Following this year’s InsureTech Conference in Las Vegas, it's clear we are operating in a new environment. Here are some thoughts that may be helpful in guiding stakeholders.
We have entered a hardening market amid rising interest rates, soaring inflation and continuing CAT challenges. That means we can expect price increases for insurance across the board.
Venture capital investment is slowing, and insurtech valuations are moderating. Investors will no longer finance companies that spend a dollar to make 90 cents. Rather, they are looking for insurtech organizations that can achieve strategic efficiencies in both the types of products offered and the distribution methods for those products. The best companies will find investors, but they may very well receive lower valuations compared with the past few years.
Besides funding constraints, insurtech startups will see a limited appetite for capacity, as major carriers deal with losses from major weather events and rising interest rates.
While several high-profile insurtechs have had a rough year in public market valuations, there are still many bright spots for startups in this marketplace.
Investors are taking a closer look at startups and emerging growth insurtechs that can clearly demonstrate efficiencies in underwriting, products and distribution—and a realistic path to profitability. By specializing in a niche, MGAs have become more attractive investment vehicles, especially as they are more agile and can leverage advances in technology and data management that larger entities often struggle with. For example, my team and I have created an emerging growth MGA whose online product offering is transforming the experience of buying jewelry insurance throughout the U.S. I brought years of experience in the retail jewelry business, while my co-founder complemented that with in-depth expertise in insurance fundamentals -- the kind of combination that created considerable buzz at ITC this year.
Our industry has learned key lessons from its past and is finding the best path forward. The market can’t rely on endless venture funding alone to grow. Insurance business doesn’t work that way. But, as seen at ITC, our industry is adapting and improving and is here to stay.