How Israel’s Emerging InsurTech Ecosystem Can Benefit Insurers Globally

A new Celent report serves as a starting point for a look at the InsurTech section of Israel’s tech startup culture, focused on the city of Tel Aviv.

(Image source: SOSA hompage.)

Like FinTech before it, the InsurTech phenomenon has emerged through a combination of demand and supply: insurance companies need to digitize, and entrepreneurs with the requisite capabilities are eager to help them. Thus we see key InsurTech ecosystems emerge in cities that represent a concentration of insurers, technology entrepreneurs or both—such as Des Moines, San Francisco, London and Singapore. A new Celent (Boston) report calls attention to a new center: Tel Aviv and explains what it is about this city that makes it an important emerging center of InsurTech.

Gil Arazi, Founder, FinTVL.

The report endeavors to ask what might be unique about InsurTech in Israel, what the current level of activity in Israeli InsurTech, and what are its global implications. Israel is, like other centers of InsurTech activity, a modern country with property and carriers to insure it. However, it has other important comparative advantages, according to the study. To understand Israeli InsureTech, one should look to the soil out of which it grew, advises Donald Light, Director, North America Property/Casualty Practice, Celent.

“If you want to build InsurTech in a given country or region, it’s not enough to say ‘We have insurance companies and people with technical skills,’” he comments. “You need another level of analysis that asks what’s special about the kind of skills—for example, Singapore and China have mass market access, Japan has manufacturing excellence.”

Israel’s advantages spring in part from its geostrategic challenges. The country has, “outstanding technical and scientific education, major presence of global technology, and an army that exploits technological advantages,” Light writes.

“Israel has comparative advantage in processing electronic signals and driving a lot of its technical and educational system toward defense,” he says.

Focus on Cybersecurity, Fraud and Mobility

Given that combination of qualities, it is not surprising that many startups in Israel focus on two major themes—cybersecurity and fraud—with mobility being a third major theme, according to Light. “This issue of mobility is huge for P&C, and if you’re an auto insurer you should know what’s going on in Israel,” Light says. “If you’re trying to apply machine learning against large amounts of unstructured data—which is needed for fraud detection—you should understand what’s going on in Israel.”

Donald Light, Director, North America Property/Casualty Practice, Celent.

With regard to the presence of global IT firms, the study notes that Intel has 10,000 employees in Israel, about 60 percent of which engage in research and development. IBM operates three locations in the country—including its largest lab outside the U.S. and a Cybersecurity Center of Excellence. Google has a significant presence in Israel and was recently named the best place to work in the country, the study notes.

With regard to mobility, the study notes that Waze, an Israel-based navigation application was acquired by Google in 2014; and Mobileye, a vendor providing visual intelligence solutions for motor vehicles, had an IPO valued at $7.5 billion the same year. Earlier this year, Intel said it would acquire the company for over $15 billion. Israel is also home to Gett, a competitor to rideshare companies Uber and Lyft.

Israel has become a hub for technology startups and VC firms looking to fund them, according to the Celent study. “Leading Israeli VCs include Carmel Ventures and Jerusalem Venture Partners (JVP),” Light writes. “A significant number of global VCs also have an Israeli presence including Sequoia Capital, Battery Ventures, Canaan Partners, and Innovation Endeavors (solely backed by Google’s Executive Chairman).”

Tel Aviv in particular is home to SOSA (named for its location south of the Salame neighborhood), a technology innovation hub founded in 2013 that unites various players, including startups, more advanced tech companies, investors, accelerators, incubators and insurance companies looking for innovative solutions.

Major Opportunity in InsurTech

“We identified a major opportunity in InsurTech about a year-and-a-half ago,” comments Uzi Scheffer, SOSA’s CEO. “We found our self as a good address for global corporations interested in interacting with the Israeli technology industry in a very efficient way. The point was to create a center where the entire industry can meet and do business.”

About 150 entities connect with SOSA for access to Israeli startups which number about 5,000 across all industries, according to Scheffer, with closer to 100 being dedicated to insurance. However, an important area of activity at SOSA is to help insurers explore the potential relevance of solutions designed for other verticals to the insurance industry. “For example, a cybersecurity application designed for the automotive industry can have insurance impact—and that’s where it gets interesting,” Scheffer comments.

SOSA has attracted interest from major global insurers, such as Zurich (Zurich) and Munich Re (Munich). SOSA launched a branch in New York earlier in 2017 and also has a partnership with the city of Cologne in Germany and has operations in Australia.

SOSA partners with FinTLV, an InsurTech-focused firm that has a VC arm and runs the FinTLV Innovation Zone, a Tel Aviv-based startup accelerator. Like other accelerators FinTLV Innovation Zone works with a large number of startups (about 1,400 currently), has “demo days,” selects some for proofs of concept (POC) and then escorts the projects to completion, according to Gil Arazi, the firm’s founder. “Our KPI is the ratio of successful POCs,” he says.

Where FinTLV Innovation Zone may differ from other accelerators is that it takes no fees for its shepherding of the startups. “We do that because want to be able to give the best advice to the insurance companies, and we want to understand what their demand for the technologies is,” Azari explains.

Through SOSA FinTLV is connected to over 3,500 startups across verticals and seeks to connect them to insurers on the demand side. “Given our deep industry knowledge, we have the ability to locate the best solutions for insurers,” Arazi comments. “Many startups know nothing about insurance core systems, IT infrastructure data and regulation, and we help them to learn.”

Examples of recent POCs shepherded through FinTLV include the following, according to Arazi:

  • Platform for underwriting cybersecurity insurance products;
  • Aggregation engine for risk;
  • IoT data solution aimed at customer experience;
  • Auto insurance Fraud prediction solution.

“We cover all sectors of insurance—life, nonlife/P&C, health, etc.—and we are alert to opportunities that help insurers with digital transformation,” Arazi says.

As an example Arazi cites a POC that helped an insurer to move to real-time data without altering its core system environment. “The POC took only two weeks, providing real-time data for digital transformation, and giving the insurer the potential to save tens of millions of Euros annually,” he relates.

Uzi Scheffer, CEO, SOSA.

Arazi argues that “quick wins” are important for coaxing insurers down the road of innovation. “We see different kinds of insurance companies: on the one hand there are those that are more innovative and willing to take risks by backing up startups—even when the startup comes from outside the industry; and then there are those that think the world will not change over the next decade and aren’t doing enough to bring innovation,” he says. “The latter will lose a lot of customers to the former and to industry newcomers.”

Innovation and Emerging Markets Opportunity

In addition to losing traditional business within domestic markets, global insurers not prepared for a digital future will miss out on a vast business opportunity in emerging markets, according to Arazi. “The emerging market in Asia over the next decade involves 4.4 billion people—many currently uninsured—who are 100 percent mobile, very price sensitive, and looking for on-demand solutions,” he cautions. “During the next decade, 65 percent of middle-class families will be in Asia, as opposed to 40 percent today.”

Through its association with SOSA and its connection to global insurers, FinTLV plans to play a role in helping insurers successfully access those and other markets. “Because the insurance business is my passion, we enjoy seeing the fruits of what we’re doing, both for the insurance companies and their end customers,” Arazi comments.

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Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at or (503) 936-2803.

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