“The sobering of insurtech” was how brokerage giant Willis Towers Watson described last year’s trend involving incumbents worldwide, as 2017 saw record investment into start-ups and technology not only from financial investors but also from insurance firms and reinsurers.
Produced by Willis Towers Watson Securities and Willis Re, in collaboration with CB Insights, the latest Quarterly InsurTech Briefing reported that 35 private technology investments by (re)insurers in the fourth quarter and 120 for the whole of 2017 were the highest totals recorded in any quarter and year to date, respectively. Investments have been in line with efforts to enhance the efficiency of product delivery, underwriting, claims, and other administrative functions.
According to the report, there has been an increased emphasis on user experience, with (re)insurers exploring acquisitions or partnerships with leaders in the space and continually evaluating opportunities to provide capacity for consumer-responsive products. It also cited research from Aon that says 55% of insurtechs seek to change how customers interact with insurance companies.
“Incumbents sent a clear message to potential disruptive outsiders: by investing heavily in start-ups and technology, (re)insurance companies appear to have assumed a semblance of control over the insurtech revolution,” said Rafal Walkiewicz, chief executive of Willis Towers Watson Securities.
A major takeaway highlighted by the report is the emerging trend of (re)insurers increasing their activity in the sector and expanding their focus to invest in a broad range of technologies with potential applications to their core businesses. Allianz Ventures, for instance, participated in a US$35 million financing round for quantum computing software development firm 1Qbit last November.
“(Re)insurers are evaluating the cost associated with early adoption of new technology; this investment can yield great reputational and financial benefits if handled well, but companies that position themselves as fast followers can reap a fair amount of benefit with relatively less risk,” said Alice Underwood, global head of insurance consulting and technology at Willis Towers Watson. “However, companies that wait too long may find they can’t make up lost ground once anti-selection and other competitive pressures set in.”
Overall, including investments from other sources aside from (re)insurers, the fourth quarter posted US$697 million in insurtech funding volume for a 2017 total of US$2.3 billion.