Large insurers and private investors are prioritising offshore tech funding over Australian innovation and “missing a real opportunity to strengthen the local insurtech sector”, a peak body has warned.

Insurtech Australia CEO Simone Dossetor says there is potential to accelerate change in the local industry through greater collaboration, but “Australia’s private sector and insurance industry isn’t investing where it needs to”. 

The comments come after IA and PFS Consulting published Insurtech Down Under: Trends, Tech and Triumphs – a report examining emerging insurtech solutions and success stories. 

It highlights the difficulties entrepreneurs face raising capital and finding early adopters in the Australian insurance industry. 

The nation’s start-up ecosystem has matured, according to the report, with a growing emphasis on capital efficiency and sustainable business models, and funding now focused on structured deals over speculative growth.   

There are 293 insurtechs headquartered in Australia and New Zealand, with total funding of $US1.6 billion ($2.54 billion) across 100 funding rounds over the past 12 years.   

Challenges remain securing early stage funding, accessing talent and navigating evolving regulatory landscapes, with venture capital “more selective [and] investors prioritising financial discipline and long-term profitability over rapid expansion”. 

Blockchain promises to strengthen IT security, offering greater transparency and enabling smart contracts that automate claim settlements. Quantum computing could advance risk modelling, and improve capital allocation and underwriting accuracy, according to the report. 

“Technology has the potential to reshape insurance, with AI, blockchain and quantum computing likely to drive new efficiencies in underwriting, claims and fraud prevention,” it says. “AI-enabled analytics are already improving risk profiling, while applications of machine learning are streamlining claims processing and enhancing fraud detection.”  

Larger investments appear to back automation and AI-inclusive solutions, the report says, as use of predictive analytics in risk assessment and claims management grows.

Australia’s geographic isolation has encouraged start-ups to adopt a global mindset, according to the paper. Many seek international investments and markets, particularly in capital-intensive deep tech sectors, and this focus on global scalability has been a key strength in navigating economic downturns.

The report says Australia’s overall start-up ecosystem has transformed in a decade from a “relatively secondary market into a global player”.

It has climbed into the top seven nations for global venture-backed funding – behind the US, UK, China, India, France and Germany – led by the success of companies such as Atlassian, Canva, Afterpay, WiseTech, Altium, Appen, Zip and Linktree. 

“These success stories demonstrate Australia’s ability to scale businesses internationally despite geographic constraints,” the report says. “Australian start-ups ... have operated with lean structures, and prioritising profitability from an early stage has helped. 

“This financial discipline has enabled them to expand globally without excessive funding, making them attractive to investors.” 

Australia remains an attractive start-up hub because its smaller, less competitive market allows businesses to refine their products before competing internationally. Insurtech has particularly benefited, with growth fuelled by government incentives and policy support. 

“Climate start-ups, in particular, are emerging as global leaders, benefiting from policies such as the US Inflation Reduction Act and EU regulations,” the paper says. 

See the report here.