After the success of our London based chapter and our recent Federal Government Grant win, it is understandable to ask the question ‘Why Australia?’ when looking at Insurtech Gateway and their move to the land of green and gold.
Whilst most would assume areas like Shanghai or Singapore are logical next steps for insurtech hubs, the truth is Australia has a lot to offer start-ups. Australia is ranked 5th in the world on the Global Entrepreneurship Index (which measures the health of the entrepreneurship ecosystems in 137 countries) and approximately 10% of its GDP is generated from the finance sector (which includes insurance) making it uniquely suited to support insurtech ventures.
Big players experiment here
Suncorp, IAG and QBE, also known as the Big 3, all have venture funds and incubation programs based in Australia. IAG in particular has a strong Australian presence, with an incubator in Sydney that “provides founders and startups with a unique environment that fosters the opportunity to explore.” Suncorp also runs a 90-day digital incubator program and is preparing to start their third round of intake.
Our big banks are also leading the world in the early adoption of contactless payments.
Outside of classic insurer activity, other players have recognised the uniqueness of the Australian market and have made the move to set up shop. In February 2019 Microsoft opened up a technology centre in Sydney. That same year Microsoft Australia announced a partnership with DXC Technology to transition their public and enterprise clients to the Microsoft Azure Cloud.
Not only Microsoft, but global giant Amazon Web Services also established a Cloud Innovation Centre in Australia, the first of its kind in the Southern Hemisphere. The core objective of the centre is to “drive social good by solving real-world health, wellbeing and social challenges affecting Australians.”
Based on all the innovation and advancements we’ve seen in Australia in just the last year from big corporations with different backgrounds, it’s clear Australia is an emerging hub for innovation and global corporations are starting to take notice.
Looking at Australia’s ecosystem, it is well established for insurtech ventures. Sydney is classified as a ‘major hub’ in the Asia-Pacific region. A major hub refers to well-established global cities that have ecosystems ranked in the top 25 and a history of high performance. In addition to this, major hubs often attract a higher concentration of region’s founders, capital and service providers.
It isn’t just Sydney that makes Australia so appealing though, but rather their performance on a more holistic scale. Both Melbourne (#36) and Sydney (#27) rank within the top 40 global startup ecosystem rankings and have a significant amount of government support and funding helping drive their innovation. In fact, from 2018-209 the number of insurtechs operating in Australia grew by 53% and experienced a 75% increase in partnerships between incumbents and insurtech to drive these active collaborations. Australia is also known for ‘thinking globally from day one’ and the proof is in the 2019 results that showed 28% of businesses have significant operations outside of Australia[JW1] .
Unique and important problems to solve
Coupled with their mature market and global thinking, Australia also presents interesting and unique opportunities for insurtech to innovate and create solutions. Studies have shown that insurance covers just 15-25% of economic losses following natural disasters. Additionally, 94% of the normalised losses arise from weather-related perils including bushfires, tropical cyclones, floods and severe storms. Knowing that weather perils are increasing, this gives way to an increasing number of problems to be addressed with insurtech solutions. In addition to this, the UK market is a great proxy for what will work in Australia and provides insights “into the future” and further enables globally scalable models. This also gives us a unique insight from our working relationship with our London chapter, and can help expand the reach of our startups.
Although it may not be the first country that comes to mind when thinking of opportunities in insurtech, Australia is steadily establishing themselves are one of the leading hubs in the Asia-Pacfiic region and we are excited to help other players launch in the growing ecosystem.