Insurtech revolution will live up to the hype as companies invest
The potential impact of the insurtech revolution on the risk transfer industry is likely to live up to the hype, as more companies invest in the sector.
That is the view of Andrea Best, partner in law firm Drinker Biddle, who said that traditional players investing directly in the sector is a game-changer in terms of its potential.
“While some in the industry remain sceptical, some large ‘traditional’ re/insurers have teams or departments dedicated to insurtech, whether by investing in startup ventures or by actually insuring new types of insurtech products, or both,” she said.
“When you see traditional players in the industry moving into a new area like insurtech, it becomes more than just hype and turns into reality.”
She noted startup tech companies who thought they had an interesting idea and are now becoming underwriting agencies and obtaining insurance producer licences; reinsurers who are seeking to develop wordings to insure new products sold via mobile phone apps; and even some regulators who are trying to work with industry to try to fit new ideas into traditional, older insurance laws and regulations.
“As much as it is common to toss around the word ‘disintermediation’, I am not sure that is what is actually happening with insurtech. Perhaps it is more accurate to say we are seeing some new, non-traditional types of intermediaries: the tech firms who come up with the new ideas and want to sell their product are becoming the new intermediaries,” Best said.
She added that it is important to work with the right people. “Re/insurers should look to the experts in Silicon Valley and elsewhere around the world. Whether that means directly employing a team responsible for developing new insurtech products, partnering with tech firms through joint ventures and investments, or just providing the paper for a new insurtech product will depend on the particular insurer and the opportunity,” she said.
She added that all too often industry experts in regulation are an afterthought.
“It is all well and good if a tech startup comes up with a great new product and a novel way to sell it—but does it work within our existing regulatory framework?
“These are questions everyone in the insurtech space should keep in mind when weighing up new products or opportunities.”
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