Thursday, February 25, 2021
Home Others Events Pandemic Economic Uncertainty Could See Insurers Buying, Partnering with Insurtechs

Pandemic Economic Uncertainty Could See Insurers Buying, Partnering with Insurtechs

“As insurers move toward late 2020 and into 2021, we believe there may be an increase in insurance carriers acquiring and partnering with insurtechs,” consultants at Deloitte said in a 2020 Insurance M&A Midyear Update.

The reasons: Carriers are attempting to respond quickly to pandemic-driven digital demands, and insurtechs are displaying flexibility about their futures during uncertain times.

“Insurtechs may have a greater willingness to partner or be acquired due to the uncertain economic outlook, and carriers seeking to quickly respond to a rapidly changing world (such as an increased need for virtual or touchless claims) may find insurtech investment a more appealing allocation of capital than investing in the current low-interest-rate environment,” the Deloitte report concluded.

For insurtechs, being acquired isn’t the only M&A option. Some insurtech have themselves already acquired small carriers. Hippo, a property/casualty insurance personal lines broker, bought the carrier Spinnaker in June for an undisclosed price. Another example is the workers’ compensation insurtech Pie Insurance, which raised $127 million in May and then earmarked most of the money to buy a licensed insurance company or start a new one.

Deloitte said both companies show insurtechs could pursue acquisitions in the months ahead, but it’s unclear whether the trend will mushroom.

Industry insiders have speculated for months that the pandemic may accelerate insurtechs’ willingness to be acquired after forming collaborations and partnerships with carriers.

The trend was already in play, but the coronavirus pandemic has accelerated it considerably, Martha Notaras, a managing partner at insurtech investor Brewer Lane Ventures, said during an interview that was part of Carrier Management’s InsurTech Virtual Summit in early May.

“Some of the strategic relationships that have forged over time may result in actual insurers acquiring [companies from] some of the close relationships that they’ve had,” Notaras said.

She also noted the pandemic-related fundraising challenges for some insurtech startups could also spur merger activity.

“I don’t think everyone will get funded,” Notaras said. “I think some of those people will have to make tough decisions as to whether they are going to close down or whether they are able to find a home.”

Deloitte’s report said that insurers in general are now pausing from M&A activity due to pandemic uncertainties, but longer-term disruption could increase M&A pressures.

Source: Deloitte

The most important insurance news,in your inbox every business day.

Get the insurance industry’s trusted newsletter

Source link

Most Popular

Irdai notifies guidelines for standard personal accident insurance

The Insurance Regulatory and Development Authority of India (IRDAI) has directed all general and health insurance companies to mandatorily offer a...

Max Life Insurance achieved highest claim settlement ratio of 99.22% in 2019-20

Max Life Insurance on Thursday said it has settled individual claims worth over ₹562 crore in 2019-20, and attained a...

Chhattisgarh Naxal violence | Fifty four security personnel died in two years, 120 ultras killed

The details were given by State Home Minister Tamradhwaj Sahu in a written reply in the Assembly, while responding to a question raised...

Recent Comments