Technology investments in the insurance sector continued at record speeds last year, with two recent reports showing that insurtech financing broke records.
Although there were signs of a slowdown in the first quarter of 2022, experts say that interest in the sector remains strong.
The investment interests in insurtech come from the venture capital sector, hedge funds and private equity capital, as well as established real estate / non-life insurance companies or “incumbents”.
“It is safe to say that there is still a continuing interest in insurtech for 2021,” said Emmalyn Shaw, managing partner of Flourish Ventures, a venture capital firm with interests including insurtech and data and analytics in San Francisco.
“Opportunities for innovation in the insurance industry will continue to attract venture capital,”; said David Hoffman, Westfield, New Jersey-based vice president and chief research officer at Forrester Research Inc.
“We have predicted that the pace of investment would continue due to the potential for change in the industry. The disruptive technology in the industry continues to attract investor interest,” said Hoffman.
The established insurance companies’ interest in insurtech helps to differentiate the sector from other technology investments, says Shaw.
“The composition of investors specifically for insurtech is slightly different from the technology in general because the number of established players who are actively involved and look strategically at insurtech. They are an important contributor to the financing,” says Shaw.
Andrew Johnston, Nashville, Tennessee-based global head of insurtech at Gallagher Re, a unit within Arthur J. Gallagher & Co., said the established community supports the technology and wants to integrate it into its business through partnerships.
“We see traditional players acquiring startups. They see the opportunity to accelerate their own technology initiatives, both customer-oriented or more mundane, such as cloud-based valuation, quotation and issue technology,” says Hoffman.
Insurtech’s investments reached $ 19.8 billion in 2021, an increase of 176% from the previous year, according to a recent report from Forrester, with a fourth-quarter funding record of $ 4.3 billion.
A report by Gallagher Re shows insurtech financing at a record high of $ 15.8 billion in 2021, more than the total of $ 13.4 billion in 2020 and 2019, with more than half of the total financing, approximately $ 9.4 billion, invested in real estate. / non-life insurance company.
Different methods explain the differences, but both reports show massive increases in capital flowing to the sector.
While the Gallagher report shows funding for the first quarter of 2022 at $ 2.23 billion, a sharp decline from the fourth quarter of 2021 to $ 5.3 billion, the decline is less pronounced compared to $ 2.55 billion in the first quarter of 2021.
Still, Shaw said that “when you look ahead a little bit, you see that there is a slowdown.” However, she warned against drawing conclusions from a single quarter, as well as other sources, adding that investors cyclically optimize and change investment portfolios.
In addition to existing insurance companies, financing comes from a variety of players, including traditional venture capital companies as well as hedge funds and private equity funds, which “enter the venture and play an active role in insurance as well,” according to Ms. Shaw.
By the end of 2021, more than 1,200 non-industrial investors were participating in the insurance technology sector, Johnston said.
Technology that is financed and acquired is controlled by the customer–is facing innovations for back-office tools and automation. Mr. Johnston said the most successful will be “those with ubiquitous solutions that can be sold multiple times to multiple operators.”
Tampa, Florida-based insurtech Coherent announced in late April that they had secured $ 75 million in a Series B funding round at an early stage, bringing the total funding to $ 89 million.
Coherent provides web-based software that can convert spreadsheets to code so that data can be shared and used more easily and quickly between parties.
“We act as a translator between the business and the Excel files to speed up processes,” said John Brisco, CEO and co-founder of Coherent. The information in the spreadsheet is placed in an application programming interface, he said.
Mr. Briscoe is a real estate / accident veteran, having served as Chief Information Officer and Chief Operating Officer of Asia and Latin America for the Australian insurance company QBE Insurance Group Ltd.