Global investment in insurtechs was $US916.71 million ($1.39 billion) in the three months to June 30, down 34% from January-March and the first quarter to come in below $US1 billion in three years, Gallagher Re says. 

Average deal size fell 16% to $US12.39 million ($18.84 million) across only 97 deals, according to the latest Global InsurTech Report. The quarter included $US16 million ($24.33 million) investment in Australia that went to POP Holdings and Reask. 

The US, UK, India and France dominated early stage investment.   

Gallagher Re Global Head of Insurtech Andrew Johnston says around a third of insurtechs funded in 2012-to-2021 – when $US42 billion ($63.86 billion) was invested – no longer trade. 

Insurtech is now in a secondary phase focused on beneficial deliverables, rather than “digital usurpation and quick cash,” he says. 

Insurtech is experiencing a “very healthy inflection point focusing on sustainability” after the height of “extremely frothy” valuations, he says, and we are “now at a truly fascinating inflection point in global insurtech; from some expensive lessons we have become much smarter as an industry.”  

The established presence in 2023 of artificial intelligence (AI) and other technologies at industry incumbents is largely attributable to insurtech, he says.  

While some insurTechs may have been “sacrificial lambs and fodder”, Mr Johnston says the net benefit has been significant and “arguably a good return for roughly a decade that cost $US42 billion of research and development for an industry that processes some $US6 trillion ($9 trillion) of premium globally annually”. 

"Has the $US42 billion been worth it then? At an individual company level, probably not but what it has done is move things along at a pace and with a communal urgency.” 

Insurtechs can now benefit from investors who have a more realistic sense of what can be achieved and the patience required to achieve it, Gallagher Re says, with “greater stoicism and consistency of the investors...that really understand this space and the time and patience required”. 

Mr Johnston says there is no shortage of investor interest or appetite for insurtechs focused on clear commercial outcomes, and these are gaining more attention than insurtechs only offering technology. 

Early-stage funding was its lowest since late 2017, and Baring’s $US150 million Series B investment in Accelerant was the only “mega-round” above $US100 million – the third consecutive quarter with only one deal of that size.  

“I’ve seen a real flight to maturity by investors over the last two or three years,” Gallagher Re Executive Director of Strategic Advisory Paolo Cuomo said. “They increasingly seek confidence that those they are backing can convert the idea into a source of recurring revenue, and manage the challenges of keeping the startup going through the long sales-cycles common in insurance.” 

A track record of the founders “making tough decisions” is also regarded as important when seeking Series A funding, Mr Cuomo said. 

See the report here.