December 31, 2018

Tech superiority will increasingly become a key transaction driver in 2019

Maturing pool of targets will lead to spate of insurtech M&A.

With tough market conditions showing no sign of easing, (re)insurers will continue to evolve their business models in the coming year, leaving no stone unturned in the quest to gain competitive advantage, protect market share, reduce transactional costs and drive growth.

Technology will be the key to this evolution. Innovation can generate efficiencies at the back-end of the business as well as opening up channels to reach new customers in new markets via new distribution channels.

(Re)insurers have been switched on to this opportunity for some time. Some are investing in-house, creating so-called ‘digital garages’ to support the development of proprietary solutions. Others are looking to team up with dynamic and innovative start-ups that can deliver proven solutions or take stakes in these types of businesses via corporate venture-style funding.

However, 2019 could be a tipping point: as these nascent businesses scale up and reach maturitythey will become ripe for acquisition. A number of deals in the insurance industry in 2018 involved insurtech targets, such as Canada’s Mnubo and Jungo of The Netherlands.

We expect this will be the thin end of the wedge. Interest in technology as a growth driver will further accelerate in the coming year, fuelling appetite for the acquisition of insurtechs. Meanwhile, a new generation of insurance businesses emphasising a digital first strategy will look to turn the tables by acquiring the assets of traditional insurers. With established tech companies such as Amazon and Google also continuing to look to challenge established models, 2019 is set to be an interesting year.

You can read the rest of our insurance predictions here.