LONDON : Global investment in insurance technology firms totalled $2.41 billion in the second quarter, down 50 per cent from a year earlier, as investors grew nervous about frothy valuations, broker Gallagher Re said in a report on Thursday.
Insurtech firms make up around 10 per cent of the fintech sector and have seen several successful fundraisings in recent years. German digital insurance startup Wefox last month said it had raised $400 million from investors, valuing the business at $4.5 billion..
But some firms have found it tough to compete with established players and have suffered from the broad sell-off in tech stocks.
U.S. general insurer Lemonade’s shares have more than halved since it went public two years ago.
One issue is that blockchain – a database shared across computers in which records are difficult to change – feted a few years ago as a way for insurers to cut costs and become more efficient, had not lived up to its expectations.
“Blockchain is a binary decision – it’s wonderful for things like accounting,” said Andrew Johnston, global head of insurtech at Gallagher Re, adding that in contrast:
“Insurance is highly negotiated, highly flexible and ongoing. Blockchain also happens to be extremely expensive.”
The drop in valuations could lead to insurtech M&A deals or disposals which were “unlikely” six months ago, Johnston said.
However, insurtech investment picked up slightly from the first quarter, gaining 8 per cent, the report showed.