The SME insurance market is ripe for digital disruption, according to Willis Towers Watson’s inaugural insurtech briefing.

The quarterly report says 25% of premium in the small business insurance sector will be digitally underwritten by 2020.

This potential is the driving force behind significant investments made by “many of the industry’s biggest players”.

“From Travelers’ £400 million ($695.73 million) acquisition of UK SME insurance broker Simply Business in mid-March to Munich Re’s development of Digital Partners, its specialist division focused on investing in and partnering with emerging distribution start-ups, the industry is evidently embracing new technologies,” the report says.

Insurtech funding volume totalled $US283 million ($381.93 million) in the first quarter, down 64% on the corresponding period last year.

But the decline is most likely due to start-ups moving from fundraising to product launch stage, the report says.

Willis Towers Watson Securities CEO Rafal Walkiewicz says the industry must be open to change.

“As incumbents face pressure from entrepreneurial businesses targeting friction costs within the traditional insurance value chain and the continued influx of alternative capital into the (re)insurance sector, it is important for industry leaders to demonstrate an open mind, embrace innovation and invest in potential applications,” he said.

“(Re)insurance market participants must also not be afraid to ‘fail fast’ if they are going to identify technologies that will help them adapt their existing business models to position themselves for success in a streamlined insurance industry that is likely to look much different in the future than it does today.”