Insurtechs becoming more attractive as acquisition targets for insurance groups

There could be more opportunities for insurtechs to be acquired by larger insurance groups due to an increased interest in technology.

That was according to Justin Clarke, chief underwriting officer at managing general agent (MGA) ManyPets, who was speaking during the Earnix Excelerate conference in London last week (25 September 2024).

During his keynote, entitled The evolution of pricing: Insurtech influence in the UK market, he told delegates that the UK has around 280 insurtechs, including five unicorns, making it the “largest cluster” outside the US.

He said these firms were “obsessed with the customer”, good at finding niches and had already struck multiple deals - for example, he noted Lemonade had partnered with Aviva to launch buildings and contents insurance in the UK.

Clarke added: ”Insurance companies become very interested in the technology and the problem it solves. 

“[It] can take a long time to get that sort of innovation and generate capacity, so it is often easier for insurance firms to go and buy an insurtech.”

Insurtech investment

Clarke made the comments after Gallagher Re’s Global Insurtech Report Q2 2024, published 1 August 2024, revealed that global insurtech funding saw a 39% quarter-on-quarter surge between April and June 2024 to reach £992m ($1.27bn), up from £729.4m ($912.3m).

It also found that the overall insurtech deal count in Q2 2024 was the lowest since Q2 2020, which suggests a shift towards larger, more impactful investments.

And the average deal size rose to £14.44m ($18.46m), the highest level since Q3 2022.

Speaking about the insurtech market, Clarke noted that a lot of these firms were currently private equity backed and, in turn, do not want to hold the capital to underwrite [products]”.

“That’s a big driver for insurance because [these firms] have not got that overhead capital, so insurtechs can focus on distribution,” he added.