In 2023, the insurtech sector in Southeast Asia saw a remarkable resurgence, marking a significant rebound not witnessed since 2020.
According to a new report by Ernst and Young (EY), Southeast Asia’s insurtech deals reached a total value of US$2.4 billion from 27 transactions, a significant increase from the US$538 million raised across 39 deals in 2022. These figures nearly matched the sector’s all-time high of US$2.6 billion and 32 transactions recorded in 2020.
Mega deals driving Southeast Asia’s insurtech resurgence
The surge in insurtech deals in 2023 was driven by investments and transactions involving established insurtech firms with a proven track record.
This trend is highlighted by two major deals in 2023: Singlife’s acquisition by Sumitomo Life at a valuation of US$3.5 billion and Bolttech’s US$246 million Series B round.
In contrast, riskier early-stage companies secured only two publicly announced Series A deals, raising a mere US$2.3 million in 2023.
These deals reveal that investors are becoming more selective, putting greater emphasis on and deploying capital to companies that are profitable, and have innovative technologies or regional presence.
They also show that the region’s insurtech sector is maturing, a trend that’s evidenced by the rising number of exits and expanding exits options in Southeast Asia.
One notable development is the emergence of initial public offerings (IPOs) where Blue Venture Group, the operator of an insurance platform for the automotive and healthcare industries, went public on the Thailand Stock Exchange last year.
The listing pipeline appears promising as more are to follow suit, such as SilkSpan on the Thailand Stock Exchange, and Bolttech’s rumored planned listing in the US.
Singapore Dominates Deal Southeast Asia’s Insurtech Deal Flow
Though Singapore-based companies have largely dominated insurtech deal count and funding volume, accounting for 85% of the total deal value in 2023, countries like Indonesia, Thailand and Malaysia are increasingly securing a larger share of the funding pie.
This is because these emerging markets are fertile ground for insurtech growth where companies in the sector are not only predicted to capture an increasing market share of the insurance market but also experience exponential growth from their current nascent stage.
EY estimates that by 2026, gross written premiums (GWP) by insurtech companies are expected to grow substantially, outpacing traditional insurance firms. In Indonesia, Vietnam, and the Philippines, insurtech GWP is projected to rise annually by 34-49%, compared to a 4-16% growth rate for traditional insurers.
Vietnam, in particular, is expected to see the strongest growth. By 2026, insurtech GWP in the country is forecasted to constitute 4.5-6.5% of all GWP, up from 1.3-1.7% in 2021, with an annual growth rate of 47-49%.
The rapid growth of insurtech in Southeast Asia is driven by favorable demographics and structural developments.
Consumers are becoming increasingly aware of the importance of insurance through concerted efforts from governments and companies to educate the public. Additionally, regulatory developments are creating opportunities for acquisition and consolidation, boosting insurtech deals and transactions.
For example, in Indonesia, the Financial Services Authority (Otoritas Jasa Keuangan) implemented in January a new regulation requiring insurers to have a minimum equity of INR 250 billion (about US$15 million) by the end of 2026, 67% higher than the previous minimum level. The OJK will also increase the minimum to between IDR 500 billion (US$32 million) and IDR 1 trillion (US$64 million) by 2028, it said.
According to Fitch Ratings, these tougher minimum equity requirements will likely reduce the number of companies operating in the sector, fostering a more competitive and healthier market. Insurers struggling to meet the new standards will be prompted to raise additional capital or consider mergers and acquisitions (M&A) options, it says.
Insurtech trends and opportunities
Post-pandemic, Southeast Asia has seen a significant shift in consumer attitudes towards insurance, now seen as a necessity rather than a luxury.
This has created growth potential in key markets across the region, particularly among emerging customer segments such as millennials, emerging families, gig workers, and small and medium-sized enterprises (SMEs).
Millennial and gen Z individuals are seeking products tailored to their on-demand lifestyle. This demand has led insurtech companies to develop products that are bite-sized, usage-based, and customizable coverage.
For example, GrabInsure offers a telematics-based car insurance product in Thailand that adjusts premiums based on actual mileage, catering to cost-conscious millennial drivers.
Similarly, SNACK by Income in Singapore offers micro-premiums, allowing users to gradually accumulate coverage through small, daily transactions, starting from as low as 30 cents.
Emerging families, including single parents, blended families and cohabiting couples, present another opportunity.
These customers have specific insurance needs that traditional products may not fully address, prompting insurtech companies to develop products specially catering to their needs. WeSure, for example, offers critical illness insurance designed for single parents in the Philippines, providing flexible payment options and convenient policy management and claim filing.
In the SME sector, insurance needs are evolving rapidly with growing demand for digital insurance, tailored products and effective risk management solutions.
Across the region, insurers are rising to the challenge by offering innovative products and services. For example, Sunday Insurance from Thailand is using artificial intelligence (AI) to offer personalized insurance products tailored to each SME’s specific needs.
In the Philippines and Indonesia, Oona Insurance caters to SMEs and entrepreneurs’ protection needs, providing a comprehensive suite of products, such as motor fleet, personal accident and travel.
Finally, the global expansion of digital platforms has ushered in a new era of flexible, on-demand employment, giving rise to the gig economy.
This shift has highlighted the need for specialized insurance solutions for gig workers and prompted insurers introduce specialized offerings.
For example, Singlife in Singapore is partnered with Outside, a staffing platform with over 16,000 users, to provide embedded insurance options directly to gig workers. Similarly, in Malaysia, FWD Takaful launched in 2022 FWD ADD Rider, an added coverage designed to provide gig workers with benefits upon accidental death and dismemberment (ADD), including medical expenses, financial and mental health coverage.
Featured image credit: edited from freepik
