Insurtech funding volume drops 64% YOY in Q1

Insurtech funding in the first quarter of 2017 dropped severely compared to the same period last year as significant investments made in 2016 reach the product launch phase, according to Willis Towers Watson Securities.

The insurtech industry attracted $283 million in the first quarter of 2017, a 64 percent decline from $783 million in the first quarter of 2016, according to a report titled Quarterly InsurTech Briefing.

Total recorded transactions were at 38 in the first quarter of 2017 representing a 12 percent decline from 43 transactions in the fourth quarter of 2016 and a 36 percent decline from 59 transactions in the first quarter of 2016. At the same time, activity outside the US has been increasing: The US accounted for 67 percent of transactions since 2012 but only 47 percent in the first quarter of 2017.

The overall decline in funding is likely a results from start-ups moving from fundraising to product launch stage, according to the report. Technology driven life insurance distribution platform Ladder Financial launched in January 2017 for example. Slice Labs expanded availability of its on-demand homeshare preview release to Colorado, Maryland, Massachusetts, Texas and Washington (initially launched in Iowa) and started a preview release of a proprietary on-demand per use insurance product to select ridesharing drivers in March 2017, the report noted.

Fabric Technologies launched its accidental death life insurance product in 32 states in March 2017 while Urban millennial focused property/casualty insurance platform Jetty launched in March 2017. Furthermore, individual personal item insurance platform Trōv expects to launch in the US in 2017.

“As we reach a phase of ‘peak hype’ for InsurTech, the industry now needs to focus its attention on sustainable technologies that can increase the insurance value proposition, so that early, perhaps inflated expectations, can be developed into productive applications and innovations that will survive and become profitable business drivers,” according to the authors.

The potential, the report highlights, is significant with the small business insurance sector seeing up to 25 percent of total premium being digitally underwritten by 2020, and this potential has been the driving force behind the significant investments made by many of the industry’s biggest players. From Travelers’ £400 million acquisition of UK small and medium-sized enterprises insurance broker Simply Business in mid-March 2017, 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.

“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,” said Rafal Walkiewicz, CEO of Willis Towers Watson Securities.

“(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 in order to position themselves for success in a streamlined insurance industry that is likely to look much different in the future than it does today,” he added.

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