As of October this year, global fundraising for insurtech startups had already surpassed the volume reached over the entirety of 2017, according to advisory firm Hampleton Partners’ latest Insurtech M&A Market Report.
The report finds that as of October, 204 deals had been closed, compared with 202 transactions closed over 2017 and 174 closed over 2016. So far, 2018 has seen fundraising transaction values of U$2.6 billion, closing on the $2.7-billion peak noted in 2015. Total transaction values hit $2.2 billion in 2017, and $1.7 billion in 2016.
According to Hampleton Partners, there have been 151 acquisitions in the insurtech sector since 2016, with 22 of these buyers making more than one acquisition. Eighty-seven per cent of transactions have been driven by strategic buyers, with private equity making up the remaining 13 per cent.
“There is an army of insurtech startups which are challenging legacy players and the market has adopted a survival of the fittest environment,” commented Miro Parizek, Founder of Hampleton Partners. “Since organic growth and investing in research and development is a long-term game, mergers and acquisitions have been the natural solution to the incumbents’ problem of accelerating technological transformation and evolving their traditional business models.”
Indeed, insurers seem to be becoming ever more tech savvy, recognising the potential of innovative startups making use of artificial intelligence, blockchain, machine learning and the like, and absorbing them into their more traditional models in order to drive down costs and improve offerings for customers. Additionally, tech innovations are enabling the development of all-new business models, from microinsurance to peer-to-peer.
“Insurance is having to evolve quickly,” Parizek added, “with new business models and a greater focus on innovation. Insurtechs have become a natural threat to incumbents, but also potentially valuable partners in this changing landscape. It’s a sector that’s growing rapidly and stands to capture a meaningful share of the value pools within a few years.”
The speed and agility with which incumbents adapt, he concluded, will determine how big a share of the pie they can lay claim to as the industry inexorably evolves.