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Insurtech investment drops by 80% in 2021

Ben Carey-Evans, senior insurance analyst at GlobalData

The value of global investments into insurtech plummeted by nearly 80 per cent in 2021, a report by London-based data and analytics company GlobalData Technology has revealed.

The organisation said the 79.6 per cent drop in investments last year has led to job losses and tough economic conditions for insurtechs.

This follows a consistent flow of stories of insurtechs struggling in 2022.

The most recent is Lemonade, cutting Metromile’s staff by 20 per cent after completing the acquisition of the insurtech earlier this month. This came after Lemonade previously stated it would not reduce headcount.

Other high-profile insurtechs that have made similar moves in 2022 include Nova Benefits cutting 30 per cent of its staff in June and Zego cutting 17 per cent of its staff in July, GlobalData said.

Ben Carey-Evans, senior insurance analyst at GlobalData, said: “These trends are likely due to a combination of factors. As highlighted, investment into the sector has dried up somewhat.

“Funding rounds are essential to keep insurtechs running in the early stages before they become profitable, so reduced investment is a significant barrier.”

At the end of July this year, there had been $1 billion invested into the theme, which represents 49.5 per cent of the total annual 2021 figure, suggesting growth is unlikely in 2022.

GlobalData said it is also likely that in tough economic times -- such as a pandemic and now the cost-of-living crisis -- consumers turn to familiar and established brands, as they trust them more to survive and pay out claims.

It added that a lot of insurtechs focus on gadget or possessions insurance, which is not considered an essential purchase by consumers. As a result, it is a line that is always likely to be hit as disposable incomes decrease and consumers look to reduce their expenditure.

Mr Carey-Evans added: “Insurtechs will need to focus on offering value to consumers, as that is what they will be looking for in the immediate future.

“This can be achieved by relying heavily on artificial intelligence to cut processing costs, or by offering innovative products such as pay-as-you-drive and on-demand policies.

“The latter would allow consumers to control how much they pay or receive cover only when it is strictly needed.”

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Published August 30, 2022 at 7:49 am (Updated August 30, 2022 at 7:49 am)

Insurtech investment drops by 80% in 2021

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