Just how big an impact are insurtechs having on the insurance sector? New figures from the latest quarterly insurtech briefing from Willis Towers Watson suggest that impact is massive.
It has revealed that there were 66 insurtech investment deals during the first quarter of 2018 – marking a new high. Investment volume reached US$724 million – that’s up from US$624 million during the same quarter in 2017.
While there were seven US$30+ million investment rounds during the quarter, the briefing suggests that the insurance sector actually prefers minority investments in start-ups developing technology that will help ease their own commercial pressure points. In particular, they are focusing on improved processes and achieving an outsized investment return is now secondary.
“The incumbent market has actually been relatively receptive to taking a serious look at the digital innovation that is going on around us, and those driving it,” explained Paddy Jago, global chairman of Willis Re. “Most of us know that to remain relevant, we need to embrace change. I have always believed that we cannot view change and not change ourselves.”
Meanwhile, traditional venture capital investors have focused on insurtechs that address customer pressure points – such as ease of access and price. Typically, they are product-, rather than process-focused. It is believed that as they often do not have meaningful access to the insurance market they prefer to focus on “revolutionary ideas.”
As investment increases, some companies are also finding a third way – in terms of a “hybrid” model that blends traditional and incumbent reinsurer capital models.
“For insurtech start-ups, the funding scene is more complex, and finding the right investment partner has become more difficult,” said Rafal Walkiewicz, CEO of Willis Towers Watson Securities. “Hybrid models will continue to evolve, and may be the ultimate answer for insurtech entrepreneurs looking to balance industry expertise and the traditional VC value-creation mentality.”