With several leading insurtech start-ups providers going bust or cutting staff, the COVID-19 pandemic and cost-of-living crisis are having a massive impact on the global insurtech industry, with leading data and analytics company GlobalData finding that investments into insurtech have fallen significantly in 2022.

GlobalData’s Deals Database reveals that the value of global investments into insurtech fell by 79.6% in 2021. This follows a consistent flow of stories of insurtechs struggling in 2022. The most recent is Lemonade cutting Metromile’s staff by 20% after completing the acquisition of the insurtech in August 2022. This came after Lemonade previously stated it would not reduce headcount. Other high-profile insurtechs that have made similar moves in 2022 include Nova Benefits cutting 30% of its staff in June and Zego cutting 17% of its staff in July.

Ben Carey-Evans, Senior Insurance Analyst at GlobalData, comments: “These trends are likely due to a combination of factors. As highlighted, investment into the sector has dried up somewhat. Funding rounds are essential to keep insurtechs running in the early stages before they become profitable, so reduced investment is a significant barrier.”

At the end of July 2022 there had been $1.0 billion invested into the theme, which represents 49.5% of the total annual 2021 figure suggesting growth is unlikely in 2022.

It is also likely that in tough economic times – such as a pandemic and now the cost-of-living crisis – consumers turn to familiar and established brands, as they trust them more to survive and pay out claims. It is also true that a lot of insurtechs focus on gadget or possessions insurance, which is not considered an essential purchase by consumers. As a result, it is a line that is always likely to be hit as disposable incomes decrease and consumers look to reduce their expenditure.

Carey-Evans adds: “Insurtechs will need to focus on offering value to consumers, as that is what they will be looking for in the immediate future. This can be achieved by relying heavily on artificial intelligence to cut processing costs, or by offering innovative products such as pay-as-you-drive and on-demand policies. The latter would allow consumers to control how much they pay or receive cover only when it is strictly needed.”