Insurer and reinsurer investment in insurtech broke records in 2017

Incumbents are increasingly reacting to the insurtech phenomenon by exerting an increasing level of influence over the global start-up community, according to Willis Towers Watson’s (WTW) quarterly insurtech briefing.

WTW describes the trend of increasing insurer and reinsurer activity in the sector as “the sobering of insurtech”.

Incumbents are acting both directly and through venture arms. They are investing in a broad range of technology.

Alice Underwood, global head of insurance consulting and technology, WTW said: “(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. However, companies that wait too long may find they can’t make up lost ground once anti-selection and other competitive pressures set in.”

A record-breaking year

In total, there was $2.3bn (£1.6bn) raised in insurtech funding over 2017, despite Q1 showing signs of a temporary slowdown. This is a 36% increase on 2016’s $1.7bn (£1.2bn), and the second highest yearly total on record.

During the year, there were 120 private technology investments by insurers and reinsurers. This is the highest to date.

Q4 was also a record breaking quarter for insurtech, with 35 private technology investments, the most to ever occur in one quarter.

Over two thirds (65%) of insurtech investment was in companies aiming to enable the value chain and enhance efficiency within incumbents’ core functions, such as underwriting, claims and product delivery.

Rafal Walkiewicz, chief executive of Willis Towers Watson Securities commented: “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. During the year, conversations about disruption of the existing value chain evolved towards an efficiency-driven search for incremental innovation. However, technology revolutions rarely result in redistribution of power among incumbents. It can be argued that incumbents’ collective response to insurtech hype has diminished their ability to recognize true disruption.”