers a seamless online experience for policyholders, including easy claims submission and access to telehealth services. Alan uses data analytics to tailor health plans to individual needs.

Future Projections for the French Insurtech Market

1.    Market Growth and Expansion

Projection:The French insurtech market is expected to grow significantly, driven by technological advancements and increasing consumer demand for digital insurance solutions. The market is projected to maintain a strong CAGR, reflecting robust investor interest and continuous innovation.

Industry Reports: According to reports by Mordor Intelligence and Oliver Wyman, the European insurtech market, including France, is forecasted to grow at a CAGR of over 15% from 2024 to 2029.

2.    Adoption of AI and Big Data

Projection:The use of AI and big data will become more prevalent, enhancing risk assessment, fraud detection, and personalized customer experiences.Insurtech companies will increasingly leverage these technologies to improve efficiency and customer satisfaction.

Industry Insights: AI-driven solutions are expected to revolutionize various aspects of the insurance industry, from underwriting to claims processing. Companies like Shift Technology are leading this transformation by providing AI-based fraud detection systems.

3.    Regulatory Support and Innovation

Projection:Continued regulatory support will facilitate innovation and market entry for new insurtech companies. Regulatory sandboxes and supportive policies are expected to drive further growth and diversification of insurtech offerings.

Regulatory Trends: The French government’s commitment to digital transformation and supportive frameworks, such as the Pacte Law, will continue to foster a conducive environment for insurtech startups.

The French insurtech market is poised for significant growth, underpinned by emerging trends such as telematics in auto insurance, usage-based insurance models, and digital health insurance platform. Future projections indicate robust market expansion, increased adoption of AI and big data, and ongoing regulatory support, all of which highlight the substantial potential for innovation and investment in this sector. As key players like DriveQuant, Alan, and Shift Technology continue to push the boundaries of what’s possible, the French insurtech market remains an exciting space to watch.

In conclusion, the French insurtech market represents a significant opportunity for private equity investors, driven by robust market dynamics, innovative technologies, and a supportive regulatory environment. The success of companies like Alan and Shift Technology highlight the market potential, while the challenges faced by Luko underscore the importance of strategic execution and regulatory navigation. As the market continues to evolve, with trends like telematics and AI reshaping the insurance landscape,investors can leverage these developments to achieve substantial returns. By carefully selecting investment targets based on criteria such as innovation, scalability, and regulatory compliance, private equity firms can position themselves at the forefront of this exciting industry.

24 French Insurtech to follow