Opportunities in insurtech seen after two years of lower investment

The insurance technology (insurtech) sector received less investment for two consecutive years, 2022 and 2023, according to the Insurtech Global Outlook 2024, prepared by the consulting firm NTT DATA. This scenario was due to an adjustment in investor expectations due to a challenging economic and political context, as well as changes in the variables of the insurance sector.

The study pointed out that this decline was somewhat expected, as the alignment with macroeconomic trends and capital markets showed that insurtech was not considered as a case with particular opportunities, compared to other sectors.

However, it was highlighted that the digital insurance industry is at a point of maturity. Carlos Manuel Ortega, director of insurance and health at NTT DATA Mexico, explained that 114 insurtechs were detected operating in the country, and 51 of them are growing.

"All of them are coexisting at the same time in the Mexican market, making investments and managing to continue growing, this is something very particular to the Mexican market and it is also present in Latin America and in the same way in markets such as Asia, Europe or the United States," said Ortega.

This growth in insurance technology was driven by the adoption of new technologies, such as Generative Artificial Intelligence (AI), which boosted the segment's ability to combat emerging risks such as climate change, cybersecurity or mental health, evidencing the maturing of the sector, which seeks long-term sustainability and profitability.

The study identifies three waves of innovation in the insurtech sector: digital insurance, driven by digitization and the transition of insurance technologies towards sustainable models; connected insurance, which uses real-time data to move from traditional protection to proactive prevention; and generative insurance, based on Generative AI.

"Mexico has also followed the trend of declining direct investments in insurtech, we are not oblivious to what is happening and what we see in other markets. The country fortunately is able to attract investors for the sector; unlike what we see globally, in Mexico these three waves of insurtech, exist and coexist," highlighted Ortega.

Collaboration with insurers

The study detailed that insurers are no longer afraid of insurtechs, and recognize the value of collaboration to address the low level of customer engagement.

Likewise, the winning strategy for insurers involves partnering with external resources to improve aspects of the business.

On the supply side it evolves by addressing protection gaps, targeting younger customers and improving distribution channels.