(Reuters) — Global investment in insurance technology companies totaled $2.41 billion in the second quarter, down 50% from a year earlier, as investors grew nervous about frothy valuations, broker Gallagher Re said in a report released on Thursday.
Insurtech companies make up around 10% of the fintech sector and have seen several successful fundraisings in recent years. German digital insurance startup Wefox said last month it had raised $400 million from investors, valuing the business at $4.5 billion.
But some insurtechs have found it difficult to compete with incumbents and have suffered from the broad selloff in tech stocks.
American general insurer Lemonade’s shares have more than halved since it went public two years ago.
One issue is that blockchain — a database shared between computers where records are hard to change — touted a few years ago as a way for insurance companies to cut costs and become more efficient has not lived up to its expectations.
“Blockchain is a binary decision ̵1; it’s wonderful for things like accounting,” said Andrew Johnston, global head of insurance technology at Gallagher Re, adding that, by contrast, “insurance is highly negotiated, highly flexible and ongoing. Blockchain also happens to be extremely expensive.”
The fall in valuations could lead to insurtech M&A deals or divestitures that were “unlikely” six months ago, Johnston said.
However, insurtech investment rose 8% from the first quarter, the report showed.