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Majors looking to buy in tech expertise, Deloitte says 

Recent acquisition trends signal big insurers’ growing interest in the insurtech sector, Deloitte Consulting principal Prashanth Ajjampur says.

Larger investments are being funnelled into niche areas and recent deals “could be an indicator of a rising increase in activity in the small commercial insurance sector in 2024”.

As insurers look to grow in-house talent and use artificial intelligence more often and more effectively, they may look at insurtechs focused on AI solutions as acquisition opportunities.

“Larger companies within the sector may jump at opportunities to acquire not just the tech but also the talent from these insurtech companies,” Mr Ajjampur said. “These trends are just the beginning of what we’re going to continue to see.

“We will likely see targeted entry into niche markets, such as cyber or small commercial, which will allow current players to grow their market share.”

Into next year, Deloitte expects interest to centre on insurtechs specialising in cyber, AI and embedded insurance that integrates cover into retail, home and motor transactions.

“There is certainly an increasing sense of urgency around AI,” Mr Ajjampur said. “The actual benefits yielded remain somewhat questionable. However, the industry has seemingly decided that AI is crucial and will augment human capabilities.

“As a result, regulations around AI – particularly around transparency and trust – are evolving, which has the potential to impact mergers and acquisitions activity.”

Rising interest rates slowed M&A “to a crawl” in the insutech sector, and that may continue for “the foreseeable future”.

Still, Deloitte is “cautiously optimistic when it comes to M&A activity in the insurance technology space”.

“There’s a bit more wiggle room within certain niches that, if tapped into, could spur a degree of movement. We’re expecting opportunity to arise in specific niche areas,” Mr Ajjampur said.