GlobalData’s insurance analyst says that as insurtech continues to grow, there could be some ’real contenders’ to the major insurers
This year, insurtech funding rounds are breaking the pandemic gloom by helping to insert these businesses ”successfully into the insurance value chain”, according to data and analytics company GlobalData.
Investment in insurtech was strong between 2018 and 2019, but then the Covid-19 pandemic hit in 2020.
Jazmin Chong, insurance analyst at GlobalData, said: “Pre-pandemic it was rare for insurtechs to raise hundreds of millions of dollars in one funding round, let alone be able to reach a $1bn evaluation.
”However, the pandemic has accelerated the demand for digital and personal insurance services and increasing consumer demand for digital services shows no sign of abating.
“More and more tech-centric players in the insurance space are now being able to raise enough funding and reach multibillion dollar evolutions.
”The success of insurtechs’ recent funding rounds proves that such startups have been able to insert themselves successfully into the insurance value chain.”
Becoming a unicorn
German-based insurtech Wefox raised $650m in a series C funding round, reaching a $3bn evaluation on 1 June.
The insurtech focuses on personal lines and uses data analytics to achieve a better loss ratio when measuring risks.
Meanwhile pet insurer Bought by Many has also raised $350m in funding, reaching a $2bn evaluation to become a unicorn.
Also this month, connected vehicle data firm Wejo launched a special purpose acquisition company (SPAC), which raised $330m.
Chong added: “As insurtech continues to grow, these companies could prove to be real contenders to the well established insurers in the industry.
”The pandemic has made it clear that increasing consumer demand for digital services shows no sign of abating and that digitalisation is the key to staying relevant in the future market environment.”
Some more essential than others
Meanwhile, GlobalData’s Smart Money analytics tool found that global investment in insurance dropped by 17.3% in 2020 compared to the previous year, reaching a total value of $3.5bn.
According to GlobalData, this drop emphasises the impact of Covid-19, showcasing the economic uncertainty that left investors feeling cautious.
Despite the drop, the tool also found that not all insurtechs have been equally impacted by the pandemic’s economic slowdown.
According to the tool, businesses that were focused on ‘enabling business solutions’ in insurance were the worst hit from investors, experiencing a 66.8% drop in investment for 2020 in comparison to 2019.
However, insurtechs with a heavy focus on artificial intelligence (AI) experienced a 6.1% increase in investment over the same time period.
Chong said: “The [division] in insurtech investment for 2020 emphasises that certain insurtech themes are proving to be more essential since the Covid-19 outbreak.
”An area of interest has been product personalisation through data analytics and digital claims processes. Insurtechs that have focused on these areas have been able to continue thriving.”