Insurtech is getting started in Latin America. From potential to reality?

The Latin American fintech ecosystem has grown by leaps and bounds during the pandemic, doubling in size since 2018 to almost 2,500 companies last year. Yet within the realm of insurance and insurtech, the industry remains one of the most unexplored segments.

Fintechs catering to traditional insurance companies or consumers accounted for roughly 5% of the regional ecosystem. The industry has been around for centuries, but it has yet to see as profound disruption as the banking sector has experienced over the past decade.

Many argue that the sector is prone to expand rapidly following the digitization of businesses and digital services in Latin America. However, there are also hurdles such as regulation that make meteoric growth unlikely.

The payments and lending segments of fintech remain the most relevant at the regional level. However, emerging segments such as insurance have been growing fast. There are now 127 companies operating in insurance, according to data from the Inter-American Development Bank. This is up from just 28 five years ago.

A regional leader

Even in the context of lower capital for the region, many of these startups are securing considerable funding.

Founded in 2018, Chile’s unicorn insurtech Betterfly is emerging as one of the regional leaders. It has forged alliances with traditional companies such as Chubb or Brazil’s Icatu and expanded across and beyond Latin America. The company launched operations in Spain this year through the acquisition of Flexoh.

But the rising wave of Latin American insurtechs does not stop there. Earlier this year, reinsurance giant Swiss Re led a pre–Series A funding round for Latin America-based digital insurer Klimber.

More recently, Brazilian Latú Seguros raised $6.7 million in pre-seed funding round. Its goal is to provide insurance for SMEs in Latin America. Small and medium-sized companies are a highly underserved market in the region. The company is looking to sell coverage against cyber risk, lawsuits, and property damage.

Venture capital flooded Latin American tech startups in the years of the pandemic. But only a limited amount of that capital was drawn by insurtechs. Compared to other regions, the sector is still slow to pick up the pace, in many cases stemming from a historically low penetration of traditional insurance products in the first place.

There is a significant protection gap in Latin America. A majority of adults have no kind of insurance whatsoever. Estimates show that insurance penetration in Latin America stands at around 3% of GDP. This compares to over 6.3% of GDP as a global average and even higher in developed markets.

Opportunities to serve the underbanked

According to experts, this opens a new world of possibilities for startups to develop insurance products grounded on technology. “The technology is here, tools are already at our disposal and alliances will be increasingly important to generate volume and attract capital,” said Carlos Salinas, executive director at Argentine Insurterch Chamber. “The train has definitely left the station.”

According to the IDB report, a third of the insurtechs in Latin America specifically target the underbanked. The traditional financial institutions that provide protection compete primarily for banked individuals, with more often than not higher revenues than average. The bank said the opportunity to innovate in the B2C segment is “massive.”

“The main factor driving a decision to buy insurance is price, and insurtechs can provide that,” Marisol Sánchez Navarrete, president at Mexico’s Insurtech Association and founder of startup Clupp, told Fintech Nexus. “The demand for microinsurance is increasing in the region, allowing us to reach underserved areas and paving the way to offer 100% digital products supported by insurtechs.”

To be sure, traditional barriers will need to be overcome. Regulation is a big part of it, according to sector experts.


“Within financial activities, the insurance sector is highly regulated, and several Latam countries have many restrictions to develop new and innovative products,” Salinas said. For that reason, expanding across the region can have its challenges. Most of the insurtechs in the region operate within their own country. This can often undermine the appetite for venture capital investment.

Collaboration is a must

Marisol Sánchez Navarrete of the Mexico Insurtech Association.
Marisol Sánchez Navarrete, president at Mexico’s Insurtech Association.

For Navarrete, who heads Mexico’s fintech association, regulation must change to promote the sector’s development. “It is natural that technology moves faster than regulation,” she argued. “But it must be eventually adapted, so it does not stop innovation.”

Throughout Latin America, emerging insurtechs have frequently focused on improving access to car insurance, a segment with significant volume as it is mandatory in most countries. And they have also expanded into electronic gadgets insurance. Or mobility devices, a segment sometimes overlooked by traditional players.

“There is still resistance to collaborating with insurtechs,” Navarrete said. Although there has been greater cooperation with traditional insurance companies amid the pandemic, she argues that the industry remains somewhat conservative.

“More openness is needed from the regulator and the big players (international insurers and reinsurers) to collaborate with insurtechs in the region,” she said.

  • David Feliba

    David is a Latin American journalist. He reports regularly on the region for global news organizations such as The Washington Post, The New York Times, The Financial Times, and Americas Quarterly.

    He has worked for S&P Global Market Intelligence as a LatAm financial reporter and has built expertise on fintech and market trends in the region.

    He lives in Buenos Aires.