Upcover CEO lifts lid on insurtech investment challenge

At the recent InsurtechLIVE 23 event in Sydney, Simone Dossetor, Insurtech Australia’s CEO, acknowledged the challenge facing her sector.

“It’s the first time, in 2022, that we’ve seen a drop in the global overall investment in insurtech since the phrase first came about in 2016,” said Dossetor, in her opening address last week.

Why investment suddenly plummeted

Theodorou said there are “global and local macros” impacting her sector.

“There are two prongs impacting insurtechs,” she said. “One is the general software and tech company bloated valuations and the large amount of investment that’s been deployed in a very short period of time to SaaS and tech-based companies.”

She said in some cases this investment may not have made sense because these businesses were not yet generating profits or acquiring customers. When this impacted investors there was a “huge compression” in the size of these valuations.

“So a lot of spook really,” she said. “That’s why there’s been all these big layoffs and everyone’s saying, ‘Oh, wait! Acquiring customers at all costs is no longer sexy, or profitable, what a surprise everyone! We need to now make sure that this business has a pathway to profitability and that the customers we acquire make sense in that they are going to be generating value to the business and to the shareholders.’”

Tough love?

Theodorou’s reaction to this situation is not as negative as some in her industry.

“Generally, I think that’s a great thing to happen in the tech space and the software industry – which is probably not so popular for me to say that out loud – but that’s how I feel about it and I think it makes total sense,” she said.

Theodorou gave specific examples of arguably “crazy valuations” in the insurtech space in the United States.

“You’ve got Lemonade, Hippo, Metromile, all IPOing in very quick succession, a lot of them backed by SoftBank as a venture fund and getting listed share prices and possible valuations that they’re not really achieving right now,” she said.

Big opportunities are still there

The result, said Theodorou, is insurtech has quickly become a dirty word. However, she insists there are still big opportunities in the sector for investors.

“Deals are still being done, depending on the venture fund, and where people are wanting to look at good deals for businesses that make sense,” she said. “Superscript in the UK [an insurtech that offers commercial insurance by monthly subscription] have just done a £50 million Series B! So there’s still massive opportunity in this space.”

Theodorou said the insurtech sector has “so much white space and, as brokers know, there’s so much to value to add.”

A recent Gallagher report found that global insurtech investment fell sharply in the fourth quarter of 2022, declining overall by almost 60% compared to the third quarter.

Insurtech Australia is working to reverse this trend and recently returned from ITC Singapore where one aim was to attract investors.

“The tagline for our pavilion with Austrade at ITC Singapore [Insurtech Connect Asia] was: ‘The best and brightest in insurtech starts in Australia,’” said Dossetor.

Dossetor also said new insurtechs continue to launch in Australia.

“They either bring new expertise and technology from other industries, or they’re insurance geeks with a passion to solve a problem they’ve been frustrated about for many years,” she said. “And they’re going out there alone.”

Despite the drop off in investment, Australian insurtechs continue to have success.

Earlier this month, io.insure, an Australian mergers & acquisitions (M&A) tech and insurtech firm entered the UK market.

Cover Genius, another Australia-born insurtech, refers to itself as one of the fastest growing insurtechs globally. The company was ranked by the Financial Times as the fastest growing company in the Asia-Pacific region in 2020.

Last year, one of the firm’s initiatives included partnering with RMS Cloud, a property management software company.

Are you an insurtech? How do you feel about the investment situation? Please tell us below.