Insurtech funding drops by more than half during first quarter

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Covid-19 pressures seen as the primary reason for the drop

Quarterly global insurtech funding was down by more than half (54%) in Q1 this year as coronavirus led to a drop.

This is according to a report ‘Quarterly Insurtech Briefing Q1 2020’ from Willis Towers Watson (WTW), it found that insurtech investment worldwide totalled $192m for the first three months of 2020.

Global deal count for was up 28% (96) over Q4 2019 during the first three months of the year, with the UK recording a 10% rise in deals.

But the quarter did see some megadeals worth more than $100m with a series D issue by PolicyGenius – the only deal to enter this territory.

Andrew Johnston, global head of insurtech at Willis Re said: “Again, Covid-19 is a likely culprit for less engagement from industry capital as (re)insurers focus their attention on other, perhaps more pressing issues.

Johnston said that it has been a “particularly interesting” quarter for global insurtech.

“It is clear that Covid-19 has had a material impact on later-stage investments, and (re)insurers are holding back. Despite the very large percentage drop this quarter when compared with the last, we are still seeing a huge amount of activity in early-stage funding rounds, across a very large number of deals, he added.

“The relative downturn of (re)insurer participation in this round would explain why we have seen fewer megadeals, affecting the overall amount raised significantly, which is not surprising as (re)insurers increasingly participate in later stage.”

quarterly-insurtech-briefing-q1-2020-covid-chart_Willis Towers Watson

Source: Willis Towers Watson (WTW), Quarterly Insurtech Briefing Q1 2020

Down

Meanwhile, WTW also reported that seed and series A financing was down 9% compared with the previous quarter at $223m.

But the early stage deal count rose three percentage points to 51% of all deals.

Insurtechs that focused on property and casualty (P&C) insurance increased their share of total funding to 83% – marking the largest gap for life and health funding since Q3 2016.

Whereas B2B-focused companies accounted for over half (55%) of recorded deals in Q1 2020.

The value of strategic investments by (re)insurers dropped by 8% from Q4 2019 and 43% from the highest point reached in Q3 2019.

Opportunities

Investor, Matthew Jones said: “We believe there are opportunities to improve the industry in pretty much all lines of business, life and non-life, personal and commercial, and across the insurance value chain, from underwriting to distribution to asset management.

“We also believe that there is a maturing cohort of insurtech companies worthy of investment. We, as investors, are enablers of innovation.

“Entrepreneurs are the real leaders. By and large, they acknowledge that insurance is complex, and they have gained a respect for the industry.”

Stephen Jones, UK P&C insurance lead at WTW Insurance Consulting and Technology business, added: “Motor insurers’ focus on deploying emerging technologies has and will continue to be on operational efficiencies and customer experience across the various policy life stages, while seeking competitive advantage in areas of excellence very specific to insurance.

“Genuinely new product forms enabled by technology, on the other hand, will logically be focused on new and existing niches. The opportunities for insurers to use technology to enhance products and reduce costs are significant. Among incumbent insurers, reducing costs typically offers more bang for the buck than product proliferation.”