Insurtech funding drops 64% in a year: report

Funding for insurtech startups dropped by 64% in the first quarter of 2017 compared to the previous year’s opening quarter, according to Willis Towers Watson Securities (WTWS). The statistics were included in WTWS’s quarterly InsurTech Briefing, which shows that the insurtech industry attracted $283m in Q1 2017, as opposed to $783m for Q1 2016. The number of transactions also reduced during the past 12 months – 38 in Q1 2017, representing a 36% decline from 59 transactions in the first quarter of 2016. There were some geographical trends as well – the investment in insurtech from Chinese (re)insurers accounted for 9% of the global total between 2012 and 2017, but just 4% in the latest quarter. However, rather than signalling a lack of appetite for this burgeoning sector, the report suggests that the low funding figure is due to the fact that so many projects and products are nearing launch status. Furthermore, investment in the most recent quarter has focused on Series-B funding and beyond as opposed to seeding and initial capital (8%), suggesting a maturity in the market but also a need to deliver workable products that produce a return on the considerable investment. “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,” states the report. The report singles out the small business insurance sector as a potential goldmine for insurtech providers and developers, given the forecast that by 2020, 25% of small business premiums will be digitally underwritten. This projection has fuelled a lot of the investment in the sector, states WTWS, citing Travelers’ £400m acquisition of UK SME insurance broker Simply Business in March 2017, and Munich Re’s development of Digital Partners, its specialist division focused on investing in and partnering with emerging distribution startups, as evidence that insurers are 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,” commented Rafal Walkiewicz, chief executive officer, WTWS. “(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. The report also features interviews with a number of insurtech startups focused on the commercial insurance sector and commenting on the challenge of bringing digital services to the commercial world. “The technology required to add enough value that customers pay attention is hard to build, it goes way beyond being able to quote online and requires real structural changes to almost all existing processes,” commented Matt Miller, chief executive of Embroker, a US-based insurance broker and management platform that uses cloud technology.

Insurtech funding drops 64% in a year: report

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