Following record year, insurtech funding expected to keep growing: Digital Insurance research

February 11, 2021 2:18 PM

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Insurtech funding growth is predicted to continue in a big way in 2021, despite the lingering impacts of the COVID-19 pandemic, according to Digital Insurance research. Our survey of 121 leaders at insurers, insurtechs, and other parties finds an industry excited to apply the accelerated consumer digitalization due to social-distancing mandates and other mitigation efforts to the insurance industry. This is our first release of findings from the survey, and serves as an overview to the major themes. We'll be releasing more results in different content over the following weeks.

Varied impacts

Insurance's digital leaders have a lot of optimism that the consumer changes -- and corporate changes, such as remote work -- will drive increased adoption of next-generation technologies as the world emerges from the fog of COVID-19. However, some of the innovation has turned inward, as the second-most-common response to this question was that insurers were more likely now to cultivate internal innovation teams rather than reach out to startups first. That's driven more consolidation around mature companies and created some friction for early-stage startups.

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AI's moment nears

Artificial intelligence is the No. 1 expected technology that the insurtech community expects to recieve attention. That's not counting chatbots, though they did come in a close second along with customer interaction technologies. A respondent summarizes, "Customer interactions continue to be driven online for industries that were traditionally conducted in person; like insurance and banking, and COVID-19 is accelerating this trend. The ability to offer insurance in a simplified way and integrate into other relevant customer journeys is critical to growing adoption and prioritization of insurance for consumers and businesses."

Among the "other" responses for this question: API integrations, embedded insurance, and short-term policies.

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Experience overwhelms

A significant plurality of respondents believe customer experience to be the business area most invested in this year. With distribution in second place, there's a clear line from the focus on AI in the tech question to this one. As one respondent put it, "Given focus on distribution, attracting new customers, and retaining existing customers, carriers will focus on AI to understand data and signals from their customers and potential customers. This will enable carriers to provider an increased level of customer service."

Among the "other" responses for this question: Finance and regulatory compliance.

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Personal lines still leads

The insurtechs who responded to our survey see personal lines P&C as the most ripe target for transformation. But there is not much variance overall between business lines, perhaps indicating there will continue to be some specialization among insurtech startups.

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Funding in line

Most insurtechs predict a 2021 funding level in line with the past few years, with between $5 billion and $10 billion invested in the sector. In 2019, according to Willis Towers Watson and CB Insights, $6.4 billion was invested; in 2021, that number went up to $7.1 billion.

Profile

A total of 121 people responded to our survey. Of our insurance company respondents, 47% were at companies of $1 billion or less in premium; 26% were at companies of $10 billion or more in premium with the balance in between.

Of our insurtech respondents, 63% identified themselves as early-stage companies with the rest late-stage.

Our "other" group included venture capitalists, non-insurtech software vendors, consultants and analysts, among others.

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