“Resistance to change and lack of innovation are the challenges of insurtech in Latin America”

According to McKinsey, the insurance sector in Latin America is “a fertile ground for accelerated growth and innovations in business models.” Additionally, the consultancy states that it is the fastest-growing region globally in the insurance sector.

This opportunity for growth and innovation is being seized by insurtechs. Latin America currently has 477 insurtechs, according to the Digital Insurance LATAM report, representing a 2% growth compared to the previous year. With agile solutions focused on the user, startups and scaleups like the Argentine 123Seguro are helping to reduce the insurance penetration gap in Latin America, transforming the way insurance services are offered and managed to improve accessibility, efficiency, and customer experience. Its CEO, Martin Ferrari, recounts to BBVA Spark the trajectory of this insurtech.

How did the business idea of 123Seguro originate and what were the company’s first steps?

The business idea of 123Seguro emerged after several years of observing the development of the insurance market outside Argentina and Latin America, especially in Europe and the United Kingdom, where innovative models were making an impact. Together with my brother, who is the co-founder, we began to analyze and discuss how this market was evolving. We decided to take the plunge in late 2010, also influenced by the fact that my brother was living in London, where digital insurance was a daily reality. This led us to understand the trends and adapt them to the Latin American market. Once we saw success in Europe, we launched.

What are the main challenges facing the insurtech sector in Latin America in general and in Argentina in particular?

The challenges focus on resistance to change and lack of innovation in a traditionally conservative industry. Over the years, the sale of policies has followed a similar approach to that used centuries ago, making it difficult to adopt new technologies and disruptive business models.

Another significant challenge is the need to educate the population about the importance of insurance and its role in financial protection. Many people are unaware of the available products, perceive insurance as expensive, or simply do not understand the insurance acquisition process.

Furthermore, the insurance industry is subject to strict regulation, which can hinder the introduction of new business models and technologies. Despite these challenges, the pandemic has demonstrated the potential of insurtech to transform the industry and improve the customer experience. However, there is still work to be done to overcome cultural and regulatory barriers and allow insurtechs to flourish in Latin America and Argentina.

The insurtech sector is one of the great opportunities in Latin America and contributes to reducing the insurance penetration gap in the region compared to the rest of the world. How does insurtech innovation help empower the sector in Latin America?

In the region, insurance penetration in terms of GDP ranges between 2.5% and 3%, which is considerably low compared to other regions of the world. Insurtech innovation is essential for closing this protection gap in Latin America. There are several challenges that limit access to insurance, such as unawareness of available products, the perception that insurance is expensive, and the lack of attention to specific population segments, such as small businesses.

Insurtechs are transforming the industry by offering new products tailored to the needs of societal segments that traditionally did not have access to insurance. Through technology, these companies can reach a broader scale at a lower distribution cost than traditional insurance companies. Additionally, insurtechs simplify the communication and understanding of insurance products, making them more accessible to a wider audience.

Your company is described as a digital insurance broker, providing advice to clients for insurance procurement. What benefits does it offer to users?

When we started, we defined ourselves as a digital broker, but now we have expanded that concept to a digital insurance platform. Our direct-to-consumer value proposition focuses on transparency. Through our platform, the user can input their data and vehicle information, and in less than 10 seconds, compare among 15 companies and 5 products, all transparently and quickly. Our goal was to make all that information about prices, products, and coverage accessible and give consumers the ability to choose quickly and easily.

In addition to simplifying procurement, we focus on facilitating all subsequent processes. From claims resolution to policy renewals and payments, we aim to eliminate bureaucracy. We transform the customer experience so that every interaction, from procurement to resolving any issues, is quick, simple, and transparent.

How do you leverage technology to provide this value?

Our digital broker model has evolved into a B2B2C proposition, where we collaborate with banks, financial platforms, e-commerce, marketplaces, retailers, car manufacturers, car dealerships, and fintechs to offer insurance to their customers through our technological platform. We have developed APIs to facilitate these partnerships and ensure a consistent and satisfactory user experience throughout Latin America, adapting to the particularities of each country.

Our mission is to make the procurement and use of insurance policies transparent and easy in the region, either directly with the user or through our distribution partnerships. Technology is fundamental in everything we do: it allows us to put the customer at the center of everything and make their lives easier.

How have you managed to secure the capital needed to launch your project?

During the first eight years, we mainly self-financed with family capital. During this time, we focused on developing the company and accompanying its growth with clients, without resorting to external investment. In 2018, when we considered that we were ready to take a significant leap and were technologically consolidated, we decided to seek external investment. In this first investment round, venture capital investors participated along with strategic investors such as Mercado Libre, the leading technology company in Latin America, along with other external investors.

From that moment, our financing strategy changed, and we focused on three main areas of growth. First, we began a process of regional expansion and opened offices in Colombia, Chile, and Brazil, in addition to starting operations in Mexico. Secondly, we diversified our product offering, incorporating life, home, small and medium-sized enterprise, and motorcycle insurance, in addition to auto insurance. And finally, we expanded our distribution channels through strategic partnerships with various partners.

What is the outlook for the company’s growth in terms of the number of clients and platform reach?

We have experienced an average growth of between 30% and 50% in the number of clients year after year. Regarding our platform, we currently have more than 50 insurers integrated, positioning us as the insurtech with the highest level of integration in the entire region. Furthermore, we have established collaborations with banks, fintechs, retailers, and human resources platforms, among others, making us the platform with the highest penetration in terms of distribution channels. These data reflect our ongoing advancement and consolidation in the market.

What advantages does collaborating with BBVA Spark provide for 123Seguro?

Firstly, it highlights the opportunity to have counterparts who understand the unique characteristics of the digital world and entrepreneurship. This understanding is crucial as conversations with traditional financial industry often lack this understanding, which can hinder communication and effective collaboration.

Additionally, the possibility of working with a platform that has a regional vision is a very positive aspect. Through collaboration with BBVA Spark, 123Seguro can not only address the specific challenges and opportunities of Argentina but also have a broader perspective covering other countries where it operates. This regional and international perspective allows for more comprehensive strategic planning and the possibility of replicating successful models in different markets.

What advice would you give to an entrepreneur looking to launch their project or scale their business in 2024?

Firstly, it is important to recognize that there is no perfect time to start. There always comes a point where it is necessary to take the leap and pursue that dream. Regarding the initial focus of the project, it is essential to fall in love with the problem you are trying to solve and be close to the customer to understand and empathize with them are key aspects. It is essential to be passionate about what you do and be willing to work hard, both in the short and long term.