Investing in technology-oriented insurance ventures (insurtech) is clearly a global trend and almost half of all the money being poured into them globally is going into artificial intelligence and internet of things startups, new research finds.
The research from Accenture, which includes an analysis of CB Insights data on 450 insurtech deals over the last three years, appears in a new Accenture report titled The Rise of InsurTech.
The CB Insights data reveals that global insurtech investment totaled $1.7 billion in 2016 and both the volume and value of deals have almost doubled since 2014.
While more than half of all deals still take place in the U.S., insurtech has gone global with the United Kingdom, Germany, China and India now being significant markets and other countries coming on.
Only about 14 percent of the insurtech deals in 2016 had an insurance industry investor or partner, although the industry’s participation has been rising every year. The report does find that insurers and reinsurers are also investing in other types of startups including in the areas of payments and data security.
As for the insurtech deals that took place in 2016, the three sectors of big data/analytics, AI and IoT collectively accounted for 56 percent – and approximately 70 percent of the total value invested.
However, according to the report, the combined number of deals across AI and the IoT increased 79 percent in 2016. Even though the two technologies represented only one-quarter (24 percent) of the 216 insurtech deals globally last year, the two sectors accounted for 44 percent or $711 million of total insurtech investment — compared with just 10 percent of global insurtech investment in 2015.
“We’ve seen a rapid acceleration of investment into and deal activity around intelligent automation and IoT start-ups over the last 12 months,” said Roy Jubraj, a co-author of the report and Accenture’s Digital & Innovation lead in the company’s Financial Services practice in the U.K. and Ireland. “These technologies are primed to disrupt the industry in the years to come.”
Accenture now has a dedicated insurtech stream as a part of its London FinTech Innovation Lab.
More investment is still going into personal lines than commercial lines startups, although the number of commercial lines deals has grown. The report also notes that many personal lines technologies could likely be used in commercial lines eventually.
Despite the political and economic uncertainty around the United Kingdom’s vote to leave the European Union, the country continued to attract strong insurtech investment in 2016. Even though the number of insurtech deals in the U.K. remained flat, the value of the investments there more than doubled last year, to almost US$19 million. Investment in AI and the IoT also increased significantly, to almost $1.7 million in total.
Germany and France also saw strong growth in investment in 2016 to round out the top three insurtech markets in Europe. With insurtech’s investment expanding globally, the United States’ share of deal volume in 2016 dropped slightly, from 63 to 56 percent of total deals. The percentage of insurtech investment for the rest of the world (deals outside the traditional hubs) more than doubled, from 11 percent in 2015 to 23 percent in 2016.
Insurtech’s shifting geographic focus maps closely to similar global trends across fintech. Recent Accenture fintech analysis showed that China, and more broadly, Asia Pacific, are playing a more prominent role as investment destinations for fintech capital. While global investment into fintech ventures grew 10 percent in 2016, to US$23.2 billion, Asia Pacific as a region for the first time eclipsed North America, with fintech investments there more than doubling in 2016, to US$11.2 billion.
According to the report, AI and the IoT promise increased levels of personalization and better real-world outcomes for customers. Artificial intelligence has the potential to take the industry from assessing risk based on past experience to monitoring risks in real-time and mitigating, or even preventing, losses for customers. The IoT promises to enable insurers to offer more-personalized, real-time service; boost operational efficiency; and price products with greater precision.
“The rise in insurtech is further evidence of the growing role that new technologies are playing in shaping innovation across financial services,” said Julian Skan, a senior managing director in Accenture’s Financial Services practice who oversees the FinTech Innovation Lab London. “The next challenge for insurtech startups is the same as what the more mature fintechs are now facing – being able to translate that investment into growth and customer acquisition.”
The report was released in conjunction with Accenture’s Fintech Innovation Lab in London, which in January kicked off the largest program in its five-year history, with 20 startups selected from a global field of more than 300 financial services technology entrepreneurs. Eight of the 20 startups presented to a group of venture capitalists and financial-industry executives.
The FinTech Innovation Lab London is modeled on similar programs co-founded by Accenture in New York City, Hong Kong and Dublin. Globally, the labs’ firms have raised more than $480 million in venture financing after participating in the program, and the 36 companies that participated in the London FinTech Innovation Lab have increased their revenues by 170 percent, on average, since completing the program.
Source: Accenture report, The Rise of InsurTech
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