Genuine disruption of incumbent insurers by insurtechs has been “extremely limited” despite almost $US50 billion ($77.91 billion) of global insurtech investment, Gallagher Re says.
Gallagher Re Global Head of Insurtech Andrew Johnston says the “era of rushed growth for growth’s sake” at the expense of profitability is coming to a close, and success has typically come only in areas where incumbents have been embraced and respected.
“Hubristic rhetoric around disruption is declining in sequence with the growing realisation that profitable carriers – no matter how ‘outdated’ – … are to be supported, not displaced,” he said.
The current macroeconomic environment “doesn’t tolerate losses,” Mr Johnston tells insuranceNEWS.com.au, and many insurtechs are now under pressure to retain risk which “in practice makes them more like incumbents”.
“You cannot go it alone in this industry. You need risk, asset, market, distribution partners. A lot of people wasted a lot of money finding out that that was, in fact, the case,” he said.
Mr Johnston says there has been “degrees of disruption” by one incumbent using technology more ably than a traditional competitor.
“They’ve used that technology to sort of marginally outpace that traditional foe,” he said.
Gallagher Re’s latest quarterly Global Insurtech Report says there was $US2.35 billion ($3.66 billion) of global insurtech investment in July-September, down 2.5% from April-June. There were 140 deals and insurance firms made 24 investments.
Average deal size fell 8% to $US20.42 million ($31.82 million) as early-stage funding soared 48% on the second-highest quarterly number of seed-funding deals ever. Insurtechs attracted $US1.2 billion ($1.87 billion) in mega-round funding, double the previous quarter.
Brisbane-based insurtech ExtrasJar, which was founded in 2019 and offers flexible health and pet insurance plans, raised $600,000 in the latest quarter.
Mr Johnston says Australia is a “palpably exciting hotbed for insurtech innovation,” with a “wonderful combination of incumbent participation, entrepreneurs, new startup businesses, investors”.
Australia has “possibly got it right more than anywhere,” he says, praising a “healthy degree of pragmatism” and no one trying to “own the space”.
“Australia’s got it really right in as much as they’ve brought together all of the right sort of market participants and from day one tried to work together versus having pockets of innovation in isolation, trying to go it alone and just spending a lot of money finding out that that’s actually a very difficult thing to do,” he said.