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.”
Investors should brace for an imminent collapse in the entire cryptocurrency market following a steep decline in the value of Bitcoin over the last year, a new study from Juniper Research has warned.
12 October 2018
Insurance companies and banks have successfully prevented eight in ten cyber attacks on their organisations this year, up from approximately two in three over 2017.
02 October 2018
Nearly two-thirds of large businesses with over 10,000 staff are looking to deploy new blockchain projects, up from around half last year, a new survey has found.
18 September 2018
Why InsurTech? A Pressured Insurance Value Chain
By Andrew Sagon, Andrew Johnston and Matthew Wong
InsurTech is a burgeoning phenomenon that is modernising the insurance industry. It is disrupting the traditional value chain whereby insurers offer loss protection, and shifting the emphasis to risk mitigation. Incumbents face disintermediation as investors in search of higher yields pour money into insurance-linked instruments in the capital markets. And entrepreneurial businesses are targeting friction costs and inefficiencies within every aspect of the traditional value chain.
Nimbleness and agility will unlock potential
By Elinor Friedman, Andrew Harley and Klayton Southwood
Recent Willis Towers Watson surveys in the U.S. have shown that P&C and life insurers in developed markets are taking seriously the potential of big data and predictive analytics to improve their businesses. Nimbleness and agility, rather than brute force, are likely to be key to realizing that potential.
Driven by technology, toolkits and talent
By Claudine Modlin and Graham Wright
Advanced analytics is helping some insurers offer innovative products and solutions. What do insurers need to know about the changing nature of analytics and whether it is worth the investment? Claudine Modlin and Graham Wright discuss technology, toolkits and talent — topics that may help you decide.
Risk transfer is part of a comprehensive solution
By Adeola Adele, Patrick Kulesa, Kevin Madigan and Alice Underwood
Given the dynamic nature of cyber-risk, taking a multidimensional approach that integrates board governance, technology solutions, behavioral change and risk transfer solutions can help reduce risk to a manageable level.