Name
Global FinTech Guide
Country _ Name
Germany
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 customer wearables to consult on, offer and/or manage the customer’s insurances.

Introduction 

Attitude of the country towards InsurTech-services

InsurTechs are getting more and more popular in Germany. Overall, the political and social climate is positive.

However, there are reservations in the public that German insurance companies are hesitant about innovations. As a result, they are increasingly at risk of missing the boat on new InsurTech trends. It is generally acknowledged in the industry that insurance start-ups offer great opportunities. Nevertheless, very few companies have yet initiated processes and measures to implement new digital products and services on the insurance market. They also expect traditional intermediaries to be among the losers in the InsurTech innovation wave and hope to generate their business through other sales channels in the future. 

Nevertheless, the number of InsurTechs has risen in recent years to 160 in Germany. Cooperative InsurTechs form the broad mass of the scene: Almost 85% of InsurTechs rely on cooperations with insurance companies and brokers and would like to work together with established players as digitisation or sales partners. Overall, most InsurTechs are still in the early stages of development; only 3% have reached the maturity phase and have been able to assert themselves as a stabilised, established and profitable member of the German insurance landscape.

It is therefore fair to say that the climate in Germany is definitely turned towards InsurTechs or is becoming increasingly open to them.

Legal affairs

Obligations and requirements to provide InsurTech-services

The insurance business is regulated in the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG) and the German Industrial Code (Gewerbeordnung – GewO). Furthermore, data protection and money laundering regulations also have to be complied with.

InsurTechs are subject to insurance supervision if they conduct insurance business. Conducting insurance business as a provider domiciled in Germany requires a license from the competent German supervisory authority, which usually is the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). Insurance intermediaries or insurance consultancy services require a license not under VAG but rather under GewO. Such licnese is usually issued by their local chamber of industry and commerce (Industrie- und Handelskammer – IHK).

A license for conducting insurance business costs EUR 32.259,00. A license to operate as an insurance intermediary or consultant and to get registered are approx. EUR 300.

The insurance business authorisations may only be granted to public limited companies (Aktiengesellschaften), mutual societies (Versicherungsvereine auf Gegenseitigkeit), public corporate bodies and institutions under public law. The requirements for an authorisation c
an differ depending on the line of business being pursued. Furthermore, certain insurance classes cannot be bundled together and offered by an undertaking. A sufficient documentation has to be submitted as part of an application for authorisation to conduct insurance business, which includes a business plan. Furthermore, the company requires a sufficient business organisation, the persons who effectively run the undertaking or perform key tasks have to be sufficiently qualified and the company must have sufficient financial resources. Additionally, the provisions on non-insurance business must also be observed in the application process.

Insurance intermediaries and insurance consultants require a clearance certificate, an extract from the central business register, a certificate in tax related matters from the tax authority, an extract of the record of debtors and of the insolvency register, a professional liability insurance and proof of expertise.

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

The German InsurTech sector seems to lack somewhat behind the FinTech sector. However, this prejudice could be misleading. The InsurTech sector grew from 2018 to 2020 by 42%. It is also worth mentioning that of the seven (7) German FinTech unicorns, one (1) of them is an InsurTech (wefox). Currently, approx. 70 InsurTech companies exist in Germany.

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

While the actual provision of insurances still remains with established insurance companies holding a respective licence, offering complementary insurance services to financial services seems a growing industry in Germany. Banking or trading apps offer insurance products such as travel, title or smaller health insurances that can be activated right through the app. Also, the list of offered insurance products gets longer, for example e-commerce insurances. Approx. 85% of InsurTechs cooperate with insurers and insurance brokers. Other than actual insurance products, the insurance broker market is deemed established in Germany.

A key driver in the InsurTech sector is expected to be data analysing capacities and the utilisation of big data to predict risks ever more accurately. The availability of precise data also impacts established insurance products such as car insurances.

It is likely to expect an open insurance initiative, followed by the open banking endeavours that gave a significant (and also disruptive) push to banking services. At present, discussions are led by small- and mid-size initiatives such as Free Insurance Data Initiative (FRIDA) or Open Insurance. Initiatives of the established insurance associations or even the legislator might follow.

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