Australia has the opportunity to be a leader in the insurtech world as it boasts an innovative and collaborative industry coupled with a transparent regulatory environment.

That is the message from Insurtech Gateway Australia Portfolio Manager Nick Proud, who says investors are piling into insurtechs across the globe and “chomping at the bit” for more.

Noting Lemonade’s share price has tripled since its IPO, Mr Proud says Australia is “yet to see the likes” of that sort of runaway success, “but it’s coming”.

A customer-led approach is being adopted by insurtechs in Australia and this will “help them win the hearts and minds of consumers both locally, and for those that choose to, globally,” Mr Proud says.

“The industry here is ripe for innovation and there are some incredible tech integrations happening around the world that will undoubtedly hit our shores in a tidal wave of change.”

So far this year, global Insurtech funding has reached record figures, with the first half already exceeding 2020 in terms of funding in the sector.

Insurtechs have raised $US7.4 billion ($10.01 billion), with 15 rounds of over $US100 million ($136.21 million) in funding. Early and mid-stage deal activity remains strong, particularly compared to 12 months ago when the coronavirus pandemic was in full swing in the northern hemisphere.

Successful insurtechs are achieving more than tenfold growth in just a few years and investors are seeing “incredible” returns, with valuations jumping in multiples between early-stage capital rounds, while initial public offerings achieve record subscriptions, Mr Proud says.

He cites six simple reasons why: Insurance is a large and rapidly augmenting market; There are popular, expensive and urgent problems to solve; Insurtechs are developing defensible and proprietary solutions; There are unique founders entering the market; Low-cost distribution pathways; and pathways to safely pilot ideas with consumers.

Three IPOs of note have investors wanting more, he says: Hippo, Oscar Health and Bright Health.

June and July brought unprecedented earlier stage activity and funding with more than a billion dollars announced.

“Investors are paying for growth, rather than margins. There is a massive opportunity in the industry for tech-enabled disruption,” Mr Proud said.

He recommends backing insurtechs focused on usage-based insurance (UBI), digital platforms for B2B credit security, community loss-pooling, insurance that incentivises positive changes in customer behaviour, embedded insurance for the rental/share economy such as Miami-based startup Lula, gig economy protection, parametric insurance, and risk prediction and mitigation tools.