The total transaction volume of InsurTech M&As in Asia hit US$460 million in 2017, more than three times that of 2016, as industry incumbents and new entrants to the market pushed towards greater digitalisation, according to the fourth Quarterly InsurTech Briefing from Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company.
The increase in deal activities in Asia helped drive global InsurTech transactions to a record high in 2017. In the fourth quarter alone, insurers and reinsurers made 35 private technology investments globally, pushing the yearly total to 120, the highest numbers recorded respectively in any quarter or year. In terms of the actual volume, US$697 million of InsurTech funding in the last quarter rounded off 2017, which saw a total of US$2.3 billion, up 36% from 2016, and marked the second highest total for any year to date.
Turning to specific markets, China and India, home to much of the innovation in InsurTech, accounted for a significant 73% of transactions in 2017. Hong Kong, Singapore and other Asia markets continued to build on the momentum from 2016 and accounted for 27% of the transactions, representing a much more conspicuous contribution than in 2015 when they only amounted to 4% of the regional sum.
“As companies seek InsurTech transactions to tap new technologies, they are looking mostly to Asia, and in particular to Hong Kong and Singapore, amid low growth and even lower interest rates in the U.S. and European economies,” Angelini adds.
“Hong Kong and Singapore have well-regulated free markets, mature insurance customers, and access to international capital markets. These make it easier for investors to integrate resources.” Among the high profile transactions was Yunfeng Financial’s acquisition of MassMutual Asia.
The new research, produced by Willis Towers Watson Securities and Willis Re, in collaboration with CB Insights, highlights the key InsurTech trends of 2017. It shows that InsurTech transactions continued to focus on capabilities related to digital distribution, consumer models and data analytics, while claims management and other back-end processing applications also became top business priorities, as insurers and reinsurers seek to enhance efficiency and engagement throughout the value chain.
“Investments have picked up especially in the areas of artificial intelligence, automation, process enhancement and customer engagement as companies hope to drive further efficiencies in business operations,” says Vincent Lien, Managing Director, Willis Towers Watson Securities, Asia Pacific.
“InsurTech certainly plays a significant role in those areas via the use of data and analytics. They are still to reach prominence across Asia Pacific, so the opportunities are huge.” The popularity of data and analytics comes from the natural connection between data, peoples’ lifestyles, and their corresponding insurance needs, according to Kevin Angelini, Head of Strategy for the Insurance Consulting and Technology business in Asia Pacific at Willis Towers Watson.
“Thanks to advances in technology, now a growing abundance of data is available enabling insurers to use sophisticated data analytics to reward people who live a healthy lifestyle,” says Mr. Angelini.
“This is a growing trend within insurers and the next challenge is to gain alignment from the wider ecosystem such as regulators and reinsurers.”
In August last year, Jack Ma’s Alibaba-backed Yunfeng said it would buy Hong Kong-based MassMutual Asia for US$1.7 billion, with ambitions to integrate roboadvisory technology and advanced data analytics into the insurance business.
Another example was Singapore Life, which received a capital injection from China Credit during 2017.
Singapore Life is the first local independent life insurance company in Singapore to be granted a licence since 1970. Singapore Life markets life products directly through a state-of-the-art digital underwriting engine licenced from UnderwriteMe.
It announced the acquisition of Zurich Life’s Singapore run-off business in January 2018. Both Hong Kong and Singapore are trying to position themselves as the region’s leading FinTech hub. Last year, this effort saw Hong Kong’s Insurance Authority launch an InsurTech Sandbox to facilitate pilot trials, and start a licencing fast track to provide a dedicated queue for new authorisation applications from online-only insurers in order to accelerate the approval process.
Meanwhile, last February, Monetary Authority of Singapore announced its intention to introduce the ASEAN InsurTech LaunchPad, which aims to bring in high-growth InsurTech start-ups to Singapore and facilitate collaboration between locally-based insurance corporations and start-ups.