Spending on artificial intelligence (AI) and the internet of things (IoT) technology now account for almost half of total the investment in insurance technology (insurtech) start-ups globally, according to Accenture.
According to Accenture’s new The Rise of InsurTech report, the combined number of deals across AI (including automation) and the IoT (including connected insurance) increased 79% in 2016. Even though the two technologies only represented a quarter of the 2016 insurtech deals globally last year, they accounted for 44% (or US$711 million) of total insurtech investments. This is a rise from 10% in 2015.
“We’ve seen a rapid acceleration of investment into and deal activity around intelligent automation and IoT start-ups over the last 12 months,” said Roy Jubraj, a co-author of the report and Accenture’s Digital & Innovation for the Financial Services practice in the UK and Ireland. “These technologies are primed to disrupt the industry in the years to come, so it’s fitting that we’ve established a dedicated insurtech stream as a key part of Accenture’s FinTech Innovation Lab in London.”
Accenture found that AI has the potential to transform the insurance industry from simply assessing risk based on past experience, to monitoring risks in real-time and mitigating, or even preventing, losses for customers. Meanwhile, the IoT will enable insurers to offer more personalised, real-time services, price their products with greater precision and boost operational efficiency.
Despite the political and economic uncertainty around the UK’s vote to leave the European Union, the country continued to attract strong insurtech investment in 2016. While the number of insurtech deals in the UK remained flat, the value of the investments there more than doubled last to almost US$19 million last year. Investment in AI and the IoT also increased significantly to almost US$1.7 million in total.
Germany and France also saw strong growth in investment in 2016 to round out the top three insurtech markets in Europe. The US’s share of deal volume in 2016 dropped slightly, from 63-65% of total deals. The percentage of insurtech investment for the rest of the world (deals outside the traditional hubs) more than doubled, from 11% in 2015 to 23% in 2016.
“The rise in insurtech is further evidence of the growing role that new technologies are playing in shaping innovation across financial services,” said Julian Skan, a senior managing director in Accenture’s Financial Services practice who oversees the FinTech Innovation Lab London. “The next challenge for insurtech start-ups is the same as what the more mature fintechs are now facing – being able to translate that investment into growth and customer acquisition.”