The COVID-19 pandemic could turn out to be a catalyst for digital transformation in the insurance sector, according to Getsafe CEO and founder Christian Wiens, who sees the crisis as potentially beneficial for insurtech firms.
Speaking in an interview with Reinsurance News, Wiens noted that the pandemic has forced many re/insurance companies to adapt to new ways of working, with varying levels of success.
For some, sales teams have been seriously restricted as they lack the technology and experience to sell digitally, while time-consuming manual processes in underwriting, customer service and claims handling have presented major challenges for those working from home.
But for insurtech firms not dependent on physical sales structures or paper-based processes, it could represent an opportunity to extend their technological lead over traditional competitors.
“The coronavirus pandemic is accelerating digital transformation throughout all areas of society,” Wiens told Reinsurance News. “Insurtechs could benefit from this. Their modern technical infrastructure and digital solutions give them an edge over traditional insurance companies.”
Getsafe, a German insurtech firm backed by Munich Re, could itself be in a strong position during the pandemic according to Wiens, as it utilises 100% digital policy and claims processes, as well as a digital sales structures and discussions.
“In this respect, I believe that the pandemic can be seen as a catalyst for digital transformation that will drive the insurance sector,” Wiens explained.
“Large, traditional companies will not go bankrupt overnight, and it will take time for insurtechs to gain significant market share. But the current crisis will set small and medium-sized businesses back further than before.”
The Getsafe CEO did acknowledge that the insurance sector works on a long-term business model, and will likely be less affected by the coronavirus crisis than other financial sectors, with business set to continue as usual for most existing customers.
“But the current crisis does have an impact on new business,” he added. “Customers are reconsidering whether or not to make personal appointments with a broker. They are switching to digital insurers and discovering the benefits. Many of them will not switch back after the crisis is over. That is the greatest danger for insurers – and the greatest opportunity for insurtechs.”
In many ways, COVID-19 will act as a stress test for start-ups, particularly for those in the tourism and mobility sector, such as Flixbus, Airbnb and GetYourGuide.
These industries will most acutely feel the economic and social impacts of the pandemic, and many people are already postponing purchasing decisions or cancelling their plans completely due to uncertainty around the situation.
“Startups face a particular difficulty in that they are unable to use conventional financing channels because their business models are considered risky,” Wiens noted. “Almost every startup makes losses in its first few years, which is why venture capitalists provide seed capital. But currently they are hesitant to invest, which will put many startups in a difficult position.”
The German government has already assured that startups can apply for financial support from the economic stability fund, but Wiens warned that very few currently qualify for the relief package.