’Investors are becoming more democratic in their funding allocations,’ says global head of insurtech
By Clare Ruel
The recent collapse of two Insurtech 50 firms came as a surprise to me.
HugHub, which received an impact score of nine from 2023’s inaugural report from Insurance Times and Oxbow Partners, entered administration in April 2024.
The insurtech blamed a failed series B funding round for its closure – this is despite the fact that it won a bronze award at Insurance Times’ Tech and Innovation Awards last year for Best Use of Technology for Customer Experience.
Meanwhile, motor insurtech Humn.ai entered administration in December 2023. Humn.ai achieved an impact score of 11 in last year’s Insurtech 50 report.
These examples signify a strange time for insurtech funding.
According to Gallagher Re’s Q1 Global Insurtech Report, published in May 2024, global insurtech funding in 2024’s first quarter plummeted due to a lack of megaround deals.
But what exactly is happening in the UK around insurtech funding?
Funding plummets
I recently spoke to Andrew Johnston, global head of insurtech at Gallagher Re and author of the aforementioned report. He told me that “around 9% of the total [global] funding went into the UK”.
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According to Gallagher Re’s report, global insurtech funding dropped below $1bn (£800n) in 2024’s Q1 to $912.25m (£729.74m). This is compared to $1.103bn (£880bn) for Q4 2023, making this the lowest recorded quarter for insurtech funding in four years – since Q1 2020.
Johnston explained: “Investors are becoming more democratic in their funding allocations and spreading capital more evenly”.
This caution from investors can be seen as far back as May 2022, following the onset of the cost of living crisis and inflation creeping up.
Despite this reported hesitancy for 2024, Gallagher Re ranked the UK a “comfortable second place” for insurtech funding activity – behind the US – back in Q3 2023.
Johnston added: “The UK was one of the main drivers of the early insurtech scene – long may that continue.”
Investor appetite
Further discussion with key market participants sheds more light on the funding matter.
André Symes, group chief executive of Genasys, noted that “securing funding has become notably challenging, especially since the ”2020/21 insurtech-fintech boom”.
Symes said the Covid-19 pandemic played “a significant role in weeding out some of the overhyped insurtechs and capital markets have continued this trend”.
He continued: “Notably, no insurtech that has gone public is currently trading at a valuation higher than its initial public offering (IPO) price, with reductions ranging from 70% to 90% in that sector. As the market has normalised, these companies now face down rounds or choose to cut their losses.”
An IPO is when shares of a private firm are made public.
Similarly, Ambra Zhang – co-founder and chief executive of insurtech Juniper – said: “Investors are much more cautious on insurtechs nowadays and they expect more validation and thorough market research.
”Not every company can crack the code of mastering the complexity of the sector, overcoming regulation, building a sustainable business model and then chasing the growth expected by venture capital firms.”
Attractive technology
While I agree that investors have been exercising more caution around insurtech funding, does this really come down to what firms have ‘good’ technology?
Simon Pritchard, managing director of software firm IS2, noted that he had seen “insurtechs come and go” as the landscape changed over the last decade.
“It is becoming increasingly fashionable again to deliver a profitable bottom line and that’s no bad thing. Leveraged borrowing against the future may be ok, but at some point, it has to deliver a return,” Pritchard explained.
He continued: “If [the] continued naïve belief that sector transformation is purely about ‘good’ technology, then it’s tough out there – unless there are deep pockets for sustained long-term funding”.
For me, it has never been smooth sailing for insurtech funding, but – with investors taking continued caution – there could be more losers.
Whether there will be more insurtech casualties this year remains to be seen, but I am personally sad to see Humn.ai and HugHub disappear.
Interested in all things insurance technology and insurtech.
Writer of the monthly TechTalk section of the magazine and backchat. When not writing can be found doing yoga, at some kind of dance workshop, singing, globetrotting, or baking – not in any specific order.View full Profile
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