Creative software, data & analytics companies are sharpening established practices and challenging legacy systems in the insurance sector, as significant inroads are being made into the giant insurance market. This innovation trend is driven by growing consumer power, rising cost pressures leading to a search for efficiencies, mounting regulatory burdens, and a large pool of venture capital.

Already the growing sector has seen 240 M&A transactions since 2011, with volumes increasing in number by more than 10% annually. Disclosed values for 105 of these deals total $37.4 billion in aggregate, with 36 each worth more than $100 million. The vast majority of deals are in North America or Europe, and involve companies with software-centric business models. Private-equity backed platforms and strategic investors shared the market roughly 40/60 by both volume and quantum. 

According to QM Indices, insurance software, data & analytics investments have outperformed the FTSE 100 by significant margins since 2011, creating a powerful opportunity for investors:

• Insurance software outperformed the FTSE 100 by 112.3% 
• Insurance information, data, and analytics outperformed by 52.4% 
• Insurance tech-enabled services outperformed by 33.0%

Quayle Munro expects M&A velocity in insurance software, data & analytics to accelerate, and premium valuations to be offered for companies providing proprietary datasets and sophisticated tools.

Andrew Adams, CEO at Quayle Munro comments:

“Leading incumbents have been highly acquisitive as they seek to consolidate their market positions. Insurers are increasingly seeing that their solutions could enable significant operational improvements across the entire insurance value chain, to the benefit of all. Companies with the best potential are attracting the attention of consolidators.

“Significant investment from traditional insurers, via newly-established venture arms, is a clue to the disruption on the horizon. As increasing volumes of capital are put to work and more insurers become receptive to new technologies, we expect to see the insurance software, data & analytics and tech-enabled services M&A market go from strength to strength.”