Insurtechs may suffer short-term losses from the coronavirus outbreak, but stand to gain in the long-term due to an increased need for digital offerings.
Conversely, traditional insurers may face long-term disruption to business models, according to Johnny Stubbs, UK head of insurance and business development, GetSafe.
“I think for insurtechs and for all start-ups this is clearly a challenging time. There are funding challenges which are going to really shine a spotlight on the viability of small businesses and start-ups. On the flip side, there are incumbents that are perhaps less worried about their future in the short-term, but this is perhaps a more long-term realisation for them that the world is changing and having a digital first approach is increasingly important,” says Stubbs.
“I think they both have their own areas of concern, one on the short-term survival and the other on that sort of long term.”
Traditional insurers are being hit from all angles. Apart from an industry-wide inability to pay out for coronavirus covers, in the US the sector is facing reproach from both lawyers and policy makers. Members of Congress are debating the need for legislation that would require insurers to pay for shutdowns causes by the pandemic. In the UK, insurers have been tightening their terms to exclude anything pertaining to the virus to great criticism, the FT reported.
Yet insurers have been preparing for mass health crises since Sars, Mers and swine flu; the severity of the coronavirus pandemic simply expediates that process, says Stubbs.
“I think pandemics are something that have been talked about for the last five or 10 years as predictions were being made about it. Obviously now this has happened and it brings to the fore that this is a reality and a reality that may happen again, and I’m sure that there will be changes in the sort of structure as a result of that. How that’s implemented and when it happens I wouldn’t be in a position to comment on, but certainly the world has changed in the last few weeks and months,” says Stubbs.
According to Tom Jenkins, CEO of the European Tourism Association (ETOA), the coronavirus pandemic could fundamentally change insurance contracts.
“People may suddenly include pandemic provisions in contracts, and insurers may rush out with policies to protect people against such eventualities,” says Jenkins.
These external challenges, combined with the outdated technology many insurers still depend on, may offer insurtechs a competitive edge. While insurers are facing criticism and in certain cases, threats of collapse, some insurtechs offering digital products have seen increased business. GetSafe has recorded its best month on record.
The pandemic is being credited with accelerating a digitisation process which was already occurring in the insurance industry, and Stubbs believes it could place insurtechs in a position to properly compete with insurers.
“Insurtechs will become more credible competition. I think that perhaps there is a more supplementary role at the moment, but there is a clear demand for the types of services that the insurtech industry is providing, and that demand I believe will only continue to grow,” he says.
“I think the key thing is that we should be able to provide a service and provide insurance in a way that is not obstructed by disruption. Something like this does highlight the importance of insurance, whether that’s that people have the right health insurance in place, that they are able to be covered from illness, from work or there’s unemployment benefits – these are all structurally underpinned by the concept of insurance.”