Latin American insurtech sector: Resilience and innovation to protect the future
By Digital Insurance LatAm
In the ever-evolving landscape of Latin American insurtech, the new benchmark study "Insurtech Latam Journey" by the consultancy firm Digital Insurance Latam reveals a sector that, despite facing formidable challenges such as funding droughts and high startup mortality rates (13%), continues to demonstrate remarkable resilience and innovation.
The insurtech ecosystem in Latin America, composed of 477 companies, has experienced a modest annual growth of 2%, with an organic growth rate, not discounting the closure of insurtechs, standing at a vibrant +15%. This growth is particularly significant in the context of a 44% decrease in investment in 2023 compared to the previous year, marking a resilient ecosystem that continues to adapt and evolve. "The insurtech ecosystem is going through a transition phase and is getting healthier," clarifies Hugues Bertin, CEO of Digital Insurance Latam.
The study highlights trends and significant shifts within the sector towards two major trends: on one hand, embedded insurance and the role of major digital platforms in this context; and on the other, technology to enhance new distribution channels or strengthen the role of traditional intermediation, including innovative distribution models. These models emphasize digital channels and the integration of technology into traditional insurance processes, showing the sector's commitment to innovation and customer-centric approaches.
Country-specific perspectives offer a deeper understanding of the unique challenges and opportunities within the region. For instance, Brazil, despite a high mortality rate among insurtech startups, continues to play a significant role in the ecosystem due to its large market size and capacity to attract investments. Meanwhile, Mexico and Colombia stand out for their dynamic ecosystems and collaborative environments that foster growth and international expansion. Chile is distinguished by its focus on innovation and regulatory flexibility, which has been pivotal in enabling the development of insurtech within the country. "Each country is living its own reality, but the continent has never been so integrated, both among the players of the same country, such as insurers, brokers, and insurtechs, as well as at the inter-country level with the role of associations and, in particular, the Pacific Insurtech Alliance," Bertin clarifies.
The report is characterized by describing in exhaustive detail the ecosystem as a whole and also sheds light on the financing landscape in 2023, which was marked by a significant decrease in investment, with only 125 million USD invested, representing a 44% reduction compared to the previous year. Despite this, there was a notable concentration of investment in full-stack insurtech solutions, highlighting the market's adaptation to the changing demands of consumers and the search for more integrated insurance solutions.
In conclusion, while the Latin American insurtech sector faces a myriad of challenges, including a significant decrease in investment and a high mortality rate among startups, it continues to show its resilient and innovative spirit. "The collaboration that exists in Latin America from the entire insurance sector to co-construct the protection of the future in Latam is a unique dynamic worldwide, and many are watching us from Europe or North America," Bertin concludes.
The study (attached under the Documents box on the right-hand column of this screen) is freely accessible on the consultancy's website and invites interested parties, investors, and innovators to get involved and support the Latin American insurtech ecosystem, in particular the associations of each country and to join the AIP (Pacific Insurtech Alliance), emphasizing the opportunities for collaboration and transformation in the insurance industry.
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