The first half of 2023 witnessed a significant decline in venture capital funding for insurtech start-ups, reaching levels similar to 2018.
According to the report “The State of Global Insurtech” prepared by Dealroom.co, Mundi Ventures, MAPFRE, NN Group, and Generali, insurtech investments amounted to $2.4 billion, a 45% decrease compared to the same period in 2022.
However, despite the funding downturn, insurtech still represents a massive $7 trillion market opportunity.
The decline in funding primarily affected mature start-ups in Series C rounds, which experienced a notable drop of 62% from their historical peak.
On the other hand, early-stage start-ups in seed or Series A rounds showed more resilience with a 29% decrease. These figures highlight the potential for growth in the insurtech market, as early-stage start-ups continue to attract funding.
The report emphasised that while insurtech presents a substantial market opportunity, it struggles to attract investment compared to other sectors like food and health. Mobility and financial services, with fewer opportunities, received funding amounts five and ten times greater, respectively.
Additionally, the report highlighted the underfunding in life insurance compared to health and casualty insurance, which have received more significant investments.
Operational efficiency remains a crucial focus for industry players, and insurtech start-ups are driving innovation across the value chain.
Through technological advancements such as artificial intelligence (AI), insurtech companies are streamlining processes such as claims automation, marketing, and customer engagement.
Emerging technologies like generative AI tools, including ChatGPT, offer new possibilities for the industry, although their specific impact on processes is yet to be fully determined.
The United States continues to lead the way in insurtech investment, while Asia experienced the most significant growth with a 58% increase in the first half of 2023 compared to the same period in 2022.
In Europe, the United Kingdom, Germany, and France attract the majority of funding, while countries like Italy, the Netherlands, and Estonia showcase growth in early-stage start-up funding rounds.
Spain has invested in more than 40 start-ups, with a 0.7-point growth in early-stage venture capital investment.
The Latin American insurtech ecosystem has shown promising growth in recent years, although funding levels have not yet reached their peak.
In the first half of 2023, Latin America received $79 million in investments, while the region secured $239 million in 2022.
Insurance’s role in climate change mitigation and adaptation, as well as emerging risks like cyber protection, presents opportunities for insurtech start-ups.
However, the industry still faces challenges that need to be addressed through collaboration and the adoption of scalable insurtech solutions.
While the current market rationalisation has impacted the insurtech industry, experts remain optimistic about the future.
Javier Santiso, CEO & General Partner of Mundi Ventures, anticipates a resurgence of ultra-liquidity driven by technology-focused private equity funds.
The report concludes that despite the recent downturn, insurtech’s transformation of the industry remains unstoppable, with immense potential for innovation and investment in the coming years.
