Tech-driven innovation is fundamentally reshaping the insurance industry. Emerging capabilities including
Insurtechs are a driving force of this evolution, and investors are taking note. In 2021 alone, the total amount of VC invested in insurtechs surpassed
This has created significant pressure on insurtechs to scale. The path to scale differs depending on the type of insurtech player. Here, we focus on two common types: emerging carriers and distributors, and ecosystem players.
Emerging carriers and distributors
Emerging carriers and distributors are B2C startups, often digital-native brands, looking to disrupt how insurance is bought and priced. To scale successfully, they need to establish a path to profitability, prepare a clear investor story, and refresh their strategy to extend the growth trajectory and challenge incumbents.
Drive profitability
Once insurtechs have raised capital and acquired customers, the biggest hurdle is driving a path to profitability. In our experience, insurtechs at this stage often find it difficult to scale their initial unit economics. However, once insurtechs have built differentiated technologies and processes in their core markets, many are successfully tapping into new revenue generation opportunities in pursuit of profitable growth. For example, a life insurance insurtech chose to commercialize its technology platform and pivot from an agency to a B2B platform provider. The company entered a $1 billion to $2 billion annual premiums market, with a pricing strategy that enabled margins upwards of 30 percent. At a time when investors are much less inclined to make pure growth bets (compared to the past few years), insurtechs that demonstrate solid economics and a realistic path to profitability will stand out from the crowd.
Enhance the investor story
Traditionally, insurtechs have struggled to perform well in public markets. Our analysis shows insurtech share prices are down roughly 75 percent from January 2021. Investors are often unsure whether to assess emerging insurtechs as insurers or tech companies, and the time needed to achieve profitability can cause concern. When share prices and initial growth expectations come under pressure, there is a clear need to refresh the investor story. This involves developing an initial hypothesis, gathering data-driven evidence from financials and operations, and coaching management to clearly articulate the story to investors. When done successfully, this process can not only build investor and shareholder confidence but also help an insurtech gain clarity and alignment on the strategic path forward.
Refresh the strategy
After achieving scale in their core markets, insurtechs will naturally set their sights on new and attractive segments and geographies that can unlock next-horizon growth opportunities. This is the time for a full strategy refresh—an exercise that requires analytical rigor and external perspectives. The goal is to create a roadmap for an ambitious growth trajectory and to identify a clear set of enablers and strategic M&A opportunities to achieve these growth targets. In our experience, the most successful insurtechs have clearly defined the playing field where they can win and doubled down on specific customer subsegments. Once the strategy comes into focus, insurtechs can then bring the model to new geographies and drive growth on a global scale.
Ecosystem players
Ecosystem players are B2B utilities that enable a better insurance ecosystem. To drive accelerated growth, they need to refine their go-to-market approach, increase the efficiency of their engineering and professional services functions, and explore opportunities in adjacent markets. As large insurance groups have started to build their own utilities, the imperative to scale quickly has become more urgent in a winner-takes-all market.
Refine the GTM engine
A thoughtful GTM strategy can unlock significant opportunities for ecosystem players, especially in a crowded marketplace where insurtechs are competing for the attention of carriers. For example, a claims insurtech raised substantial capital and was under pressure to accelerate growth. After developing additional use cases for its product and quantifying the value at stake, the company designed a new sales and account strategy, reset its pricing strategy, and refined its product road map. The result was a comprehensive GTM approach that would help insurtech grow market share and profitability.
Build efficient engineering and services functions
An efficient engineering and professional-services function is integral to achieving scale. As ecosystem players grow, many find that the increasing number of customer projects can become a source of delays and rising costs, especially if there is a significant services component to the product. This was the case for a global provider of insurance and investment software. By benchmarking the size and cost of its in-house professional services organization against its peers, the insurtech identified significant savings opportunities on the delivery cost base and laid out an implementation road map with numerous levers to assist in realizing the savings within three years.
Expand into adjacent markets
With so many ecosystem providers vying for a position in the insurtech space, it is critical for players to focus beyond their core and drive growth in adjacencies—both organically and through strategic
The next few years will determine the insurtech winners in an increasingly polarized competitive landscape. Those with a clear path to scale will be poised to become industry leaders and accelerate profitable growth.
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