A report by leading think tank the Geneva Association suggests the current symbiosis between insurtech startups and re/insurers is likely to shift, as an increasingly digitised business landscape looks set to blur the line for traditional players.
Insurance startups and other market entrants have not had a major disruptive impact on the insurance industry so far, states the report.
Instead, they have played a complementary role, as re/insurers themselves are making strategic investments in startups, allowing them to have a stake in these developments while at the same time providing the capital for such enterprises to develop their own business.
However, the GA states that, as established technology companies such as Google or Amazon expand their footprint by exploiting increasing returns to scale, network effects and feedback loops through machine learning, an increasing number of sectors are being reorganised.
As digital platforms carry more economic transactions, the economic power of these networks, which connect consumers, firms and even industries to one another, expands.
The outcome is that traditional boundaries across industry sectors and jurisdictions become blurred, and competition increased.
The report points to auto insurance as an example; vehicle manufacturers have been installing wireless connections in vehicles and collecting data for decades. But now, the sheer volume of software and sensors in new vehicles, combined with artificial intelligence, can sift through data at ever-quickening speeds, leading to the emergence of new services and revenue streams.
Vehicle manufacturers or data collector companies that receive data from car sensors could then either cooperate with incumbent insurers or be inclined to sell insurance themselves.
The GA says Insurers therefore run the risk of being disintermediated from the risks they have always insured.
