Two-fold increase in InsurTech investment recorded

More than $1.3bn (£1bn) was invested in insurance technology firms in the third quarter of this year, double the amount recorded in the previous three months.

Thursday 20

Two-fold increase in InsurTech investment recorded

That is according to a new briefing from Willis Towers Watson (WLTW), which shows that, while individual investment rounds were larger, the number of deals fell 20% to 57.

The third quarter saw eight transactions worth over $40m, up from six, with continued active participation from reinsurers.

It was also found that InsurTechs are deploying parametric structures, which unlike indemnity-based insurance, pay out a predefined sum based on a trigger chosen as a proxy for a loss.

WLTW said parametric products align the interests of insurers and insureds in a way that traditional indemnity covers do not by removing incentives to manage down or inflate claims.

“The impact of parametric insurance can be much more profound than simply lowering frictional costs and mitigating the potential for fraud,” WLTW Securities CEO, Rafal Walkiewicz, said.

“The use of parametric insurance encourages conversation around risk mitigation. The simplicity facilitates a decoupling of functions of the value chain and allows for modularisation.”

WLTW found that some InsurTechs have acknowledged these benefits and combined technology and information within parametric or event-based structures to address existing inefficiencies.

They use a combination of third party and proprietary data, advanced sensors, and the capabilities of the Internet of Things to develop a new paradigm of insurance offerings for the connected world.

The briefing looks in detail at several examples, including companies using parametric structures to cover the risks of earthquakes, travel disruption, flash flooding, and horticulture.

WLTW senior economist, Dr Magdalena Ramada, said: “When automated correctly, besides being increasingly economical to deploy, parametric products are an important tool to access underserved segments and bridge coverage gaps.

“Their underlying policy structure and digital nature fundamentally reduce the complexity and frictional costs of traditional insurance, allowing for the simplicity, scalability and flexibility needed to cater to most of these markets.”

Most popular

  1. Digital transformation presents ‘acute’ skills shortage for financial services

    Financial services companies are looking to digital transformation at a greater rate than most vertical market businesses, and are facing an “acute shortage” of skills as a consequence.

    Friday 08

    08 February 2019

  2. Companies face $5.2trn in cybercrime losses over next five years

    Cyber attacks could cost businesses as much as $5.2trn (£4trn) in additional costs and lost revenue over the next five years.

    Monday 28

    28 January 2019

  3. 10-fold increase in blockchain and cryptocurrency investment

    Blockchain and cryptocurrency developers benefited from record levels of investment in the UK last year.

    Wednesday 09 

    09 January 2019

White paper

  • Quarterly InsurTech Briefing Q1 2017

    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.

     

     

  • Insurance big data – float like a butterfly, sting like a bee

    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.

    Download PDF

  • The new era of insurance analytics

    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.

    Download PDF

  • How can we manage the dynamic nature of cyber-risk?

    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.

    Whitepaper Form