Global, Tuesday 1 November 2022: $2.35 billion of global InsurTech-sector investment was made in Q3 2022, just 2.5% down from Q2’s total, but the headline figure masks significant dynamics. Early-stage funding soared by 48.1% quarter on quarter, driven by the second-highest quarterly number of seed-funding deals ever. At the other end of the spectrum, P&C InsurTechs garnered $1.2 billion in mega-round funding through investments of $100 million or greater, double that of Q2, according to the latest quarterly Global InsurTech Report from Gallagher Re, the global reinsurance broker, published today.
Despite the mega-rounds, average deal size fell 7.6% to $20.42 million in Q3. The decline reflects the volume of early-stage funding; total deal count was up 6.1%, to 140 deals. The effect was most pronounced in L&H funding, which slid from $917.85 million in Q2 to $579.19 million in Q3. Deal size in that segment slumped 38.6% to $15.24 million in Q3, averaged over 51 deals (compared to 40 in Q2). Total funding of P&C InsurTechs was up 18.8% to $1.77 billion. (Re)insurers made 24 investments, pushing the market towards a three-year high for strategic funding in 2022.
Dr Andrew Johnston, Global Head of InsurTech at Gallagher Re, said: “Third-quarter investments this year were made at a particular inflection point for the global InsurTech sector. Pressure is mounting on those companies that sold the idea of endless growth to secure funds. The extent to which some founders truly believed they could grow their businesses (to the degree they were indicating) in our industry will always be a topic for discussion, but it seems very clear now that the era of rushed growth for growth’s sake at the expense of profitability is coming to a close.
“Hubristic rhetoric around ‘disruption’ is declining in sequence with the growing realisation that profitable carriers (no matter how ‘outdated’), intermediaries, and traditional markets are to be supported, not displaced. Genuine disruption has been extremely limited despite almost $50 billion of global InsurTech investment. Success has typically come only in areas where incumbents have been embraced and respected. Meanwhile, there’s increasing pressure on risk-originating InsurTechs operating as MGAs to begin partaking in the process of retaining risk, which in practice makes them more like incumbents.”
The quarterly series of Gallagher Re Global InsurTech Reports in 2022 focus on specific geographies. The Q3 2022 report covers Asia Pacific, and opens with a ‘snapshot’ of InsurTech in the region. Q3 2022 was the region’s highest funding and deal count in the year to date, with APAC-based InsurTechs having raised a total of $999.77 million across 76 deals. In this most recent quarter, 53.5% of all disclosed APAC funding went into India-based InsurTechs, which raised an impressive $210.76 million. In terms of all deals ever completed, InsurTechs from 18 APAC countries have raised $7.77 billion through 447 deals , which equates to 17.71% of all InsurTech fundraisings ever. During H1 2022, APAC hosted 11 mega-round deals and boasts three of the top 10 InsurTech nations in terms of total funding contribution: China (3rd), India (4th) and Singapore (9th).
The November Report includes: case studies of the InsurTechs FWD, a full-stack pan-Asian life insurance business with approximately 10 million customers across 10 markets; Cover Genius, a distributor which provides embedded cover for customers of large digital companies; Bangkok’s AppMan, a B2B service provider which develops apps intended to enhance personal lines customer experiences; and Singapore-based B2B tech provider InsureMO, which provides middleware platforms that supply insurers with APIs, product templates, data pipes, etc.
The Report’s ‘Deal of the Quarter’ dives into Zopper, one of India’s leading embedded insurance platforms. Zopper has raised $100 million over five funding rounds, including $75 million in September’s Series C round, and targets GWP of $300 million by March 2023 and an IPO in the next five years. This quarter’s ‘Regional Specialist’s View’ is provided by George Kesselman, Chief Commercial Officer at ZhongAn Tech and co-author of The InsurTech Book; while the ‘Industry View’ comes from Ted Ohkuma, Head of Tokio Marine Innovation Lab in New York.
‘The Role of the Insurance Ecosystem’ is delivered by the India InsurTech Association, and features a conversation with its co-founders Prerak Sethi, Shwetank Verma, and Subhajit Mandal.
Finally, in ‘Broker’s Hour’ Mark Morley, Gallagher Re’s Managing Director of Asia-Pacific, focuses on the characteristics of the APAC market which set it aside from others, and he said: “Asia is a fast-growing digital economy with high mobile penetration, increasing digital literacy, and affordable internet access. All that contributes to a readier acceptance of new technology trends. This is especially true in emerging Asia, where the demographics are skewed towards the tech-savvy younger generations set to be the mass affluent consumers of the future. They have fundamentally different purchasing behaviours and preferences. Against that backdrop, some insurance-sector incumbents see InsurTech as a threatening disruptive force, while others consider it an enabler for greater customer engagement and value creation, with the potential to tap into new markets and customer segments.”