The problem Brexit presents for the UK's insurtech sector

Brexit has injected uncertainty into the insurtech sector, raising questions about trade, despite this it has also opened up new opportunities for investment.

Alexander Milne, head of insurance, trade and capital at the Department for International Trade said that despite this “uncertainty” he was “really positive” about the overseas demand for UK insurance and increasing the country’s demand for insurtech investment.

He urged the UK insurtech industry to help government understand what it can best do, such as supporting corporate industry.

It was the message from the second panel at Insurtech UK’s breakfast briefing ‘Insurtech: the next global success story for the UK?’, where discussed was where insurtech fits in the UK’s post-Brexit economic vision and what it might take to create a global player in the UK.

The alliance of insurtechs known as Insurtech UK said that it plans to work with the government on key issues such as dual pricing and data.

The group launched in November last year and currently has 44 members, 6 associate members and 13 service partners –with a further two sign-ups following the briefing.

Choice for innovation

Last year the government said it was pushing for the UK to be recognised as the “choice for innovation” but in comparison to Europe it is still way behind the curve on investment.

In August last year as part of the industrial white strategy paper, the government launched ‘The Allocations Booklet’ which highlights its aim to achieve 2.4% of gross domestic product (GDP) for the private and public sector in R&D claims by 2027, with a total of £1.7bn being committed to the first two waves of the Industrial Strategy Challenge Fund (ISCF).

Access to funding

Luisa Barile, Bought by Many’s chief financial officer, said that there was uncertainty for UK insurtechs around access to funding.

However, there are positive signs of change. Bruce McIntyre, partner at IMAS Corporate Finance LLP revealed that IMAS closed just over 100 insurance deals, and also advised Neos how to sell to Aviva.

Moreover investment activity for UK insurtechs was more than $1bn (£780m) in 2018, compared to $792m (£616) the previous year, according to the findings from KPMG’s latest Pulse of Fintech report. 

And the briefing heard there remains a good ecosystem in the UK which supports startups. John Warburton, founder of Konsileo, said the problem seems to appear further down the line in maintaining investment, even though HMRC has a very strong role to play in the early stages.

In this sense the group agreed that members had a great opportunity in front of them in setting the tone of what insurtech actually means in the UK, such as serving the sharing economy. In the US the way insurance products are sold is still “archaic” Milne weighed in.

Corporate vs financial investors

But corporate investors and financial investors are two different things. Milne added that “quite often we are playing the two sometimes against each other and sometimes in collaboration – when we are working with our clients yes we are trying to find the answer to their short term problems but also we are trying to de-risk their journey in the long-term.

“Often corporate funds can really help with that de-risking, the pulls for capital are quite nuanced, it depends on the situation. But a lot of those investors are overseas.”

He explained that the Department for International Trade is trying to help insurtechs connect with the right pools of capital and explore the right discussions, specific to discussions.

Biba announced in January via the firm’s manifesto that it was setting up a dating agency for insurtechs to connect them with brokers, as this was also a challenge.