How can organizations innovate during a pandemic? In the booming world of InsurTech, the sky might be the limit…. John Bruno, Chief Operating Officer of Aon and Chief Executive Officer of Data & Analytic Services at Aon, shares his thoughts on the future of innovation in the wake of the novel coronavirus (COVID-19) pandemic.
Aon’s last Global Risk Management Survey found that the majority of top risks for our clients are not currently insurable. Meanwhile, the gap between losses from insurable events and the amount that is actually protected by insurance is growing ever wider. For example, economic losses from natural disasters last year were upwards of $230 billion, yet only $71 billion of those losses were insured.
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 launchpad for innovative solutions that will help us help our clients better manage risk and close the protection gap.
InsurTech — technology used to optimize insurance — is increasingly popular for investors and they are flocking to start-ups in this industry in increasing numbers. Between 2014 and 2018, U.S. InsurTech investment grew from $400 million to $2.5 billion. That’s an increase of 625 percent. Global InsurTech investment rose from $1.1 billion to nearly $4 billion, an increase of 360 percent during this period.
Across both FinTech and InsurTech, levels of traditional venture capital (VC) on the market are higher than ever. It’s my belief that start-ups will also increasingly turn towards non-traditional avenues, such as corporate venture capital (CVC) and even sovereign wealth funds.
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. At the same time, we better serve clients and increase the size of the pie for all stakeholders across the insurance industry.
Investments rose again in Q2. So 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.
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. They recognize that the crisis can potentially stimulate innovation that increases resilience and promotes recovery.
Businesses will look to reorganize and even reinvent themselves through this experience. The food supply sector, for example, is sure to think differently about the future after this unprecedented disruption.
Retailers large and small as well as healthcare businesses are relying on 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.
The global pandemic is triggering a 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 businesses view long-tail risk and ultimately, how they manage through and mitigate that risk.