Gallagher Re’s global head of insurtech tells Insurance Times the key takeaways from the reinsurance broker’s latest report, explaining why the US market presents an opportunity for UK insurtechs
The first quarter of 2022 saw the highest ever recorded participation of early stage investment in insurtech firms, according to Gallagher Re’s inaugural Global Insurtech Report.
The report, which was published on 29 April 2022, noted that global funding for insurtech businesses in Q1 this year reached $2.2bn (£1.75bn) - and this trajectory is showing no signs of slowing down.
Speaking exclusively to Insurance Times, Andrew Johnston, global head of insurtech at Gallagher Re, said: “We are potentially on the cusp of a better democratisation of capital – with the caveat that you should not read too much into one quarter.
”But, this is the biggest ever quarter for early stage funding, which would suggest that there is a democratisation of investment capital.”
For Johnston, this means there is more money being spread around the market now, compared to the mega funding rounds of the past.
In terms of the number of funding deals, Johnston said the insurtech sector is “on par” with last quarter - Q1 2022 recorded 143 deals in total, although there were fewer mega deals, he added.
“If this is the beginning of a trend of more democratised capital - more money going in during the early stages, and less people taking massive gambles at the mega round end - that could be a really interesting thing for us to observe,” Johnston noted.
American money
Johnston said that insurtech investment is currently coming mainly from non-insurance industry investors that are based outside of the UK.
He explained: “It’s fair to say that there is a lot capital available. There are a number [of] non-industry investors looking at insurtech now - perhaps cash coming from people that do not know our industry as well as some UK investors might be willing to take a bet on something considered risky.
“My sense is that American investors generally think the quality of UK businesses is high. So, UK businesses may feel that access to cash [in the US] is so much easier, without [understanding] that they might be a very attractive investment proposition to an American investor.
“[The UK is] a much more competitive market - we have a much longer history of technology in our industry relative to the US.”
US-based Johnston added: “There’s a general sense that the UK has got its insurtech act together. That view is held for the Israeli insurtechs [too].
”It’s not unusual for US investors to really like certain European businesses. But that money isn’t readily available here - we don’t have a culture of investing into any business, so [it speaks] volumes of UK businesses, or at least how they are perceived by investors.”
Online shopping
A driving factor in promoting online insurance purchasing was advertising for price comparison website (PCW) GoCompare, added Johnston.
Although the PCW is only just taking off in the US, the firm was been operating in the UK since 2006, when it was founded by Welsh businesswoman Hayley Parsons.
Johnston feels that GoCompare’s adverts featuring a moustached opera singer ”did a lot” for the culture of insurance shopping and buying.
He said: “Culturally that did a lot as all of a sudden, people were saying ‘what is this?’ It then became very normal for people to buy insurance online. I don’t think there has ever been that single initiative to bring this idea to the masses.”
The trouble with a platform like GoCompare being successful in the US, however, is because there are ”50 different states [and] 50 different types of insurance regulation, so it’s not as simple as creating one website in California, for example, and it being ok for everybody,” Johnston added.
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