InsurTech is revolutionizing the way insurance companies do business. This tech allows insurers to be more proactive in servicing their consumers and catching up with competitors. Here with Ben Baker to elaborate on this concept is Kobi Bendelak, the CEO of InsurTech Israel. Kobi explains why Israel has transformed into this tech giant and what drives their culture for its people to innovate faster, better, and more diversely. He shares how the InsurTech industry in Israel is very successful and how it stands out globally. The challenges in its development stage were numerous but the straightforwardness of their goals towards solving insurer’s problems is one of the keys to its success.
I'm going back to my roots. I'm going back to Israel. I have Kobi Bendelak from Israel. Kobi is the CEO of InsurTech Israel out of Tel Aviv. Kobi, it is a pleasure having you on the show.
Thank you, Ben. It's my pleasure.
Most people don't know I lived in Israel for a few years. You're in Tel Aviv. I lived in Jerusalem a few years in the ‘90s and the early 2000s. The technology world, what it was then versus what it is now is an incredible change. Israel has always been at the forefront of the technology industry. I'm sure that is what's driven InsurTech. Why don't you tell me about InsurTech Israel, who you are, what you do and who you serve? Tell me a little story, Kobi.
First of all, I will speak a little bit about myself. I came from the insurance industry. I’ve been there for many years. After I finished my Army service, I started to be a broker. I opened my company many years ago. I had big luck because after a few years of operation, I got a quote from Generali Group to be partners and to buy 50% from my shares. From 2001 until 2015, my broker company was part of the Generali Group. It was an amazing opportunity to grow and to be part of the ecosystem here in Israel. My company was one of the biggest MGA in Israel.
Explain what an MGA is.
It was something in between an insurance company and agents. We get qualified to give cover and to handle claims for insurance policies for the underwriter and for the insurance company. In 2015, I got a call from a competitor and he asked me if I want to sell my company to him. It came from nowhere. It was hard for me to decide to do that because this company was part of my life. It was 22 years in operation. The quote was too good to say yes and so I said yes. In 2016, I quit all my operation in the insurance industry and I went to retire at 45 years. As you can imagine, it's boring.
Going to work all day every day and everything that you do, and all of a sudden going from 100 miles an hour to zero. I don't think that would go over well.
It was boring after three months of doing nothing. I looked for a new challenge. Suddenly, I got an email. In the subject, it was written, “InsurTech Meetup in Tel-Aviv.” I didn't know what InsurTech and what is Meetup. I was a broker, but it looks interesting to me. A Meetup is to meet people. I decided to go. As you can imagine, I had plenty of time. I went there and there were many people at the venue with a lot of interesting ideas. A lot of spirit to how to change the world of insurance with good ideas and interesting technology. Most of the people in the venue didn't know exactly what is insurance.
I saw that for me as an opportunity because I have money to invest. I wanted to invest money in startups. On the other end, I have a lot of knowledge for my big run connection, understanding how this industry is working. After I did some scouting around, I decided to start investing. I collected eleven partners for my company. We started investing in startups. We already invested in four InsurTech startups. Most of them are famous, so we're proud of what we are doing in our investment.
On the other end, follow to that activity, I got an interesting approach for many people around the globe. Most of them are entrepreneurs, VCs and insurance companies. They start asking me if I can help them to understand this industry. It's an amazing thing called into tech. They wanted me to help them to understand how I can help them to go to market, to study the product, things that I have for my knowledge, for my big one. As you remember, I had plenty of time, so I drank a lot of cup of coffee with many interesting people from all over the world. After a while, I understand that I have something in my head because people want to speak and to hear me.
That’s the reason I decided to open another arm in my company. It's called a consulting arm. Following our activity and investment activity, we have a consulting activity. Do we help entrepreneurs and startups with all the necessary things that they need to go to the market? For startups that are not operating the insurance world and want to go into this interesting InsurTech side, we help them to understand how to do that and incorporate from all over the world that has a deep interest in what's going on here in the InsurTech ecosystem in Israel. They call us and use our collection and knowledge here to have official appearance. There are many other delegations that are arriving here. It's an interesting issue now in Israel. InsurTech Israel is a company that has two arms. One is the investment and it is active now in Israel.
I want to go back because it's important for people to know, and this is critical why Israel is such a technological giant. Why is it such an entrepreneurial giant? What's the culture that you think that drives that? It fights above its waist. If you look at the number of technology companies that are in Israel, you look at the amount of innovation that happens in Israel, it comes down to a lot of the culture. What do you think that drives that culture that allows people to innovate faster, better and more diversely in Israel than a lot of other countries that are way bigger with much larger budgets?
It's the culture. It's based on many things. It's not just one thing. Many entrepreneurs that you can see in Israel, not just in the InsurTech side, you can see that most of them came from the Army. The Israeli Army is a technology Army. There’s a special unit that uses the technology. Many entrepreneurs are coming with ideas that are arriving from the Army. They can operate easy in Israel because the ecosystem here is support. We get support from the government. There are many capitals here in Israel. There's a lot of money that is looking for investments here in Israel.
It's interesting, this is culture. You can base it on education. The Hebrew University is one of the most advanced universities in the world. There is a joke in Israel saying that the Jewish mom in the past wanted her son to be a lawyer or a doctor. Now she's looking that her son or daughter will be an entrepreneur. That's a big change. In the end, we are surrounded. We are living in a tough neighborhood. This makes us independent. We know that we need to extend our own. This is what makes this culture successful.
It's interesting that you bring up the whole Army and the university cultures because there's a story that I remember and I can't remember when it was. It was the F-16 fighter jets when you first got them. You were worried about being able to see behind you. Instead of creating some big technological advancement to be able to look behind you, you put in rearview mirrors from old Buicks. It's a culture of practicality. It's a culture of, “What's the problem? How do we fix it?” That's an amazing thing about the Israeli culture. It's not, “Build it and it will come.” It’s, “What's the problem and how do we fix it?”
Many people ask me how the InsurTech industry here in Israel is active and there is a free unicorn InsurTech startup in Israel. There's Lemonade and Next Insurance and Hippo. There’s no other place in the world, maybe in the US. There are many unicorns in one country. We are lucky. People ask me why and how it's happened. I said that because InsurTech is not just technology. InsurTech is a creative idea. The entrepreneurs see a problem and they have creative ideas on how to solve this problem and technology for the solution.InsurTech is not technology. It's not science fiction. It’s creative ideas to solve a real problem. Click To Tweet
InsurTech is not technology. It's not science fiction. It’s creative ideas to solve a real problem. This means that the Israelis are unique people. They know how to solve problems. We are independent and we know how to solve problems. We see a problem and most of the time, we will build a solution to fix it. For that reason, the InsurTech industry in Israel is successful because we know how to solve a problem and we added technology for that. This is what to make it happen.
We were talking about the fact that you had two companies that became unicorns. That was Hippo and one other corporation that have already a unicorn.
It’s Lemonade and Next Insurance.
You have three now. It's amazing the technological shift that's allowed that to happen in Israel. It's also having the technology and having the ability to have many people in one country that are focused on technology. When I last lived in Israel, it was 1995. You had to go to the street corner, you had to buy these little tokens that only fit in the payphones. It was the most archaic system in the world. You carried around these little tokens that you couldn't use for anything other than the phone system.
Now every Israeli probably over the age of eight years old has their own cell phones. You have Wi-Fi throughout the entire country. You have these technology corridors that the rest of the world is investing hundreds of millions and billions to build operations in Israel to be able to be at the forefront of the next generation of technology. It's the combination of that entrepreneurial spirit and the technology innovation, the investment in technology, the investment in the hardware and software and the people around it that have probably allowed the InsurTech culture to flourish. My question is what are the biggest changes you've seen over the last 5 or 10 years that have allowed the InsurTech world to thrive not only within Israel but throughout the world?
In the world, users want to get something different. They get to use other services easier. They want to have it on the insurance side. This is what pushes all this industry forward because the users, the consumers want to use the insurance in other ways. This is an orthodox industry with a lot of barriers, aims, challenge and entrepreneurs. Investors are looking for this kind of industry. One more thing that makes it attractive is because there is a lot of money there. The insurance industry is the finest in the industry. It's an important industry in the world. There's a lot of money, a lot of needs, a lot of grit to go over. This is a good field for technology to arrive. You can see that even not in Israel. You can see that on other continents like Africa. I've been to Nigeria and I saw that. Because we are using now the electronic wallet, they can jump over age in 1 or 2 years. The technologists support this industry and make it hot now.
Do you find that the best innovations come with collaboration within the insurance industry or outside the insurance industry? When you bring innovations that are completely outside the insurance industry and use that innovation and thought process to make insurance better or people-focused totally inside the industry and not looking at how other developments are making them better.
The disruption cannot be in one day. It's a huge market. It's a huge industry. What we can see in the InsurTech side, if most of the insurance companies start to be digitized, they’re using the digitization to go forward, they build a website, develop the application. They start to connect with the consumer by digitized application, any application. In the end, this is the beginning of the story because this industry will disrupt from side to side. I can see the starter because we will see a new move into the insurance industry for players that’s never been on the insurance side. You can see it a little bit in the car insurance industry. Tesla, Volvo, BMW starts selling insurance for their clients.
We are doing that now with the insurance carriers. It's okay because they don't have the knowledge of how to do that, but in the end, they have enough capital to do it on their own. One to three years from now, they will do it on their own so you can see a lot of interest from the corporates in the world about the insurance side from Facebook, Amazon and Google. I can see a big maneuver into the insurance side, the insurance industry from corporates that’s never been there before.
This is the one thing that I see in the near future. One more change that we will see that the reinsurer will start to operate to direct consumers. You might ask yourself why the reinsurer is active in the InsurTech industry. Why do they need to do change their money machine? They have a money machine, why do they need to move it or to change it? The reason they are going to change it or they want to change it is that they want to add the middlemen, the insurance companies and the brokers. Now they cannot do that because they don't have any distribution channels and services channels.
Technology will help them to do that. What we will see in the coming years is that the reinsurer will start acting like an insurer. This is the second change that we will see. The other trends that we will see that's parallel to a path. We will see another path. InsurTech start to be insurance companies like Lemonade and many others. Parallel to the old industry of the insurance company, agent and broker, we will see new players. The technology will support that. This is the reason that the InsurTech area is hot now because it's all these changes for the coming years.
Do you see these changes coming about through joint ventures or do you think there's going to be a complete mind shift of change where people outside the industry, the BMWs, the Volvos, the Teslas, etc. are going to sit there and say, “We're going to take over the car insurance industry. We're going to do it ourselves. We're going to take over that industry because when you buy a 16 or 48-month lease, it's going to come with the insurance already built into the price?” Do you think that we're looking at that shift? Is it going to be a joint venture between the insurance industry and the car industry that allows for that to happen?
Maybe we’ll see that in many ways, but insurance is profitable. They're making a lot of money. Because of that, I can see that the common associate will be a part of that. In the end, they will do it by then or they need to have more skills, a lot of knowledge and experience, to do that. In the end, they will have enough money to do that. They will do that for sure. They’re starting to do it now. You can see it in other ways. A lot of retail websites start with selling insurance.
You have a lot of retailers that sit there and say, “Fine, you buy a computer. We'll give you a 2 or 3-year maintenance package on it. If anything goes wrong, bring the computer back to us. We'll take care of it.”
It's an insurance. In the end, it’s a big change. It's like an earthquake. The industry and the insurance company know that. They are making a lot of effort not to miss this opportunity, but it's too late. The gap is too big. I can see that all the insurance companies in the world will close. There's a lot of insurance company will operate. There will be many that will not be operating anymore. This is the future of the insurance industry as I said. New players are coming and it will be an influenced industry for sure.
What do you see as the main challenge with adoption? Technology is ripe with fear. People are afraid of things that they don't understand. People are afraid of things that are new. People are afraid of what if it doesn't work? What if we invest in something, it messes up our entire system, it hurts our customers and it bankrupts us? What do you think are the biggest challenges for the InsurTech industry moving forward?
You mentioned in your question about the fear of the insurance companies or the old industry because the insurance company has a lot of faith. I understand that. It's a big mess to change the IT operation system in insurance. I cannot see that working. It’s a big fail. This is the reason that this industry has a big gap because most of the insurance companies built their own operating system. There are no 1 or 2 or 3 operations systems working in all these industries. Almost any insurance company have their own IT solution. This is what makes this industry old with a big gap between the needs and what is going on. What I can see in that situation is that they will find a solution. You can find here in Israel 1 or 2 insurance companies that helped them to bridge this gap by making a virtual IT system that can help them to adopt the new technology. It's a pouch on this problem.
It doesn't change the system. It creates one more layer and one more patch to a broken system.
This is the situation. It's interesting. This is the reason that we can find a lot of ideas from all over the world. Most of them are not going to be part of the old ecosystem. There's a lot of startups that operate on their own. They operate as MGAs so they can hold the risk and they can handle the claims and give service. In the end, they will be an insurance company on their own. There is a new big path of InsurTechs that is going to be the new insurance in the world. We had a conference that we’ve been part of. On the stage, there were three regulators, the EU insurance regulator, the German regulator and the Israeli insurance regulator. They sit on the stage to speak about InsurTech and what they said was right on. The insurance in the near future is the InsurTech. This is the reason that this industry is running fast.
What about the end-users? I understand that there's huge adoption of companies like Hippo, Lemonade and online technology by the end-user in the Millennial and Gen Z, the younger generation. When you come to corporate insurance and people our age and a little bit older that are still owning the companies that are still doing it, there's probably less and less adoption because of lack of trust and fear. What are the technology companies doing to be able to address that fear and be able to get people on board, the end-user on board to get them to understand what the value is to them and how it's going to make their life better?
It’s the education. We are talking by using Zoom and we are not so young.
We couldn't have done that a few years ago.
It's a measure of education. My mom uses WhatsApp. In the end, if people like it, enjoy that or understand that it adds value for them, they will use that. It's not a big challenge. This buyer is not so deep. In the end, people will adopt any new technology. There are cultures that adopt technology easier, faster. There is a culture or country that’s a new adopter. In the end, it will happen. It's not difficult. I don’t think this barrier is deep.
What do you think is the biggest challenge?
Time is always a challenge. It doesn't matter.
The entrepreneur needs to be patient. They need to understand that this industry along with scales. We need to raise enough money to operate for a longer time than before. Time is a big challenge. We will speak in 2023, the industry will be different. It's time. Keep going and keep saying. In the end, it will be that.
How do you work with your consulting clients and people within the environment to get them to be a little bit more patient, to get them to understand the long-term horizon? The year 2023 to you and me doesn't seem that far away. To somebody who's 18, 21, 23 years old, it seems like forever. How do you work with these young InsurTechs to get them to understand that things don't happen immediately? People have to be patient and there has to be a schedule to work with in terms of timeline.
I don't need to educate them to understand that. They feel that on their own. How can I help them in this situation? Best of all with my experience, I'm an entrepreneur by myself. InsurTech is well in the end, it's like a startup. I'm the founder. I have a lot of experience. I give to my entrepreneur clients a lot for my knowledge about how to solve a problem. If we see a problem, if we see a challenge, we sit together and think about how we can solve that, how we can solve this challenge or solve this is a situation with new ideas. This is one side and the other side is helping to raise money. This is a big challenge. It's not easy to do that. We are helping them to do that. Give them time to go forward and make their product more advanced. This is how we help them. From our experience and our connection in the world, we help them not just to buy time, we help them to go forward.
I’ve got two last questions I want to ask you. The first question is what do you think are going to be the big problems that InsurTech is going to solve in the next few years?
If I knew that, I would be there yesterday.InsurTech is not just technology. It is a creative idea. Click To Tweet
Tell me what I'm investing in.
The on-demand insurance, there are a lot of needs for that. I believe in on-demand insurance. There are a few problems with on-demand insurance. I don’t think about the commercial side, even the commercial side, but in the private insurance, people like to use the insurance when they need it and how they need it and how risky they are. They don't want to pay money for anything. The on-demand insurance is the hottest topic in the industry now and will be even more in the coming years. This is the main issue that I think that InsurTech’s areas will be operated. Any drive-by miles or something like that, car manufacturer and car insurance, the PNC Insurance, even life insurance and health insurance. People want to buy insurance to vent when they think that they need or when they think that they will need it.
I can buy $10 million worth of life insurance twenty minutes before I die. I like that.
You will not be able to do that. You will be able to buy life insurance when you get a loan. It will end while your loans will end. If you are flying and you want to buy life insurance because your life is now riskier, you don’t need to fill all these long forms to have life insurance, it will be automatic. There is an application here in Israel, make a healthy assessment and know how your life is by taking a picture of your face. This can help you to buy life insurance easy. Take a picture, you have life insurance. If you want to and you can click and it's end. You will not need to go to this old process. People will buy life insurance on-demand and health insurance on-demand will be different.
Kobi, it's been a marvelous conversation. I’ve got one last question. I ask this to everybody. The question is when you leave a meeting, when you get in your car and you drive away, what's the one thing you want people to think about you and InsurTech Israel when you're not in the room?
I add value in that meeting, to the people that participated in the meeting. If I add value, this is my goal.
Adding value to people is an incredible thing and you absolutely do it. Kobi, thank you. Thank you for being such a wonderful guest. Thank you for doing all that you do.
Thank you, Ben.
Kobi is the CEO of InsurTech Israel InsurTech Israel is Investment fund and boutique strategy consultancy dedicated to engendering innovation in the Israeli InsurTech. Our extensive network and deep industry knowledge with the most dynamic and game-changing Israeli startups. We work closely with strategic partners around the world as well as local and global Insurtech startups.
Kobi was the founder and CEO of Reshef Insurance Brokers, part of Migdal / Generali Insurance Group. Kobi has 22 years' experience in the insurance industry.and holds a BA in Management and an MA in Law from Bar Ilan University and he is a Colonel (Reserve) in the IDF.
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