Australia’s insurtech community gets it right: Gallagher Re – Daily – Insurance News
Gallagher Re says it’s time for insurtechs to scrap the disruption agenda and embrace collaboration with incumbent insurers, and points to Australia as a shining example.
Australia is “incredible as a territory for insurtech development,” Gallagher Re Global Head of Insurtech Andrew Johnston tells insuranceNEWS.com.au, and from a risk profile perspective has “kind of got it all,” acting as a microcosm of the global insurance arena, for example in property catastrophe claims.
“I’ve been fortunate enough to spend a lot of time down there and I’ve worked with a lot of Australian companies, and it’s a really exciting space. I think Australia has gone about it in the right way,” he said.
“It just seems to be this almost palpably exciting hotbed for insurtech innovation. There’s this wonderful combination of incumbent participation, entrepreneurs, new startup businesses, investors.”
Australia has “possibly got it right more than anywhere,” Mr Johnston says, noting local success stories such as embedded insurance leader Cover Genius which has just raised $US70 million ($109.08 million), claims repair platform Handdii which has partnered with Allianz and Hippo, and Brisbane-based FloodMapp, which is expanding its “wonderful innovation” into North America with an office in San Francisco.
A “healthy degree of pragmatism” has seen greater collaboration, he says, and “no one come and try to own the space”.
“That’s so important in our industry. Australia’s got it really right in as much as they’ve brought together all of the right sort of market participants and from day one tried to work together versus having pockets of innovation in isolation, trying to go it alone and just spending a lot of money finding out that that’s actually a very difficult thing to do.”
The comments come as Gallagher Re publishes its latest quarterly Global Insurtech Report, which reveals funding in the sector was roughly stable in the third quarter from the previous quarter, bolstered by renewed investor interest in start-ups.
The report says there was $US2.35 billion ($3.66 billion) of global insurtech investment in July-September, down 2.5% from April-June. Average deal size fell 8% to $US20.42 million ($31.82 million) as early-stage funding dominated, with that area of funding soaring 48% on the second-highest quarterly number of seed-funding deals ever.
Insurtechs also attracted $US1.2 billion ($1.87 billion) in mega-round funding – investments of at least $US100 million ($155.82 million). That was double the previous quarter. There were 140 deals and insurance firms made 24 investments.
Mr Johnston says the “era of rushed growth for growth’s sake at the expense of profitability is coming to a close”.
“Hubristic rhetoric around disruption is declining in sequence with the growing realisation that profitable carriers – no matter how ‘outdated’ – intermediaries and traditional markets are to be supported, not displaced,” he said
Genuine disruption has been extremely limited, Gallagher Re says, despite almost $US50 billion ($77.91 billion) of global insurtech investment. Success has typically come only in areas where incumbents have been embraced and respected, and many insurtechs are now under pressure to retain risk which “in practice makes them more like incumbents”.
“Where I think there has been degrees of disruption is where one incumbent has been able to use technology to the better degree than another incumbent with whom they were traditional competitors. They’ve used that technology to sort of marginally outpace that traditional foe.
“You cannot go it alone in this industry. You need risk, asset, market, distribution partners. A lot of people wasted a lot of money finding out that that was, in fact the case,” Mr Johnston said, adding also that the current macroeconomic environment “doesn’t tolerate losses”.
Brisbane-based insurtech ExtrasJar, which was founded in 2019 and offers flexible health and pet insurance plans, raised $600,000 in the latest quarter.
“Australia has provided these companies this opportunity to grow and understand what they want to do and what their market proposition is,” Mr Johnston said. “The market has been very understanding towards those looking to innovate, and then if they want to they can go global.”