InsurTech firms raised a record $15.4 billion in funding in 2021 with 566 deals completed, according to CB Insights. Since then, investors have been driven to scale back some of their InsurTech bets due to the current economic environment and general below average performance of public companies.I have compiled some stats, trends, analysis on private market insurtech companies from leading research firms to give us a better picture of the current InsurTech landscape.
CBInsights –State of InsurTech Q2 2022 Report
After experiencing a steep 56% QoQ drop in Q1 2022, InsurTech funding remained flat at $2.4B in Q2 2022. It is important to note that while InsurTech funding didnot rebound, it also did not drop further in Q2 as did the overall FinTech category. However, Insurtech deals did drop 16% QoQ to hit 132 – the lowest count since Q4 2020 – and $100M+ mega-round funding share came in at 38% in H1 2022, falling below 40% for the first time since 2018.
While M&A deals dropped 23% QoQ in Q2 2022, they still hit the second-highest number in recent years, signaling a continued interest in Insurtech consolidation. Insurtech M&A activity is on pace for a record year as there were 46 M&A exits in H1 2022 which represents 79% of 2021’s total. Notable deals include LexisNexis’ acquisition of Flyreel and Munich Re’s acquisition of Clareto.
Globally, Europe saw the most notable global deal share growth QoQ with its share rising by 7 percentage points to hit 29%. While they captured a larger share of deals, Europe-based startups also watched funding fall QoQ. The US leads in InsurTech funding at $1.5B and 60 deals in Q2 2022.Europe leads in early-stage deal share, the US leads all other stages. U.S. InsurTech startup funding brought in $2.6B in H1 2022, less than a quarter of 2021’s total
While life & health insurance deals dropped by 5% QoQ, funding jumped 13% in Q2 2022. The increase in funding was largely driven by rounds raised by health insurance tech startups, notably Alan’s $193M Series E and Clarify Health’s $150M Series D.
InsurTech Insights – What Insurtech Industry Trends to Watch for in 2022
These are a few trends that many think will be driving what’s to come next in 2022:
Prediction #1: Rapid adoption of artificial intelligence by leading insurance carriers will grow with an emphasis on implementing a touchless claims process. – “With major insurers realizing its benefits — timelines cut from weeks to seconds, spared resources so experts can focus on complex cases and overall happier customers who settle faster — we’ll only keep hearing about touchless claims and it won’t be long before it becomes an industry standard.”
Prediction #2: Insurers will weigh tech solutions to address the impact of climate change. – “Ever-advancing technology, like Tractable’s AI and others such as risk modelling or underwriting automation, has opened the door to InsurTech solutions that can be quickly and efficiently implemented.”
Prediction #3: Established incumbents will feel intensified pressure to accelerate tech offerings to compete with up-and-coming industry players. – “We’ll see more partnership and even M&A activity between incumbents and insurtechs.”
InsurTech firms have been pioneering digital technologies to help the insurance industry improve efficiencies and deliver better customer experiences. EY reports that “many firms are embracing embedded insurance and platform-based business models leaning on data-driven insights to help facilitate customers’ digital journeys”.
InsurTech firms that can meet insurance companies’ vital business needs in areas such as data analytics, increasing scale, or using technology to differentiate the brand, will be positioned to win.
EY states that there are four key technology themes that are shaping the industry: artificial intelligence, big data, embedded insurance, as well as cloud-based platforms and as-a-service business models. The four key commercial themes driving investment activity are: growing third-party technology spending, prioritizing automation, monetizing big data assets, enhancing cybersecurity and RegTech.
The key for InsurTech investors is to quickly and accurately identify firms and ideas that best meet customers’ current and emerging needs and help insurance carriers pursue new avenues of growth.