Investment in insurtechs plunged 80% last year to $US2.21 billion ($3.21 billion), GlobalData says, and funding growth is unlikely in 2022 as only about half last year’s total had been invested by the end of July.

Insurtechs will need to focus on offering value to consumers amid tougher economic conditions, the research group says.

“Investment into the sector has dried up somewhat,” Analyst Ben Carey-Evans said. "Reduced investment is a significant barrier.”

He recommends a focus on artificial intelligence to cut processing costs, or offering innovative products such as pay-as-you-drive and on-demand policies which allow consumers to control how much they pay, or receive cover only when it is strictly needed.

GlobalData says several leading insurtech start-ups are “going bust or cutting staff,” and covid and a cost-of-living crisis are having a “massive impact” on the global insurtech industry. Its Deals Database shows investment had been around $US10 billion ($14.55 billion) in both 2020 and 2019.

US insurtech major Lemonade cut Metromile staff by a fifth after buying it this month, Nova Benefits cut 30% of its staff in June, and Zego 17% in July. GlobalData says tough economic times may see consumers turn to “familiar and established brands” which they are more confident will survive and pay out claims.

“A lot of insurtechs focus on gadget or possessions insurance, which is not considered an essential purchase by consumers. It is a line that is always likely to be hit as disposable incomes decrease and consumers look to reduce their expenditure,” it said.