Insurtech funding set a new $7.1bn high water mark in 2020
Counting 377 total deals throughout the year, itself also a record, Willis found the following:
Q4 was particularly successful for the industry, securing 103 deals at a value of $2.1bn total and with 67% of the achieved funds attracted by P&C-focused firms. Also, compared with 2019, insurtech in 2020 experienced a 12% increase in funding and a 20% increase in deal volume.
Insurance vindicates its focus on technology
Another significant detail noted by Willis is the wider geographic distribution of countries attracting investment: 23 locations in total, including Hong Kong, Brazil and Switzerland, which the company notes as being previously “dormant” in the sector.
“While our industry is facing extreme issues relating to COVID-19, we also have an unprecedented level of access to technology and technologists who can help it prevail during these times of instability,” said Dr Andrew Johnston, Global head of InsurTech at Willis Re.
“Many InsurTechs probably feel vindicated that the insurance industry has been forced to realise the value of technology. The issue for insurtechs now is to survive months, possibly years, of market uncertainty."
Risk management in contemporary insurance
In our , we spoke with Dr Johnston on the topic of risk management in a highly volatile market. Insurtech may have secured its , but the real challenges still lay ahead; digital transformation efforts must be maintained if insurance is to survive:
“I actually think [the pandemic] has not been a bad thing at all for our industry from an operational perspective,” he told us. “I don't think that any single initiative or business could have accelerated the digitisation process to the degree that COVID has been able to [...] if an insurer cannot manage risks digitally, they're probably in trouble.”
Global investment in insurtech reaches all-time high
Global investment in the InsurTech sector reached an emphatic record during H1, 2021, as half-year funding of US$7.4 billion exceeded full-year investment in 2020, and in every other year, according to the new Quarterly InsurTech Briefing from Willis Towers Watson.
It was found that the latest quarter saw 162 deals yield more than $4,824 million in investment, a 210% increase over Q2, 2020. The enormous quarterly total, itself more than any annual total before 2019, was driven largely by 15 mega-rounds of $100 million or more. Collectively, these deals reached $3.3 billion, or two-thirds of total funding during the quarter. The money was raised predominantly by later-stage players seeking expansion.
A need for the insurance community to reflect digital changes
Series B and C fundraisings drove a large number of deals in the second quarter, but the number of early-stage deals also increased. They were up by more than 9% from the previous quarter, and 200% from pandemic-stricken Q2, 2020. As a percentage of overall deals, early-stage activity held roughly steady, at 57%.
InsurTechs focused on distribution accounted for 55% of start-up deals, and for 10 of the 15 mega-rounds. Most of the distribution InsurTechs target reduced dependence on agent channels. Of all Q2 deals, 73% were for P&C-related InsurTechs, while 43 companies raised funds for L&H technology. Funds were raised by companies from 35 countries, including new entrants Botswana, Mali, Romania, Saudi Arabia, and Turkey.
Dr. Andrew Johnston, global head of InsurTech at Willis Re, said: “As technology changes our lives, society will demand an insurance community that reflects and supports our changing, digitally empowered behaviours. Consumers and businesses increasingly expect insurance to be delivered when and how they want it, and risk carriers that fail to respond will fall away over time. To embrace technology is a minimum survival condition. Those that use it to redefine service in the insurance world will thrive. That means a positive future for InsurTechs that bring a truly differentiated business approach to our industry. Some of them will create untold long-term opportunities for themselves and the insurance sector.”