Insurtech fundraising reaches all-time high

Global fundraising for insurtech startups has already reached an all-time high in volume in 2018 as of October with 204 deals, following 202 deals in the full year of 2017 and 174 transactions in 2016, according to the latest The Insurtech M&A Market Report by Hampleton Partners.

Fundraising transaction values reached $2.6 billion so far in 2018, close to the 2015 peak of $2.7 billion. In 2017, transaction values were at $2.2 billion, following $1.7 billion in 2016.

Since 2016 the insurtech sector has reported 151 acquisitions, with 22 buyers making more than one acquisition, according to the report. Strategic buyers, such as insurance enterprise software company Sapiens International and insurtech Charles Taylor, are in the driving seat with 87 per cent of all transactions, versus private equity’s 13 percent, the reported noted.

“There’s an army of insurtech startups which are challenging legacy players and the market has adopted a survival of the fittest environment,” said Miro Parizek, founder of advisory firm Hampleton Partners. “Since organic growth and investing in R&D is a long-term game, M&A has been the natural solution to the incumbents’ problem of accelerating technological transformation and evolving their traditional business models for the 21st century,” Parizek added.

One key example of an insurance giant innovating via M&A is Zurich International which bought Bright Box and its AI-first, connected car platform Remoto, according to Hampleton. Zurich Insurance Group is working with data gathered by its connected car technology to develop personalised auto insurance and services.

Artificial Intelligence (AI), blockchain, machine learning, robo-advisory and Internet of Things (IoT) technology innovators are being absorbed by traditional insurance companies and vendors, Hampleton noted. New business models such as microinsurance, usage-based and peer-to-peer insurance are being enabled by technology innovation which is driving down the cost base, it added.

“Next-generation insurance is having to evolve quickly with new business models and a greater focus on technology innovation,” Parizek said. “Insurtechs have become a natural threat to incumbents, but also potential valuable partners in this changing landscape. It’s a sector that’s growing rapidly and stands to capture a meaningful share of the value pools within a few years. How quickly incumbents adapt to these inexorable market changes will determine the size of their share in the next generation of the insurance industry.”

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