This article has been reposted with permission
In my last blog I talked about how the insurance and risk management industry must embrace innovation if it is to stay relevant to clients. The dislocation created by the novel coronavirus (COVID-19) pandemic is just one example of an under-insured risk.
It’s not just the pandemic. Aon’s Global Risk Management Survey 2019 found that the majority of risks that businesses worry about are not currently insurable. This is happening at a time when overall insurance spend as a proportion of global GDP is stagnating but there is an opportunity for insurers to satisfy clients’ increasingly complex insurance needs with new and relevant products.
It’s become clear that new technologies – and specifically, advances in digitalization – represent the obvious launch pad for innovative solutions that will help our clients better manage risk and close the protection gap.
As a result, InsurTech has fast moved up alongside FinTech for investors and they are flocking to start-ups in increasing numbers.
Between 2014 and 2018, U.S. InsurTech investment grew from $0.4bn to $2.5bn, an increase of 625%, according to
Across both FinTech and InsurTech, levels of traditional venture capital (VC) on the market are higher than ever, according to the
This investment will enable the insurance industry to address the needs of high-growth markets – in the sense of both emerging risks and emerging economies. By responding to unmet needs, we help make the underlying insureds more resilient in this increasingly dynamic risk environment. Importantly, at the same time, we not only better serve clients but increase the size of the pie for all stakeholders across the insurance industry.
COVID-19 as a catalyst
But could InsurTech’s march be slowed by COVID-19? Investors across all industries are in a “wait and see” mode. While we expect a short-term impact on funding while investors wait for greater certainty, I don’t anticipate that COVID-19 will impact the macro growth trend for InsurTech. VC companies are drawing their credit lines down because they want the start-ups they’re invested in to have sufficient cash to continue ‘inventing’ through the crisis.
Importantly, they recognize that the crisis can potentially stimulate innovation that increases resilience and promotes recovery.
Across commerce, businesses will look to reorganize and even reinvent themselves after the COVID-19 pandemic. The food supply sector, for example, is sure to think differently about the post-COVID-19 world after this unprecedented ‘contingent business interruption’.
Retailers large and small as well as healthcare businesses are activating workers who are not covered by medical insurance; more gig workers are being hired by businesses to meet their delivery needs: supply chains must be made more flexible and more tech-enabled.
Of course, COVID-19 is going to have an effect on the economy and on business sentiment. But it’s also an innovation rallying cry to InsurTech entrepreneurs and investors.
Notably, Aon proactively scouts for minority-owned start-ups – that represent the diversity of our technology community – to seek opportunities for proof of concepts that respond to the needs of our clients. We will also utilize Aon’s innovation network to mentor minority entrepreneurs in emerging technology and help them increase the value of their businesses.
Aon itself is ready for the post COVID-19 world of innovation. We took bold actions some years ago to perform a digital pivot and ensure that our colleagues have the tools and capabilities to serve our clients, wherever they are in the world. We moved our entire global firm to full remote working in four days. In addition, we opened up our collaboration platforms to our clients and market partners to ensure that together we could solve problems and address needs even better than through traditional means.
The global pandemic crisis is going to trigger another digital pivot – one that will see the InsurTech space attracting renewed VC and CVC investment flows. The resulting solutions will help resolve the many dislocations created by the COVID-19 outbreak and will ultimately re-imagine how consumers and businesses interact with risk transfer solutions.
