• Paul Williams, CEO at Ripe


• 06.03.2024 10:45 am
#AI #insurtech #technology

After several years of steady growth, the fintech market faced declining fortunes in 2023 due to challenging economic headwinds, soaring inflation, and technological upheavals such as AI entering the mainstream.

Against these odds, however, the ‘younger sibling’ of this market – insurtechs - has remained quietly resilient throughout, continuing to grow and innovate. 

Insurtechs saw the most M&A deals of any sector in the past quarter. And while most fintech sectors experienced lower funding, the total funding for insurtechs remained at $1.1 billion in Q3 2023, according to business analytics platform CB insights. 

The rise of insurtechs over the last decade has pushed the wider industry forward in leaps and bounds, showcasing how technology can give policyholders a better customer experience and improve back-end operations. However, for some insurtechs launched in recent years with VC funding, 2024 will be a turning point. They will either achieve profitability or fold as investors step back - sparking consolidation and exits.

So, what’s in store for 2024?

Blockbuster deals 

As larger insurance businesses look to accelerate growth, 2024 will see blockbuster deals in the market to drive shareholder returns through cost synergies. The possibility of a different UK Government by the end of 2024 could also cause tax changes, making this a busy year for deals as sellers may try to cash in their equity before any changes.

Transatlantic acquisitions  

More US firms, such as AJ Gallagher, Brown & Brown, Acrisure, and Assured Partners, will enter the UK insurance market through mergers and acquisitions in 2024. Private Equity will also continue investing despite the UK recession, high inflation, and higher interest rates. In 2024, quality investments will be favored over size, with valuations holding steady. Proven business models with strong organic growth, customer retention, and underwriting results will remain in high demand. 

An evolving regulatory landscape

The Consumer Duty, which came into force July 2023, forms part of a wider push on the industry to set a higher standard of consumer protection. 

The FCA will continue upholding a high level of business practice, stepping in where it sees dysfunction or poor outcomes for consumers, such as multi-occupancy property owners, GAP insurance, and other specific product lines. Brokers must ensure the right product governance and controls to effectively manage these risks. 

Technology is key    

Working together across different sectors will be essential for a smooth and successful shift to new technologies. The possibility of integrating AI into businesses will enable tasks to shift from human to machine. Therefore, the demand for deeper technical knowledge in the workforce to rise in the coming years. Rather than becoming a barrier to growth, this can be efficiently managed through a coordinated effort from both insurance companies and industry organizations. 

Bodies such as the Chartered Insurance Institute (CII), have an opportunity to step up and streamline the upskilling of technical talent, avoiding the risk of duplicate training within each company. By clearly identifying future needs, and constructing training programmes to meet these, insurance businesses can embrace the opportunities that automation brings. AI also offers the potential to update business operations to move staff into different roles, with AI taking over certain tasks and enabling staff to add value in other areas.  

With the speed of technological change accelerating, insurance companies will need to keep pace in the next year to thrive, evolving in step with new technology and upcoming regulation.

The year ahead

Insurtechs are poised to lead the fintech industry in 2024. New developments in technology will create new possibilities for fast expansion in the industry, while companies will join forces through mergers and acquisitions, increasing their influence and scope. Make no mistake, the insurtech market is one to watch as the year unfolds.