Global Insurance Fintech Investment Grew by 237% in 2015: Accenture Research

April 27, 2016

While insurance historically has been a laggard in the fintech race, it is increasingly a high-growth investment area in the fintech field, according to research from Accenture.

Accenture’s fintech research reveals that the overall increase in global insurance investment levels has grown by more than one-third, with a 237 percent hike from approximately $800 million in 2014 to $2.6 billion in 2015.

In addition, the report revealed that the number of fintech deals in the insurance sector has more than quadrupled since 2011.

Some of the key trends that emerged from the research were that delivering cost savings and efficiencies through fintech has been a particular focus for insurers as insurance automation accounted for 67 percent of all fintech insurance deals.

Additionally, Accenture’s findings also indicate that insurance is a more collaborative area than banking when it comes to start-ups – with 70 percent of global investment going into ventures that seek to enhance the propositions of existing incumbents, compared to 30 percent that is going into disruptive start-ups (or those that compete directly with insurers).

Last year, on the other hand, disruptive fintech ventures accounted for 56 percent of investments versus 44 percent in collaborative ventures.

Insurers are beginning to operate more collaboratively with start-ups because insurers don’t perceive them “as true disrupters to their business models and therefore there is more openness to partner with them,” said Accenture in a statement about the report.

Other findings from Accenture’s analysis on “Insurtech Investment Trends” include:

  • Through fintech innovation, insurers have the opportunity to recreate the customer experience in a way that is relevant for the customer, without having to rebuild their internal structures.
  • In 2015, non-life insurance innovations received 80 percent of the funding and insurance automation accounted for 67 percent of all fintech insurance deals. Automation investments include front-office innovations like “robo advice”, which is of increasing interest to insurers. In addition, many insurers are looking into automation to add efficiency to the back-office function.
  • Most insurers still base their underwriting and pricing on a limited view of customer variables, pooling risk and generating premiums. However, emerging technologies, such as wearables and connected devices, can help insurers create new models that help them determine the types of products and services their customers want and need based on their behavior patterns and provide them in near real-time.
  • The Internet of Things, big data and analytics, digital channels and artificial intelligence provide a broader range of data and a more holistic view of the customer, which can help insurers build tailored products and services priced for individual customers.
  • Insurers will adopt wearable technologies into their businesses and expect wearable devices to have a significant impact on their organization. For example, leading insurer John Hancock plans to provide new policyholders with a free fitness tracker band to track their health progress and rewards healthy living with a reduction in life insurance premiums and 31 percent of insurers are currently using wearables to engage customers, employees or partners.

As a result of these trends, Accenture expects massive growth in insurtech investment. “Accenture has already started to incorporate insurance into our Fintech Innovation Lab and are likely to place a heavier focus on it as we move forward,” the company said.

On April 18, the company also announced a joint venture with Apax Partners, a global private equity firm, which is designed to drive innovation in insurance software. The joint venture is designed “to accelerate the innovation of claims, billing and policy administration software for the insurance industry.”

As part of the joint venture, funds advised by Apax will acquire a 60 percent stake in Accenture’s Duck Creek Technologies, with Accenture retaining a 40 percent stake. The joint venture will operate as a new and independent company. (Duck Creek Technologies is a provider of P&C insurance software and services delivered on-premise or via Duck Creek On-Demand, a software as a service model.)

Source: Accenture

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