Over the past couple of months headlines highlighting the decline in insurtech funding year-over-year and a slew of layoffs across the sector have dominated. There is no denial that a number of prominent insurtechs which promised to deliver efficiencies, streamline operations and scalability in a market that seems ripe for transformation have not been able to meet investors’ expectations. Additionally, the shift in the macroeconomic environment has heightened investors’ sensitivity to profitability. As a result, there has been a sharp decline in total funding volume in 2022 as well as an uptick in mergers & acquisitions (M&A) activity within the insurtech sector.
What does the current environment mean for insurtechs?
While the overall funding environment has been more challenging as evidenced by the significant decline (41%) of total funding in the second quarter of 2022 compared to the prior year, fundraising in the second quarter of 2022 was still the seventh highest on record with a total of $2.6 billion raised.1
The continued commitment to the insurtech segment by investors and corporations alike is evidenced by the launch of new venture capital firms, capital raises for new funds, as well as new corporate venture capital firms being established in 2022 despite industry and macroeconomic headwinds. What is also encouraging for insurtechs is that partnerships with carriers and insurance brokers have been increasing and are expected to continue to increase.
The reality is that almost a decade after McKinsey & Company predicted “the end of an era for the local insurance agent,” the independent insurance brokerage model is as robust as ever and here to stay. As such, increasing the penetration of the independent insurance brokerage market will be critical for most insurtechs to achieve scale and profitability.
Next phase for insurtechs
As the market has entered a new phase in its evolution, insurtechs better get used to the new market conditions. Start-ups need to solve real industry pain points and have a clear path to value creation in order to attract funding, while more established insurtechs need to follow a path of growth with profitability in sight.
If you have questions about Today’s ViewPoint, or would like to learn more about MarshBerry, email or call Tobias Milchereit, Vice President, at 212.972.4883, or email or call Brian Refici, Vice President, at 440.769.0321.
As the number one investment bank in insurance distribution, MarshBerry provides a range of industry-specific services that can help insurtech firms build and enhance value through transaction advisory, strategic planning, valuation, equity and debt fundraising, management consulting, sales consulting, talent acquisition and peer-to-peer networking events. Additionally, by owning the third largest property & casualty aggregator in the U.S.2, MarshBerry can help best-in-class insurtech firms expand their agency distribution network.
MarshBerry is attending the InsureTech Connect (ITC) conference in Las Vegas from September 20 – 22. To learn more about how MarshBerry can support your business, schedule a meeting with Tobias Milchereit or Brian Refici today. We look forward to seeing you at ITC in Vegas!
Investment banking services offered through MarshBerry Capital, LLC, Member FINRA and SIPC, and an affiliate of Marsh, Berry & Co., LLC. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122 (440.354.3230)
1 As reported by Pitchbook.
2 Insurance Journal
