While insurtech fundraising has been brisk across Asia in recent years, innovators in China and India appear best positioned to move beyond a supporting role and challenge the region's industry incumbents.
Despite making progress across the region, insurtechs have yet to take a large bite out of the premiums collected by legacy insurers via new channels.
"The vast majority of insurtechs are more focused toward the marketing and distribution side ... as a complement to the traditional insurance sector," Bernhard Kotanko, a senior partner with McKinsey & Co., said in an interview. Providing additional platforms and capabilities to insurers is usually one of the main goals of most insurtechs.
When it comes to predicting which insurtechs are likely to break through and go head-to-head with incumbents, Kotanko noted that the successful digital underwriters so far were developed and delivered in one big market, such as U.S.-based Lemonade Inc.
"We don't see many successful cross country-driven business models," Kotanko said. "Within Asia-Pacific, we will see those models emerge strongest in India, China."
India-based insurtechs were three of the biggest fundraisers in 2020 and 2021, with Go Digit General Insurance Ltd., Acko General Insurance Ltd. and Policybazaar Insurance Brokers Private Ltd. raising $319.3 million, $319.2 million and $219.1 million, respectively.
Singapore Life Pte. Ltd. was also a big fundraiser with investors committing approximately $238.1 million in 2020.
Hong Kong, Singapore
Smaller jurisdictions such as Hong Kong and Singapore have sought to promote digital innovation in their respective insurance markets, but challenges remain given the nature of those markets.
Traditional distribution models are more entrenched in Hong Kong and Singapore, Kotanko said, adding that "there's been less radical disruption or completely new ideas" in those places.
Historically, a combination of an encouraging regulatory environment and a high level of insurance penetration forced insurtechs in Hong Kong and Singapore to innovate and think beyond mere distribution, said Alex Leung, co-founder of OneDegree Hong Kong Ltd., in an interview.
While Indonesia, Malaysia, Thailand and Taiwan and even Japan are trying to mirror the regulation seen in Singapore and Hong Kong to facilitate insurtech development, problems such as data gaps and lack of customer awareness can hinder the uptake of these services, Leung said.
However, with insurance penetration levels high in both the Lion City and the special administrative region, the room for innovators to grow has been somewhat limited.
Notably, insurtechs in Japan only raised $4.1 million in 2020 and $4.7 million in 2021. Japanese insurers are keen on insurtech, but they prefer to absorb know-how from foreign firms and startups through investment rather than through their own research, S&P Global Ratings analyst Eiji Kubo said.
Insurtechs in India raised $1.33 billion in 2021 and $304.8 million a year earlier. Mainland China-based insurtechs raised $673.7 million in 2021 and $1.42 billion in 2020.
