Insurtech in Australia and New Zealand is being left behind in the rush towards fintech innovation, according to a report by KPMG and business lobby the Committee for Sydney.

It finds that more than $US1 billion ($1.3 billion) was invested in insurtech groups globally last year, but in Australia the sector accounted for less than 3% of fintech companies,

“There is high demand from Australian insurers looking for new technologies to improve customer service, deliver services in new ways and to transform operational models,” the report says. “However, despite a clear need to address insurance technology, insurtech has largely been left behind in terms of the fintech agenda in Australia and New Zealand.”

The report notes insurers are becoming more engaged, with IAG and Suncorp partnering with start-up hub Stone & Chalk, while investing and partnering with fintechs such as Trov.

Broader opportunities in areas such as telematics, the Internet of Things, drone technology, driverless cars and wearables will foster innovation, and insurers are developing new offerings such as cyber policies and “just-in-time” cover, it says.

The report finds the number of start-ups in Australia has increased to 579 from 100 in 2014. Last year $US675 million ($852 million) was invested across 25 deals.

The two largest fintech sectors are payments and lending. London is the global fintech leader, but Sydney has an opportunity to become the hub for Asia, according to the report.

“The challenge now is to see the more mature players scale their businesses locally and internationally,” KPMG Australia Head of Banking Sector Ian Pollari says.