Merger and acquisition (M&A) activities need to change if insurers want to take advantage of the tech boom, according to a global report from consulting group EY.

It says many insurance companies are using dedicated venture funds to invest in insurtech groups, which helps with many challenges insurers face when investing in start-ups.

Venture funds can help companies better recognise the strategic value of an investment, which is a different measure from the traditional return-on-equity model.

Companies can also use venture funds to take strategic stakes in tech companies that do not want to be fully acquired by a single institution; many tech companies do not want to be limited in the number of industry counterparts with which they can interact.

EY says insurtech investment requires skills that are different from traditional M&A activities.

A venture fund must be supported as part of a wider approach to innovation and business transformation, the report says.

Insurers are grappling with how to enter new types of partnership arrangement, often within the context of developing digitally connected business ecosystems.

The report notes M&A activity by volume last year was at its lowest since 2010, and was down 3% on 2016. However, the value of the deals grew 4% on 2016.