Quarterly InsurTech Briefing Q4 2017

The sobering of InsurTech

February 1, 2018
Rafal Walkiewicz, global CEO of Willis Towers Watson Securities, offers insights on InsurTech activity in 2017.

The fourth edition of our Quarterly InsurTech Briefing offers an opportunity to reflect on a full year’s worth of InsurTech activity in 2017 — another year of record investment into the space from both financial investors and (re)insurers.

The year 2017 brought a new trend to the industry, which we describe as The Sobering of InsurTech. Incumbents sent a clear message to potential disruptive outsiders by investing heavily in start-ups and technology; (re)insurance companies appear to have assumed a semblance of control over the InsurTech revolution. Here’s a summary of the topics covered in our latest report.

Should incumbents feel safe?

Our Q4 Industry Theme feature focuses on (re)insurers shaping InsurTech. Sixty-five percent of incumbent investments to date have focused on enabling the current value chain, as (re)insurers have attempted to enhance the efficiency of product delivery, underwriting, claims and other administrative functions. External capital entering the industry is searching for potential unicorns, funding disruptive ideas and breakthrough technologies that may seem crazy at first.

New capital bets on high-growth products

Our Transaction Spotlight feature highlights an example of a significant bet on fundamental changes to (re)insurance sourced from outside of the traditional (re)insurance industry. Guidewire’s $275 million acquisition of Cyence (cyber risk modeling start-up) marks a technology company’s entrance into an attractive niche market, which may represent one of the most compelling growth opportunities in the (re)insurance sector. It’s interesting that one of the leading cyber risk modeling firms has been acquired by a technology vendor, and not a (re)insurer.

Who benefits from modularization?

Our Thought Leadership feature further focuses on the InsurTech sobering phenomenon and the associated growth of incumbent interest in technologies addressing their back-office needs. With technology moving forward at an unprecedented pace, incumbents are increasingly electing to outsource functions to highly specialized new entrants, renting evolving modules of technology that can be tailored to suit their individual needs.

Who were the winners in 2017?

Our (re)insurer innovation survey shows that innovation does not necessarily correlate with geography, size or even underlying product. Four companies voted to be most innovative (Munich Re, Lemonade, AXA and Swiss Re) vary in size from the hundreds of millions to over $30 billion, represent personal or commercial lines products, focus on insurance or reinsurance and have global or local platforms.

Incumbents fuel investment momentum in Q4

In Q4, $697 million of InsurTech funding rounded off 2017 at a total of $2.3 billion, a 36% increase from $1.7 billion recorded in 2016 and the second highest total for any year to date. (Re)insurers, directly and through corporate venture arms, are increasing their activity in the sector and expanding their focus to invest in a broad range of technologies with potential applications to their core (re)insurance businesses.

sobering of InsurTech heat map

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