There were a record 66 InsurTech investment deals recorded in the first quarter of this year as insurers continued to look to start-ups to improve their claims handling and underwriting excellence.
That is according to new data from Willis Towers Watson (WLTW), which reveals that $724m (£542m) was invested in insurance technology companies in the first three months of this year.
That is 16% more than in the final quarter of 2017 when $624 was invested, with transaction sizes also found to be growing after seven deals worth more than $30m were recorded.
“Most of us know that to remain relevant, we need to embrace change,” Willis Re global chairman, Paddy Jago, said. “I have always believed that we cannot view change and not change ourselves.
“The incumbent market has actually been relatively receptive to taking a serious look at the digital innovation that is going on around us, and those driving it.”
It was found that insurance sector incumbents prefer investments in start-ups developing technology that can improve their own processes and help ease distribution costs.
In contrast, venture capital (VC) investors tend to focus on InsurTechs that address customer pressure points such as price, ease of access, and underserved markets through innovation.
These investors are product-focussed and solely driven by investment returns, tending to pursue revolutionary ideas due to their lack of meaningful access to the insurance market.
However, it was also found that specialist investors are creating a hybrid model that combines the traditional VC investor mentality with the industry expertise of incumbents.
WLTW Securities CEO, Rafal Walkiewicz, said: “For InsurTech start-ups, the funding scene is more complex, and finding the right investment partner has become more difficult.
“Hybrid models will continue to evolve, and may be the ultimate answer for InsurTech entrepreneurs looking to balance industry expertise and the traditional VC value-creation mentality.”
InsurTech is expected to help generate over $400bn (£312bn) worth of premiums worldwide by 2023, more than double the estimated $187bn today.
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