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Insurtechs, Investors Optimistic About Post-COVID Future, New DIA/McKinsey Study Finds

The COVID-19 pandemic was challenging for insurance and insurtech, but with a vaccine on the horizon, most executives are optimistic about the future, anticipating more demand, stronger growth, and increasing impact, according to a new survey by DIA and McKinsey.

The Pulse of Insurtech: Impact COVID-Crisis on Insurtechs and Outlook for 2021,” a new study by DIA (Digital Insurance Agenda) and McKinsey, surveyed more than 100 leading insurtechs and investors for their perspective and combined it with recent industry insights.

The COVID pandemic spurred a stronger demand for insurtech products and services. 88% of insurtechs across all business lines expect to see a stronger demand for their product and services once the crisis is over and 71% are optimistic about the sales pipeline in the coming months.

However, insurtech investors expect lower valuations and less funding to be available, especially for smaller companies. And the “new normal” won’t happen until late 2021 or later.

The study found that the majority of investors (61%) expect most of their insurtech portfolio to be “back to normal” at some point in 2021, but several investors expect this will take longer – until 2022.

“It’s going to be mid-‘22, ‘23 before we see any kind of real normalization,” says Jonathan Larsen, chief innovation officer at Ping An Group and CEO of Global Voyager Fund. “The new normal for sure will accelerate the digitization trends that have been present through the development of the digital economy over the last 20 years.”

Among the study’s top findings:

  1. Insurtech organizations are doing well and have not had to downsize during the pandemic. The majority of insurtechs (52%) and investors (55%) indicate that insurtech organization size hasn’t changed over the past 3 months, and there are no indications of any major downsizing on the immediate horizon.
  2. Insurtechs don’t have a widespread need for emergency funding. More than 70% of investors reported no or very limited emergency funding for the insurtechs in their portfolio so far, while smaller groups of investors indicated that some of their insurtechs have needed emergency funding.
  3. Although investors expect less funding to be available, insurtechs are more optimistic, and recent funding rounds support this view. A majority (65%) of investors expect less funding to be available for the coming months, but 45% of insurtechs expect funding availability to remain the same – and only 35% expect less funding to be available.
  4. While investors expect lower valuations, insurtechs and public markets are still optimistic. The majority of investors (75%) expect lower valuations for insurtechs. Insurtechs have a more optimistic view: 40% expect valuations to be higher or much higher; 30% expect valuations to remain more or less the same; and only 30% expect lower valuations.

 


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