Support For Crowdfunding In Australia And The Implications For Insurers

Crowdfunding or crowdsourcing, the process of raising small amounts of finance from a large number of 'investors', has become an increasingly popular and rapidly evolving method for small to medium start-up ventures to raise funding. Some estimates have the value of the global crowdfunding industry at over USD 5 billion. The proposed changes to the regulatory framework in Australia with respect to crowdfunding may have an impact on insurers, particularly those that underwrite D&O and management liability insurance, and it is important that insurers start considering the implications of it.

There are two primary types of crowdfunding:

• Reward-based crowdfunding where entrepreneurs pre-sell a product or service to launch a business concept without incurring debt or sacrificing equity/shares.