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Insurtech investments for 2019 are on pace to be the highest ever despite fewer startup launches, according to a report Monday from the Deloitte Center for Financial Services.
With $2.2 billion raised in the first half of 2019, the fourth-highest midyear total and lower than 2018’s total by only $400 million, insurtechs are on pace to eclipse 2015’s record investment of $3 billion, the report said
Funding for insurtechs has moved to later-stage rounds, which shows a maturing market, the report said.
Funding remains “robust” as investors target later-stage financing rounds to support technology companies that have advanced beyond ideation to execution, the report said.
Scrutiny from rating agencies is will compel insurers to evaluate investments for returns, the report said, adding that A.M. Best Co. Inc. plans to standardize innovation assessments to determine how advanced insurers are on a five-level scale because “innovation will become a leading indicator of companies with defensible market positions,” the report said.
Insurers, however, “problematically are still treating insurtechs like vendors rather than partners,” the report said, despite only accounting for one out of four dollars invested in insurtechs this year, the report said.
Insurers still treat insurtechs like software vendors, using outdated contracting and onboarding standards and processes, which is counterproductive to the disruption insurtechs are trying to introduce to the industry, the report said.
“This trend may indicate that many in the industry are adopting a more discerning and consumable approach to insurtech investment and deployment, as opposed to investing in ideas for the sake of pure (research and development),” the report said.
There were 85 insurtech deals with a total value of $1.42 billion announced in first-quarter 2019, the third straight quarter to top $1 billion in funding, according to the new Quarterly InsurTech Briefing from Willis Towers Watson PLC.