The computer virus: COVID-19 is driving a boom in insurtech and it might be only just beginning

Insurtech was already growing fast before the pandemic, but COVID-19 seems to have turbocharged it.

Activity in the sector finished 2020 at a record high: With a solid final quarter, annual insurtech funding in 2020 reached $7.1 billion across 377 deals, according to Willis Towers Watson—up 12 and 20 percent, respectively, on 2019.

The consultant’s report shows insurtech’s scope widening in terms of its offerings, with the first wave of property and casualty initial public offerings soon to be joined by life and health launches; and its geographic reach with life and health insurtechs raising funding in 13 countries in the last quarter of the year.

To discuss the growth and development of the sector and the impact of the crisis, Intelligent Insurer’s online platform the Re/insurance Lounge  brought together a range of experts:

Click here to watch the full video

The mother of invention

All agreed that the pandemic had accelerated the development of the insurtech industry, but it did so in several different ways.

First, as Roudaut outlined, while it disrupted other revenue streams and changed behaviour, it also prompted product innovation.

“For us, COVID-19 was an opportunity. We wanted to make up for the loss of programmes, such as travel, and we have done more than that,” he explained. That included launches such as a new infectious disease cover for 25 diseases, but also tech-based adapted for the increase in working from home.

Hannover Re launched Asia’s first personal cyber insurance, including prevention services, insurance and claims assistance, and in July a parametric cover for Internet outages.

New thinking

More fundamentally, the pandemic has changed attitudes by exposing weaknesses and expanding possibilities.

On one hand, it has put a focus on existing business models, operations and incorporation of technology, according to Bell.

“The emergence of the pandemic exposed an array of legacy business practices that have been hidden to a degree by a relatively buoyant market. The behavioural changes in terms of consumers and the way people react have shone a light on some of these,” he said.

This is forcing insurers and brokers to look at how they operate and engage with customers.

But as well as highlighting the need for change, the pandemic has shown the industry’s capacity for it. The rapid shift to remote working and new ways of operating revealed that many were more adaptable than they thought.

“COVID-19 really opened people’s minds,” said Joost. “Some of the tech firms today talk about seeing five or 10 years of digital transformation in two months. There were hiccups, but everyone pulled it off and that opened business leaders minds to the fact that they could do more and faster.”

Click here to watch the full video

Room to grow

There are two caveats to that. The first is that while COVID-19 boosted the need and the willingness to adopt technology among insurers, it has not diminished the importance of people, according to Cuscó.

He agreed that the pandemic had prompted the rapid transformation of many businesses. It led to a significant digitisation of his own company’s distribution network, for instance. But it also emphasised the importance of its third-party brokers.

“You might think with a pandemic and adoption of digital channels that networks would become less relevant, but it was exactly the contrary,” Cuscó explained.

“The more uncertain the context is, the more people need to talk to someone to understand products, covers and limits. We saw double-digit growth in the number of calls to our contact centre and to our distribution network, and we had to provide them with tools to deal with that and prioritise.”

The second is that there’s still a long way to go. Much of the digital transformation and applications of insurtech to date have focused on solutions to automate and simplify processes and promote operational efficiency, said Bell. But the real impact of technology on the industry won’t come just from the back office.

“The elephant in the room is the amount of data you can now capture with technology.

“There’s a certain amount you can improve in terms of the bottom line, productivity and commercial outreach, but you can dramatically improve your margin from the premium if your data improves.

“We see that within health in terms of wearables, with telematics for cars, and in terms of the internet of things for industry,” Bell explained.

“The ability to capture that data and intrinsically change the commercial and financial profile of the company is one that insurers haven’t yet fully grasped.”

To view the full Re/insurance Lounge session click here