Despite rising coverage demand brought about by the global pandemic, customers are being left rather unsatisfied with the convenience, advice and reach offered by their existing insurance providers, creating opportunities for new players and insurtech firms, according to Capgemini and Efma’s World Insurtech Report 2021.

The report, which draws on research insights from surveys, roundtable discussions and interviews, claims that although customer intent to buy insurance rose 7% due to COVID-19, behaviors and attitudes towards insurers have changed.

Today’s policyholders are looking for a frictionless digital experience throughout the entire insurance process and are increasingly turning to bigtechs for their insurance needs amid poor customer experience and unmet expectations, the research found.

Nearly 80% of the customers who participated in the survey mentioned convenience factors as catalysts to switch carriers, and more than 69% said they would change insurers after lackluster experiences in personalized advice as well as poor reach and engagement.

Findings suggest that once a policyholder decides to switch carrier, they are increasingly willing to opt for alternative coverage sources, with more than half of customers surveyed stating they are now prepared to buy insurance from bigtechs, insurtechs and other non-traditional players which excel in personalization and customer experience.

Insurtech funding reaches all-time high

This customer shift comes at a time when insurtechs and bigtechs are no longer perceived as newbies but rather as relevant industry players that are turning up the heat on incumbent insurers.

Over the past year or so, a number of insurtech startups went public via mergers with special purpose acquisition companies (SPACs) or initial public offerings (IPOs) on the back of surging activity, including Root Insurance, a car insurance company; Metromile, pay-per-mile car insurance company; Hippo Insurance, which specializes in coverage for renters; and Lemonade, which offers home insurance.

Insurtech SPAC mergers in the pipeline include CCC Information Services, a software-as-a-service (SaaS) platform for the property and casualty (P&C) insurance industry; Kin Insurance, a homeowners insurtech startup; and Policygenius, an online insurance marketplace.

In addition to the flurry of public listings, insurtech companies have also closed massive fundraises. In H1 2021, global insurtech funding reached US$7.4 billion, exceeding the full year of 2020 funding (US$7.1 billion), according to risk management, insurance brokerage and advisory firm Willis Towers Watson.

Driving 2021 funding has been the growth in mega-rounds of US$100 million and over.  Collectively, the 15 mega-rounds closed so far this year represented nearly US$3.3 billion or 67% of total funding of H1 2021. These rounds includes WeFox’s US$650 million Series C, Bought By Many’s US$350 million Series D, Collective Health’s US$280 million Series F, and Extend US$260 million Series C.

Increased collaboration

A range of investors has supported and enabled the insurtech wave, among which optimistic venture capitalists and private equity partners, reinsurers making long-term investments for new revenue opportunities, and traditional insurers looking to strengthen their capabilities.

Companies across various industries have also partnered with insurtechs to offer new digital solutions. HSBC Life, for example, teamed up with Dacadoo, a Swiss company specialized in digital health engagement and risk quantification, to encourage policyholders to be healthier and more financially fit. Ikea partnered with Swiss Re’s Iptiq to launch Hemsaker, an affordable and easily accessible home insurance, in Switzerland and Singapore. And Lyft started offering ride-sharing commercial insurance coverage in the US in October 2020 through a collaboration with commercial insurance company Mobilitas Insurance.

Research and advisory firm Gartner estimates that global IT spending within insurance will grow to US$210 billion in 2021. Long-term spending is forecast to grow at a compound annual growth rate (CAGR) of 6.4% to US$271 billion in 2025.