Despite an uncertain global economic outlook and the ongoing COVID-19 pandemic, 2021 was a year of tremendous growth, investment, and innovation for the insurance industry. Now, as we head into a New Year, I wanted to take this opportunity to reflect on some of our industry’s biggest standout moments during the last 12 months.
InsurTech funding breaks records
As the global pandemic put technology innovation front and center, it was a historic year for InsurTech financing. CB Insights reported Q3 2021 as the second-largest quarterly InsurTech funding figure on record, with $3.1B raised across 113 deals. Notably, we also saw average early-stage deal size skyrocket, with several of the year’s largest deals going to startups building solutions for cyber insurance and risk management. 2021 also saw an increase in big deal activity (deals totaling over $50m), with $5bn in big deals year-to-date. However, with stock prices of some publicly-listed InsurTechs down, as we move into 2022 it’s possible we may see more value placed on unit economics and a disciplinary correction when it comes to private funding.
Major M&A deals between InsurTechs and Incumbents
2021 also gave us two major merger and acquisition (M&A) deals between InsurTechs and insurance incumbents, with digital insurer Lemonade acquiring the pay-per-mile auto insurance startup, Metromile, and Allianz acquiring digital insurance broker, CLARK. Whether these companies were driven by a desire to expand into new sectors, acquire talent, access data and algorithms, or all of the above, these significant M&A deals reflect the range of digital transformation-focused growth opportunities that exist across the industry and which are likely to persist into 2022.
Embedded insurance is…everywhere
When I first wrote about embedded insurance for this blog back in 2020, I spoke about the opportunities the embedded model would afford incumbents looking to revolutionize the way insurance is bought and sold, expanding their distribution exponentially. 2021 gave us a slew of real-world examples of this, thanks in large part to AI, cloud and digitization technologies. Denise Garth, chief strategy officer at Majesco, predicted embedded’s staying power in a recent interview, remarking “Forty percent of insurance is going to be embedded over the next 10 to 20 years.” But for the nearer term, I think we will continue to see insurers turning to embedded products and distribution models to improve customer service and centricity.
The return of DeFi and Blockchain
This year we also saw the revival of Decentralized Finance, or DeFi – the entire blockchain-enabled ecosystem of products and services that have replaced more traditional financial intermediaries with software. As managing cybersecurity risk became an industry-wide priority in 2021, innovations in blockchain and global demand for transparent and automated insurance products likewise accelerated. As we approach the new year, smart contract technology must now begin to generate some successful, real world use cases within DeFi to attract investors and affirm its ultimate viability.
Outlook 2022: more growth, more opportunity
With a continued focus on customer-centricity, accelerated digitization, and value-add partnerships and acquisitions, it seems likely that 2022 is poised for another year of growth and opportunity for the industry. Wishing you and yours a very happy and healthy New Year!