German-based digital insurance startup Wirecard has been accused of accountacy fraud. Does this represent a lowpoint for digital insurance?
Wirecard ran into trouble following allegations of accounting fraud were repeatedly raised by whistleblowers and subsequently reported by the Financial Times. This led Deutsche Bank to become uneasy with loans granted to the company to aid its expansion in the travle insurance sector. The German bank decided not to renew the loan, putting the company into financial difficulties.
The German authorities began a criminal investigation on 22 June 2020 into Wirecard. The company’s former CEO, Markus Braun, was arrested the same day. Just three days later, on 25 June, Wirecard filed for bankruptcy citing the reason of “over-indebtedness”. In some countries, such as the U.K., following a period of suspension Wirecard has been permitted to resume issuing e-money and providing payment services.
The Wirecard issue has not prevented other companies expanding within the digital insurance framework. In July 2020, the U.S.-based insurtech Lemonade went public. Lemonade is a direct competitor of Getsafe, and it provides young customers with insurance via a smartphone app.
Commenting on the pubic offering in the wake of Wirecard, Christian Wiens, CEO and Founder at Getsafe tells Digital Journal: “The Wirecard scandal discredits the entire fintech sector. Customers are sceptical, and investors will be cautious. This isn’t the case for neo-insurers. Yesterday, Lemonade proved that neo-insurers are well equipped to deal with a crisis – like the one we are currently going through with COVID-19. They are successfully establishing themselves in the market.”
The message Wiens is conveying is that despite the Wirecard stumble, the new insurance sector remains buoyant and the use of digital-led insurance remains an attractive one for consumers.
