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M&As in the insurance software, data & analytics space are set to hit record levels this year as traditional players and venture capitalists pump money into B2B ventures.
Rapid growth in the sector is set to drive increased M&A activity as insurers embrace new data analytics and processing systems, and consolidation among providers accelerates, according to mergers and acquisitions advisory firm, Quayle Munro.
Since 2011 there have been more than 240 M&A transactions in the insurance software, data & analytics space, with volumes increasing by more than 10% annually, according to research by the firm.
Disclosed values for the deals indicate that at least 36 were worth more than $100 million (£75 million) each, with the vast majority of deals taking place in Europe or North America, and involving companies with software-centric business models. Strategic investors led the charge, taking 60% of the market, with the remaining 40% taken by private-equity-backed platforms.
“We’ve definitely seen a marked acceleration in the number of insurance start-ups emerging, M&A transactions in the sector and private equity-backed companies buying insurance software, data and analytics providers,” Andrew Adams, CEO at Quayle Munro, told Insurance Business.
“This is a trend we expect to continue as increasing volumes of capital are put to work and board-level understanding of the power of software, data & analytics increases,” he said.
While insurance has historically been a slow adopter of technology, factors such as low interest rates and slowing premium growth in the advanced markets on which they rely have brought the need for operational efficiencies into sharper focus, according to Adams.
“Innovative software and data & analytics approaches can help address these cost and growth concerns by providing efficient workflows, enhanced visibility and better decision-making frameworks across the insurance value chain,” he said.
Significant investment from traditional insurers, via newly-established venture arms, is a clue to the disruption on the horizon, Adams commented.
“As increasing volumes of capital are put to work and more insurers become receptive to new technologies, we expect to see the insurance software, data & analytics and tech-enabled services M&A market go from strength to strength,” he said.
“The increase in funding available to technology firms in the industry should see innovative approaches proliferate. This is exemplified by the successful use of telematics in auto insurance and the growth of tech-enabled brokers. This should have benefits for both insurer and insured with more accurate underwriting, reduced claims losses, smoother claims processes and ultimately more transparent relationships between all parties involved.”
