The dollars invested are matched by the stakes: opportunities to reap gains — in cost savings, productivity increases and industry-disrupting changes to business processes — that could displace established incumbents.
This was the common theme during a panel discussion held at the 7th annual Insurance M&A Symposium held recently in New York City. Produced by the Knowledge Center and SNL Financial, divisions of S&P Global Market Intelligence, the session brought together four experts from the insurtech/fintech and M&A worlds.
Most agreed that the pace of activity is quickening.
“We’re looking at about 1,000 companies per year, and perhaps 20 to 45 percent are now insurance-related,” said Drew Aldrich, a senior associate at AXA Strategic Ventures. That’s up from 5 to 10 percent in recent years. There’s a tremendous resurgence in venture capital deal flow across primary lines of insurance — commercial, property and casualty, life and health.”
Just how much is the industry investing in insurtech companies? Mark Purowitz, a principal for financial services strategy, M&A and digital, at Deloitte Consulting LLP, says the 500-plus companies tracked by the company have invested close to $6 billion in the field over the last three years.
Among them are major life insurers including Allstate, American Family, AXA, MassMutual, Nationwide, Transamerica and USAA. These, plus established venture capital firms, collectively have boosted venture capital under management to $165.3 billion, reversing a three-year decline, according to Yearbook 2016, published by the National Venture Capital Association.
Pointing to American Family, MassMutual and Nationwide, session moderator Cathy Seifert, an industry analyst at S&P Global Market Intelligence, suggested that mutual life insurance companies may be uniquely positioned to play in the insurtech market and broader fintech spaces. That’s because they’re not answerable to shareholders for their investments, only their policyholders.
AXA’s Aldrich disagreed, noting that a carrier’s involvement is less a function of its corporate structure than of how it views insurtech from a strategic perspective.