What is the key to the success of the UK insurtech sector—and where does the industry go now?
London has stood at the core of innovation in the insurance industry for many years, and today the UK remains in a leading position within insurtech. A diverse mix of start-ups, investors and incumbents are collaborating to accelerate innovation and development in the industry, from artificial intelligence and machine learning to the Internet of Things.
London has the same number of insurtech unicorns as Europe collectively and globally stands second only to Silicon Valley. Of the approximate 3,000 insurtech businesses worldwide, about 280 are in the UK, the highest number of insurtechs per capita within all major global economies.
Despite the continued and progressive growth, the UK’s insurtechs have not been free of the recent global challenges associated with valuations. According to reports from McKinsey, the multiples of some of the most notable publicly listed insurtechs dropped from 15 times those of traditional businesses to below the level of some incumbent insurers. The analysis also stated that private capital funding declined by 32% compared with 2021. Competition from big tech and other non-insurance-related businesses has also progressed considerably.
Amazon recently launched the Amazon Home Insurance comparison business in the UK. Tesla Insurance reached $300 million in premiums by the end of 2022 by utilising Tesla’s access to its data and customer base for efficient underwriting and distribution.
Despite the global challenges, the UK insurtech sector has been resilient, employing approximately 14,000 full-time individuals, equating to about 4% of the total UK insurance workforce. Studies estimate that the insurtech industry generates £2 to £3 billion in annual revenue, with its collective direct and indirect impact on UK GDP standing closer to £5 billion and 60,000 jobs. Of this figure, 31% of the UK’s insurtech jobs are outside London.
Insurtechs can also support diversity and inclusion in the insurance industry via their typically young, diverse and educated employee base. About 39% of employees are non-British, and about 60% are younger than 40.
The Insurtech industry still faces challenges that influence ongoing success, including protecting and improving the UK’s innovation ecosystem, particularly with access to talent and capital. Through a comprehensive review of the UK insurtech environment, industry analysts are attempting to deliver practical and actionable insights for all relevant stakeholders. These recommendations could provide a road map to enable continued success for insurtech companies, insurance industry incumbents and investors focusing on tackling the most significant challenges: strengthening access to capital and talent, scaling and improving the existing macroeconomic climate.
Insurtechs can spark significant transformation within the insurance industry. Insurtech companies have the power to disrupt the historical market conditions, encouraging traditional insurers to embrace new tech and innovation, adopt product development and expand coverage to new, underserved areas and groups. These transformative changes will drive further competition and accelerate the industry towards a more inclusive and customer-focused environment.
