The data and analytics said insurtechs will need to refocus as a result of tough economic times

Total investments in insurtech firms have fallen significantly in 2022 after being impacted by the Covid-19 pandemic and the cost-of-living crisis, according to data and analytics firm GlobalData.

The firm’s Deal’s Database revealed that there had been $1.0bn (£8.19bn) invested into insurtech by the end of July 2022, representing 49.5% of the total annual 2021 figure – this suggests growth is unlikely in 2022.

In 2021, the value of global insurtech investment dipped by 79.6%

Ben Carey-Evans, senior insurance analyst at GlobalData,said: “These trends are likely due to a combination of factors. As highlighted, investment into the sector has dried up somewhat.

“Funding rounds are essential to keep insurtechs running in the early stages before they become profitable, so reduced investment is a significant barrier.”

The news follows Lemonade cutting 20% of Metromile’s staff post acquisition in August 2022 – the insurtech had previously stated that it would not reduce headcount.

Meanwhile, Nova Benefits cut 30% of its staff in June 2022 and Zego laid off 17% of its staff in July.

Refocusing insurtechs 

GlobalData said that it was likely that, in tough economic times such as a pandemic or the cost-of-living crisis, consumers were turning to familiar and established brands – due to trust in claims payouts.

Carey-Evans added: “Insurtechs will need to focus on offering value to consumers, as that is what they will be looking for in the immediate future.

“This can be achieved by relying heavily on artificial intelligence to cut processing costs, or by offering innovative products such as pay-as-you-drive and on-demand policies. The latter would allow consumers to control how much they pay, or receive cover only when it is strictly needed.”

On another note, many insurtechs focus on gadget or possessions insurance, which is not considered an “essential purchase by consumers”, according to GlobalData.

As a result, these lines will likely to be hit as disposable incomes decrease and consumers look to reduce expenditure.

  • Insurance Times has converted dollar amounts into pounds using an exchange rate of £1 = $1.22, which was correct as of 1 August 2022.