Emerging markets are the potential forerunners of the innovation race – often able to bring new solutions to the market at a faster pace than peers operating in highly developed markets – according to Willis Towers Watson’s Q3 InsurTech briefing.
With an emphasis on the China and Emerging Asia operating environment, Willis said firms in these regions are able to attract intellectual and financial capital from partnerships unseen in developed, highly regulated countries with high penetration of insurance products.
“China is the world’s third largest domestic insurance market, having recently recorded the most significant growth of any region globally, and we expect that continued growth of insurance in China will be relatively less constrained by existing infrastructure compared to more developed insurance markets, said Rafal Walkiewicz, CEO of Willis Towers Watson Securities.
As the Chinese insurance revolution facilitates new mainstream products, like pure protection and product return, the Chinese economy is simultaneously driving the creation of new distribution models, Willis explained.
“Underpinning our analysis of insurance markets in China and Emerging Asia is our fundamental expectation that as the insurance industry becomes increasingly globalized and the value chain is dissected into more specialized critical functions, underlying technology supporting these functions will become increasingly portable across geographic markets.
“In observing legacy-free markets, like China, we have an opportunity to look forward and see the likely direction of the insurance value chain in the developed world.”
In Emerging Asia InsurTech investment is on the rise with generally strong interest in the sector, although the third quarter saw a stark 68% drop in funding volume at just $312 million compared to the previous quarter’s $985 million.
The 48 P&C and L&H transactions in Q3 represent the third most transactions completed in any quarter to date, showing the vibrance of the market.
In addition, six companies in Emerging Asia, including three companies in China, raised capital during the third quarter.
Hong Kong based insurance comparison platform CompareAsiaGroup’s $50 million round was the largest transaction in Q3.
Mark Hvidsten, Deputy Chairman at Willis Re, said that despite the “daily noise about InsurTech,” barriers to entry in the insurance industry remain high for the vast majority of InsurTech start-ups.
“But, irrespective of the limited impact that InsurTechs have had on developed insurance markets, it is becoming increasingly clear that legacy-free markets are proving to be more forgiving for innovative start-ups.”
