Insurtech could be an enabler rather than a disruptor of the traditional insurance model, according to Aon’s latest annual Global Insurance Market Opportunities report.

The fast-growing entrepreneurial Insurtech segment — which has secured approximately $14-billion in investments to date across more than 550 start-ups globally — may have a more supportive role for insurers than previously thought via “open architecture innovation”. Established organisations play an important role in open architecture innovation, by collaborating in a framework which has both standards that enable scalable solutions for clients and the flexibility that encourages entrepreneurial innovation.

The report reveals that three of the leading areas where analytics can help with insurance industry growth — cyberrisk, casualty catastrophe risk, and pathogen risk — could become increasingly insurable through collaborations with Insurtech companies, and technology and analytics providers, thereby opening up new opportunities for insurers and reinsurers to provide new and enhanced products.

Meanwhile, the on-demand economy (ODE) is presenting both opportunity and disruption to the traditional insurance sector, through the requirement for a greater range of time-based insurance products that recognise that assets such as cars and homes are increasingly used on both a commercial and personal basis — driven by the increasing utilisation of services such as Uber and Airbnb.

In terms of disruption, the report highlights that US motor pure premiums could decrease by more than 40% of their 2015 levels by 2050 — the point at which autonomous vehicles are expected to be fully adopted. However, while accident frequency is anticipated to reduce as a result of driverless technology, the study warns that accident severity could increase and that a transfer of liability could occur, from drivers to car manufacturers and software providers.

Paul Mang, Aon’s Global CEO of Analytics, says: “We know that the insurance sector is facing challenges in the current macroeconomic environment, so we should expect leading organisations in the industry to drive change. We are already using technology to make us more efficient as a sector, and to expand into emerging risk markets. However, the true transformation will happen as we re-imagine risk management altogether. In this new environment, collaborations, or what we call open architecture innovation, will be key to creating net new growth.”