Southeast Asia’s (SEA) InsurTech sector shows progress and potential, but needs to focus on profitability, customer-centricity and innovation

• SEA’s InsurTech deal value surged in 2023 despite macroeconomic and geopolitical challenges 

• Diverse exit options, with full buy-outs and initial public offering (IPO) emerging as a viable strategy, point to a maturing InsurTech market

• InsurTech firms need to innovate to meet new customer demands, leverage digital platforms as “points-of-experience” and support new distribution models for growth

Despite macroeconomic and geopolitical uncertainty, a hawkish inflationary environment and elevated interest rates, SEA’s InsurTech sector saw a surge in deal value in 2023 – a development not seen since 2020. In 2023, SEA’s InsurTech sector witnessed deal value of US$2,351m from 27 deals, compared with US$538m from 39 deals in 2022, and just below the high of US$2,363m from 32 deals in 2020, majority of which was driven by Singlife’s merger with Aviva Singapore (at over US$2,000m).

The report, titled InsurTech landscape in ASEAN – key trends and opportunities shaping the InsurTech sector, by professional services organization EY, and financial services company Singlife, highlights a general flight-to-safety approach among investors as they became increasingly selective, putting greater emphasis on and deploying capital to companies that are profitable and have innovative technologies or regional presence. Investors are also favoring established InsurTech firms with a proven track record, as seen in the two major deals in 2023: Singlife’s acquisition by Sumitomo Life at a valuation of US$3.5b and Bolttech’s US$246m Series B round. In comparison, riskier early-stage companies only secured two publicly announced Series A deals raising US$2.3m in 2023. 

While funding for InsurTech firms headquartered in Singapore dominated deal count and funding (accounting for 85% of deal value), given the country’s conducive environment as a FinTech hub, countries such as Indonesia, Thailand and Malaysia are gaining a bigger share of the funding pie. This came as no surprise given the favorable demographics and structural developments. 

Rahul Vardhan, Partner, Strategy and Transactions at Ernst & Young Solutions LLP, says: 
“Fundraising in the InsurTech sector in the short to medium term is likely to be geared toward companies that are category leaders and have proven track record of sustainable and profitable growth. Presence across multiple jurisdictions will also be a key differentiator to allow scale in SEA’s underpenetrated insurance market. However, regional expansion is a capital-intensive endeavor that requires a strong understanding of local regulations to navigate the regulatory hurdles smoothly. This is particularly important for InsurTech firms that underwrite. InsurTech firms that execute this well will achieve a meaningful competitive advantage. Scarcity of such companies in the region is likely to drive high demand and valuations.” 

Varun Mittal, Head of Innovation and Ecosystems at Singlife, says:

“Singlife is proud to collaborate with EY teams on this report, which showcases innovative use cases and investment trends within the InsurTech landscape across Southeast Asia. This report lays the foundation for our 'Beyond Insurance' initiative. Through the initiative, we hope to break down walls and contribute to the wider ecosystem in a broader and more detailed manner. We hope the insights of this report will stimulate further dialogues and innovation in the industry.” 

Diverse exit options, with initial public offering (IPO) emerging as a viable strategy, point to a maturing market  

The report also revealed that in 2023, there was an increased number of exits and expanding exit options, with IPOs emerging as a viable strategy. Fundraising activity across various stages of InsurTech firms was commonly seen and firms are now expanding their options, such as via buy-outs by corporates, secondary sale to private equity firms, as well as IPOs. In 2023, there were three M&As, two secondary transactions and one IPO. 

Investors are also placing bets on SEA InsurTech companies that promise to revolutionize the industry through digital transformation. This is evident in the strategic partnerships and investments by tech unicorns and traditional financial service providers, which are leveraging InsurTech platforms to enhance their product offerings and customer experiences. Examples include Tokio Marine’s investment in Bolttech to enable the provision of embedded insurance products as well as FWD Insurance’s investment in Protos Labs (part of FWD’s Startup Studio accelerator program), a cyber risk analytics company that focuses on artificial intelligence (AI)-driven solutions. 

These trends demonstrate the broadening of the investor base for InsurTech firms, signaling a maturing market with growing liquidity.

Vardhan says:

“The investment landscape and focus of InsurTech firms is witnessing a shift. While the allure of rapid top-line growth and customer acquisition has been a driving force in the past, InsurTech firms must now balance scalability with financial prudence to attract investment. A successful expansion strategy will be one that not only aligns with regulatory frameworks but also leverages them as a catalyst for growth. Whether through organic growth, strategic partnerships or M&As, InsurTech firms must navigate these with a keen eye on compliance, market readiness and local consumer behavior.”

Customer-centric approach and innovation are key to future growth

The report also highlighted the need for InsurTech firms to innovate to meet evolving consumer demands; drive simplification of the insurance purchase process and post-sale servicing; and support new distribution models for growth. 

As customer demands evolve, InsurTech firms need to tailor their products to meet the needs of varied customer segments, such as Gen Z and SMEs, and to address changing socio-economic trends such as the rise of the gig economy and evolving dynamics of families.  

Given the diverse consumer profiles, InsurTech firms can leverage innovative technology to allow digital platforms to become “points-of-experience” for more digital-savvy audience, where value-added products and services such as insurance can be integrated through open data and e-commerce. InsurTech firms also need to consider their pre- and post-sales capabilities, such as dynamic pricing and digital claims, to enhance product value and improve customer experience. 

Additionally, distribution has been a key focus for InsurTech firms, with key players adopting various digital distribution models to support rapid growth. Hence, there has been an evolution in distribution models, with aggregators focusing on traditional insurance products through to advanced full-stack models, which disrupted the entire insurance process to meet changing customer needs.

Vardhan says:  
“It is critical to identify key areas of the value chain where processes can be improved. To optimize their capabilities and sharpen their customer value proposition, InsurTech firms are exploring innovations across three areas, namely in technology, such as using AI for dynamic pricing and claims management; in product so as to serve emerging, new and untapped customer segments such as SMEs and gig workers; as well as in distribution such as through embedded insurance and white labeling.” 

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Notes to editors

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