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Insurtech investment takes a breather

The number of global insuretech deals dropped more than 40 percent year over year as global investors focused on making a smaller number of high quality insurtech deals. Despite the large decline in deals volume, global investment in insurtech dipped only 13 percent between 2018 and 2019, in part due to the $3.5 billion acquisition of US-based Assurance IQ by Prudential Financial in October. Insurtech also attracted a significant amount of capital from the VC market, including several $100 million+ megadeals, such as Root Insurance ($350 million), Next Insurance ($250 million), and Hippo Insurance ($100 million) in the second half of the year. 

Global private investment Insurtech blue white chart

The insurtech space has matured, and thus a diminution in transactional volume is to be expected as early-stage funding dies down and M&A bidders focus on establishing category leaders in particular niches. However, aggregate deal value stayed robust thanks to mega-deals — again another sign of a maturing segment. It’ll be interesting to see if volume stays steady throughout 2020, more in line with historical totals, as opposed to the peaks of 2017 and 2018, given the degree of consolidation and market capture in the space.

Larger carriers completed multiple proof of concepts and have seen the capabilities that exist in insurtech, and now realize that these solutions will have a large impact on their future. They’re starting to partner with them, acquire them, do joint ventures with them, and incorporate them into their businesses. This is leading to significant growth within the insurtech sector. Over 2020, we’re going to start to see a maturing of insurtechs, from small departmental solutions into larger enterprise solutions.

Gary Plotkin
Global Insurtech Leader
KPMG International

Over 2019, investors in insurtech focused significantly on later-stage companies, a reflection of the larger trend of VC investors focusing on safer bets and proven companies. Partnership models are also growing in the insurtech space. For example, UK based Wrisk is working with RAC to trial a mileage-based care insurance product. As AI solutions become more mature and prevalent, there will likely be an upswing in investments in similar models of on-demand insurance. Regulators globally are working to understand the full ramifications of fintech, although a real regulatory leader in the space has yet to emerge.

Heading into 2020, traditional insurers will likely increase their focus on how to work best with fintechs in order to achieve value. There will also be increasing investments in companies able to help insurers deal with big challenges, such as cybersecurity and regtech, or data analytics and data mining. As data analytics becomes more robust, investments in solutions focused on enhancing life insurance products could also increase. On-demand insurance is also well positioned for investment growth, particularly in the small business space to address the needs of independent and gig economy workers. 

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