With a few months left to round up 2021, the year has witnessed a record-breaking $10.5 Billion investment in the insurance technology start-ups, surpassing the $10 billion mark for the first time in any one year during the first three quarters. This is according to the new quarterly Insurtech Briefing from Willis Towers Watson PLC on Wednesday.
Key highlights of the report
- The third-quarter insurtech investment reached $3.13 billion, depicting only $12 million short of the total investment into insurtechs globally in 2018 and 2019 combined – when compared to the $4.82 billion in second-quarter 2021 – but up from $2.54 billion in third-quarter 2020.
- In number terms, the third quarter’s 113 transactions were off from second quarter’s 161 deals but up from the 104 deals in third-quarter 2020; a significant increase over the third quarter of 2020.
- Also, the number of mega-rounds of more than $100 million in funding reached 11 and accounted for more than half of total funding; with two of the largest deals accounting for cyber-related insurtechs.
- As average deal size grew to nearly $12 million, early-staged startups raised a record-breaking $630 million while the share of seed and angel round fell to just 19 percent, its lowest point since Q2, 2020 and Series A deal count nearly doubled to 31 percent of deals.
Investment by regions and sectors
As the region dominating the list, the US accounted for 46% of deal count; an increase of roughly seven points from the previous quarter, followed by the UK with 8%, China with 5%, India with 4%, and a few countries at 3% while 18% of the deals are part of ‘other jurisdiction’. In terms of sectorial distribution, 49% of deals were classified in the distribution sector, 42% in the business to business area, and only 9% in the insurance sector.
Points to note
Over the past decades, the global insurtech investment has grown significantly but the stark pattern is a concentration of ‘the much for the few’. This means that while the sector continues to rise, not all insurtechs are benefitting as much of the funding is focused on a relatively few startups. Commenting on the report, Andrew Johnston, global head of Insurtech at Willis Re noted that the continuing escalation of InsurTech funding does not mean that venture and growth capital is available to most or even many InsurTechs.
What’s the situation in Africa?
It is no news that insurance in Africa; compared to other continents of the world, is nothing to write home about. A Mckinsey study in 2018 shows that the market stands at a 3% penetration rate with South Africa and Kenya accounting for the major weights. If the South African market is excluded, the study shows the number would drop immensely to a 1.12%.
Mckinsey added that the rise in demand for digital solutions; such as smartphones and affordable internets penetration, has provided opportunities for insurtechs to step in and offer innovative products that allow customer-centricism, micro-payments, flexible sign-ups as well as access to a wide range of services through mobile phones in recent times, thereby attracting investment in different insurtech businesses.