Name
Global FinTech Guide
Country _ Name
France
SectionTitle
InsurTech
Body
InsurTech is composed of the words “insurance” and “technology”. It is used as a collective term for the application of modern technologies in the domain of insurance services.

Digital and mobile brokers: FinTechs belonging to this category mostly act as digital insurance brokers and provide users with an overview of their insurance contracts with their respective conditions. Some FinTechs offer very short-term insurance contracts to cover specific cases which can be concluded often spontaneously via mobile devices. Oftentimes additional consulting services are offered.

Internet of things: FinTechs belonging to this category collect data by measuring for example the driving style of the customers or through wearables the customers wear to consult on, offer and/or manage the customer’s insurances.

Introduction

Attitude of the country towards InsurTech-services

In the context of the emergence of InsurTech, the competitive landscape of insurance sector has remained mostly unchanged: the main competitors of long-standing insurers are still banking-insurance businesses that benefit from the implementation of their group’s digitisation strategies. “BigTechs” have not entered the market, and insurers believe their entry to be unlikely in the short-term; InsurTech are seen as partners or niche competitors rather than as threats able to bring out major changes (ACPR, Digital transformation in the French insurance sector, n°132, April 2022).

In the short-term, InsurTech players, that is to say start-ups using new technologies to conduct insurance business, are viewed as the most likely to shake up the industry. The insurers surveyed do not credit them only with advantages, though. Traditional insurers recognise the pioneering role banking-insurance actors played in terms of customer relationship, simplicity, and agility, especially thanks to the use of artificial intelligence. They also consider banking-insurers’ management costs can be more competitive due to the conjugated effects of their specialisation and their information systems that are better suited to new digital uses without any outdated systems to maintain. However, they point out that these new players are positioned on specific parts of the value chain (mainly distribution and customer relations) and reach a highly targeted share of customers with specific products and uncomplicated risks, in a typically small number of business lines. Moreover, few of these InsurTech companies carry the risk directly, adopting the status of intermediary instead, which leads them to entering into partnerships with traditional players. 

Three scenarios for the evolution of the financial sector are envisaged by insurance bodies:

  • Continued digital transformation of traditional players with integration of innovative start-ups;
  • Development of partnerships and distribution agreements with operators that integrate insurance as a component of a more global offer to the customer (platformisation scenario);
  • Rise of industrial and technological players, notably through partnerships with traditional, well-established insurers.

Traditional insurers point out the risk of losing customer relationships and degraded quality of service due to a fast pursuit of profitability by these new entrants in the insurance market. However, they are relatively unconcerned about the regulatory and technical barriers to entry which constitute a real obstacle to the fast and massive capture of market shares by InsurTech or Big Tech companies.

Legal affairs

Obligations and requirements to provide InsurTech-services

Institutions wishing to conduct insurance or reinsurance business must be licensed. The institutions in question are
covered by the provisions of the Insurance Code, the Mutual Insurance Code and the Social Security Code as follows:

    i. Governed by the Insurance Code:
    • French insurance and reinsurance companies;
    • Branches of insurance undertakings outside the European Union.
    ii. Governed by the Mutual Insurance Code:
    • Mutual institutions (mutual insurers and unions of mutual insurers)
    iii. Governed by the Social Security Code:
    • Provident institutions

The license is delivered by the ACPR. Institutions applying for authorisation prepare an application including legal (list of insurance classes, certification of payment of funds, information about fitness and properness, expertise and experience of persons tasked with running or overseeing the institution, etc.), technical and financial components (provisional three-year programme of operations, detailed projections showing forecast sales, technical results, net profit, loss expectancy, technical provisions, coverage of regulated liabilities and solvency margin, a description of the activities in which the institution plans to engage (target customers, distribution methods etc.), a description of the reinsurance programme and a breakdown of the technical resources to be put in place to manage business). The ACPR has a total of six months to reach its decision from the date on which it receives a completed application.

Since January 1, 2016, the European Solvency 2 prudential regime has applied to the French insurance market. 

As for insurance mediation services, Directive (EU) 2016/97 of 20 January 2016 on insurance distribution has been internalised in French law. Three European regulations are directly applicable. Article L512-1 of the Insurance Code requires the registration of insurance intermediaries on a unique register that groups all kind of insurance intermediaries in accordance with article L.512-1, the ORIAS.

Registration, which is renewable each year, is subject to prior payment to ORIAS of annual registration fees set according to the category of intermediary, up to a maximum of € 250. There are four categories of insurance intermediaries (article R.511-2 of the Insurance Code):

  • Insurance or reinsurance brokers
  • General insurance agents
  • Insurance agents
  • Agents of intermediaries

Insurance brokers and their agents have to join a professional association approved by the ACPR.

These four categories are not exclusive. The same intermediary may practice under several of them.

The ACPR have supervisory powers over insurance intermediaries. Insurance brokers and brokerage firms are required to pay an annual contribution to cover the costs of supervision (article L.612-20 of the CMF). The amount of this contribution, paid for their activity on April 1 of each year, is currently € 150.

Intermediaries are subject to obligations of good repute and professional capacity, and to civil liability coverage.

Additional comments regarding the legal situation for InsurTech-services or what InsurTech’s must be aware of in this business area

N/A.

Economic conditions

Market size for InsurTech-services and biggest companies in this business area

As regards the insurance sector in general, the net income of insurers appears to be decreasing in 2020, falling from € 12.9 billion in 2019 to € 9.7 billion in 2020 (i.e. a drop of 25%). The crisis has thus affected the profitability of the insurance sector, which is reflected in a decline in return on equity (5.0% in 2020 versus 6.8% in 2019). The French insurance market remains the largest in the E
U in terms of both size and volume of premiums collected, with assets of € 3,099 billion. 

At the end of 2020, the consequences of the low interest rate environment and the crisis on the French life insurance market resulted in a decline in its position at the European level: it now ranks third in terms of premiums collected in this segment.

In terms of premiums collected in this business segment, in non-life insurance, the crisis had little impact on the volume of premiums collected by French insurers. In direct business, with € 108 billion in premiums collected in 2020, France remains the leading European market in this segment. When reinsurance is included, the French market ranks second. 

As of December 31, 2020, the French insurance sector comprised 683 insurance brokers or exempted from approval, compared to 695 in 2019 and 1,129 in 2010. Among these 683 organisations, the sector is divided into (ACPR, French banking and insurance market figures for 2020):

  • 281 insurance companies governed by the Insurance Code, including 7 supplementary occupational pension organisations -ORPS- (2 more than at the end of 2019), as well as end 2019), as well as 12 reinsurers and 4 branches from third countries;
  • 369 mutual insurers (including 87 substituted mutual insurers) governed by Book II of the Mutual Insurance Code;
  • 33 provident institutions governed by the Social Security Code.
     
Regarding FinTechs in particular, the number of insurance Start-ups increased from 203 to 224 in France between January 2020 and January 2021 (KleinBlue, Insurtech and innovation, March 2021). The amount of funds raised by French InsurTechs more than tripled between 2020 and 2021: from € 183 million to (at least) € 627 million for 2021, based on 24 transactions involving 23 InsurTechs. Of the approximately € 2.3 billion raised by French FinTechs in 2021, 29% is related to insurance, compared to 27% for operational financial services (France FinTech).

Additional comments regarding the economic situation for InsurTech-services or what InsurTech’s must be aware of in this business area

 N/A.

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