By Efrat Sagi-Ofir, co-founder and COO of Air Doctor
Insurtechs have seen mixed fortunes over the past six months but the future is looking bright. Insurtech startups with a stake in the game when it comes to health insurance and healthtech have been able to prosper, although the impact of COVID-19 has been more sharply felt by others, for whom the future remains less certain. Whether they’re thriving or just surviving, what’s true for all these companies is that the economic effects of the pandemic are leading to positive change in the international insurance sector now and for the foreseeable future.
In common with a number of early-stage startups across a broad range of sectors, several insurtechs will have experienced operational and liquidity challenges, as well as an associated decline in revenue as a result of the ongoing general economic disruption. Innovation and business development have slowed down for some too, as existing and potential partners and customers consider the impact of the pandemic on their own businesses.
Many insurers will have had to pay out much larger sums than they’d budgeted for, for example, even in their “worst case scenario” planning. While claims on travel and automotive insurance will have fallen dramatically since March, there will have been significant spikes in life and health insurance claims.
Those insurtechs affected by these challenges have therefore had to reconsider their short-term priorities and longer-term strategies.
There are two groups of insurtechs that have managed to keep their heads above water in the face of such challenges, however. The first of these are those that are able to directly help insurers save money now. This is a key consideration for a lot of insurers in such uncertain economic times, especially those who have borne the brunt of increased life and health insurance payouts.
The other group is those insurtechs able to help insurers manage the transition to digital, the need for which has come sooner than many might have expected or been ready for due to the Coronavirus crisis. Although the trend toward digitisation in the insurance sector pre-dates the pandemic, many of the larger insurance companies appeared to lack the impetus to fully commit to it. Now, though, an increase in the use of digital platforms for services such as online purchasing and streamlined claims handling means the situation has forced their hand somewhat. It’s those insurtechs that are built to help ensure legacy insurers are ready for the rapidly approaching digital age that are thriving right now.
Although many insurers are putting new partnerships on hold for the short term, it hasn’t prevented them from rolling out new initiatives to help their customers – and their own businesses – through this current period of uncertainty.
Take travel, for example. Despite worries over the possible transmission of the virus and the rapidly-changing status of countries on the Government’s “safe list”, there is still a desire from many people to travel abroad. This desire, combined with concerns over the consequences, has created a demand for new and enhanced travel insurance products. Travellers are particularly interested in being offered better options should they fall ill while in another country, such as face-to-face appointments rather than telemedicine, and access to GPs and private clinics rather than being unnecessarily sent to the hospital by their insurer.
It’s unfortunate that it’s needed a global pandemic as a catalyst, but the insurance industry does appear to be changing for the better, with insurers providing better, more relevant products and services more suited to the needs and preferences of today’s digitally-fluent customers.
The changes we’re currently seeing in the insurance industry are primarily driven by an immediate response to current economic events. Nevertheless, moving toward digitisation and the customisation of products and services will, in the longer term, allow insurers to provide better customer service as well as improve their own efficiencies. And once this is all over, they’ll become the norm.
The insurance industry was already on the path to greater digitisation. The necessities of the pandemic have simply accelerated its journey. The rapidly shifting demands of a world adjusting to life with the Coronavirus have seen advances that were once the province of innovating insurtechs being adopted by a larger audience, with appetite still growing within insurance companies for these types of innovative digital solutions. By riding this wave of adoption, and by helping the larger, legacy insurers to adapt, insurtech startups will be in a position to thrive, even in this most challenging of times.