Insurtech investment at all-time high, but barriers remain - Willis Towers Watson

Insurance technology fundraising reached an all-time high of $2.55bn in the first three months of this year, despite, or perhaps because of, the ongoing effects of the pandemic.

Total funding grew by 180% when compared with the first quarter of 2020 after an initial slump in funding as fears surrounding the Covid-19 pandemic reached its pinnacle, according to the reinsurance broker.

Total funding grew by 22% comparing consecutive quarters, that is the first three months of 2021 against the final quarter of 2020, as investment activity steadily bounced back, Willis Re noted.

“The record level of activity this quarter reflects our industry’s ever more widespread willingness to engage and adopt technology, which continues to grow at an unprecedented rate,” said Andrew Johnston, global head of insurtech at Willis Re.

“Technological innovation gains ground only when a community emerges to support it, and COVID-19, more than any other factor, has rapidly accelerated the change that was already well under way. Covid-19 has helped strengthen the narrative, and demonstrably illustrate the results technology can deliver, which are now being achieved at scale.”

Investment was driven primarily by non-life, property and casualty insurance focused companies, which represented 69% of deal share, according to Willis Re data. The number of discrete deals soared 42% higher than during the previous quarter, added the broker.

Eight companies accounted for more than $1.13bn in funding during the quarter, 44% of the total raised. That marks a new quarterly high for the number of mega-round fundraisings of $100m or more.

Next Insurance, Coalition, Zego, Sidecar Health, Pie Insurance, Clarify Health, Corvus Insurance Agency, and TypTap all raised sums equal to or greater than the threshold, propelling Coalition and Zego to billion-plus “unicorn” status.

Alongside these unicorn-making rounds was a 13 percentage-point increase in early-stage deals compared to the previous quarter. Some 60% of investments in Q1 2021 were Series A or B fundraisings.

The global footprint of insurtech investments also increased during what was the most geographically diverse set of early-stage start-ups in a single quarter, representing 24 countries including Bangladesh, Estonia, Brazil, Nigeria and the UAE.

Johnston suggested many of the current wave of insurtechs would not succeed because the technology “must make intellectual and commercial sense to…insurers, brokers, or insurance buyers.”

“For them, the technology itself is the least interesting part of the initiatives. Unfortunately, a failure to understand these realities, in addition to the general difficulty of entering our industry as a nascent business, means that many insurtechs will most likely never achieve the grandeur of their aspirations,” he added.