InsurTech—Promise, threat or hype? Insights from stock market reaction to InsurTech innovation

Abstract

This study assesses the impact of InsurTech innovations on incumbent insurers, their competitors and the insurance industry as a whole using a unique dataset of global InsurTech start-up companies funding events from 2017 to 2019. We conduct an event study on insurers' stock returns and find mixed results on investors' reaction to insurers' investment in InsurTech innovations. Our results show that the stock market reacts positively to blockchain, peer-to-peer and on-demand digital insurance but negatively to digital analytics, digital distribution, cross-selling and cyber security innovations. We also find that the insurance industry is adversely affected by disruptive innovations brought in by competitors outside of the industry while disruptive innovations from incumbents do not have such a negative impact. These results are discussed and interpreted.