Insurtech scored one of its best years in 2020, says S&P

By William Girling
Despite the difficulties of 2020, S&P Global’s market analysis found that global insurtech experienced one of its best investment years so far...

Despite the difficulties of 2020, S&P Global’s market analysis found that global insurtech experienced one of its best investment years so far.

Among the achievements recorded are:

  • US$3.83bn in IPOs, the largest sum since 2015 ($2.96bn), with Q4 netting $1.59bn alone
  • 20 IPOs in total
  • Nine flotations

Insurtechs represented four of insurance’s top five largest IPOs:

  • GoHealth: $913.5m
  • Root: $654.7m
  • Duck Creek: $465.8m
  • Lemonade: $366.9m

Despite this success, S&P tempered its praise by nothing that strong IPO showings did not necessarily translate to overall market success. It notes that Lemonade stock has been regarded as consistently bullish since July, while GoHealth’s fortunes have been less positive (although its stock is now on the rise).

Furthermore, Lemonade must still overcome its enduring struggle to turn a profit. An article from Nasdaq posits that, no matter how popular it is with the millennial generation, the company’s 70% net loss ratio is simply unsustainable.

Digital transformation fuels investment

The emphasis on insurtech investment could be explained by the wider market’s recognition that digital transformation will be essential to insurance’s survival in 2021 and beyond, particularly as tech ecosystems threaten to disrupt the sector.

“Investors are backing insurtech startups – having raised US$12bn globally since 2010 – in a display of confidence for technology driven businesses,” said Shay Alon, MD and Global Lead for Life and Annuity Software at Accenture. 

“Most carriers recognise that ecosystems are already disrupting their businesses and that disruption will intensify. In addition, the COVID-19 crisis is likely to permanently realign protocols in the market as consumers come to expect constant access to their personalised digital services.

“The industry has been on a steady path toward fundamental change, but the pandemic has been a real inflection point for why there is no time to waste in their journey to a more digital future. Customers have moved online and insurers must meet them there,” he concluded.

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