By Christian Wiens, CEO and Founder
The insurtech scene has yet to digest such a drastic impact as the coronavirus crisis – as do most companies worldwide. Never in their young history were insurtechs confronted with a crisis causing global economic disruption. But how will they be affected? Could they even benefit from their digital business models?
The effects of the coronavirus pandemic will be felt in the global economy. Experts predict that we will most likely see a recession in the upcoming months. No startup has experienced anything like this – so the crisis will serve as a stress test for them. This will be problematic for underfunded startups, as funding will decline in the next months. So the pandemic will weed out those companies that do not have a sustainable business model.
What does this mean for the insurtechs? Some of them, especially insurtechs in a very early stage, might fail because they won’t have access to venture capital. For the others, coronavirus might be a catalyst that will accelerate digital transformation in the insurance industry. Insurtechs, with their strong technical infrastructure and their digital solutions, are in a leading position here, and it is an opportunity for them to outpace their more analog competitors.
We see this already in our daily work. As digital natives and with our own tech infrastructure, it is easy for our team of more than 85 people to switch to working from home from one day to the next – without business being affected in any way. Insurtechs – and many startups in general – are digital by nature. It is in their DNA to use digital solutions and their processes have been structured that way from the beginning. So working remotely is something they can quickly adapt to.
Traditional insurance companies are not even close to being as agile. They still have physical distribution structures for their business models, and they still work a lot with paper. Insurers and particularly agents and brokers that have not adapted to digital structures will have difficulties, especially the small and medium-sized companies. The crisis will set them back further than before.
On the other hand, the traditional big players will not go bankrupt overnight. They have already adapted to new customer expectations and they will continue this path of digitisation. Their greatest challenge is not so much a technological change, but rather a change in mentality. They need a cultural change.
The coronavirus pandemic transcends borders. So does technology, except technology has an inherently positive effect. More than ever before, there is now a realistic opportunity to build a truly global company in the insurance sector where sales are 100% digital. That has never been done before. In times of crisis, it becomes obvious how strong a digital business model is. Digital insurers will most likely set the pace here.