Asian Insurtech Is in for a Bumpy Ride
Insurtech has been on a tear lately. According CB Insights, deal activity in the sector has been expanding at a rapid rate. In 2016 alone, the total number of insurtech deals surged over 40%, while total funding dollars pushed the $2 billion mark.
And that’s just startups. Matt Streisfeld, a VP at venture capital firm Oak HC/FT, says that overall investments in insurtech exceeded $4 billion in the first four months of 2016, completely dwarfing the $650 million invested in the sector for all of 2014.
“That dwarfs the $650 million invested for all of 2014.”
– Matt Streisfeld
Exactly what I said. In Asia however, things might be a little different:
“InsurTechs face considerable regulatory barriers, as has been the case for many FinTech startups navigating the different local regimes in Asia.
That’s Samuel Hall of Startupbootcamp Fintech, who as Deal Street Asia reports, is a little iffy about insurtech’s Asian conquest.
Why is this the case? Well here’s the man again:
“These challenges manifest both in terms of identifiable obstacles and uncertainty caused by regulatory gaps, or grey-areas. Southeast Asia cannot be treated as a homogeneous entity, and scaling successfully in Asia demands that companies deploy highly differentiated strategies in different markets.”
Hall continues, “Some countries will require local partnerships or JVs, whereas some may be directly accessible by startups on their own, perhaps with support from local insurance partners. In all cases, strong relationships and close contact with regulators is likely to play an important role in scaling across the Asian market.”
That’s not all; Hall says that another problem for insurtechs would be the target market’s culture or behavior. In certain nations, the distribution and delivery of insurance is often being well-rooted, and this will likely dictate how consumers view or purchase insurance products.
He also noted how attuned Asian insurers are to their own industry’s inefficiencies. This, again, could prove to be a headache for “disruptors” as they end up competing against incumbents and their own in-house, innovation lab-created solutions.
This sort of explains why insurtech funding in Asia, while robust by most means, still lags those in the developed countries. China for instance is a distant fourth compared to the U.S. when it comes to deals, despite having insurtech monsters such as Zhong An Insurance calling the Middle Kingdom home.
At any rate, Hall emphasized that “flexibility and a well thought-out regional strategy” should help Asian insurtech firms overcome their hurdles, adding that he’s actually bullish about their future:
“We’re bullish. North America and Europe have borne the brunt of ongoing economic uncertainty, but Asia continues to see investment flood into FinTech. As everyone well knows, the pace of development and size of investment in China is enormous, and as its influence in Asia continues to grow we expect to see continued investment in FinTech and InsurTech across the region.”
He did, however, have this caveat to share:
“Successful approaches will likely be replicated and repeated in Asia, so to stay relevant, startups will continually need to make sure that they are executing at a very high level.”
Let’s see how it goes.