InsurTech M&A Activity and Changing Consumer Demand

Discussion during the SIR’s fifth Life and Health Roundtable on April 7^th  was built around two key topics: InsurTech M&A activity and changing consumer demand. The event was moderated by Chris Rzany.

InsurTech M&A: What’s driving the activity and what are the implications?

Participants offered a number of ideas regarding M&A activities in both the life and health ecosystems. Chris shared a few examples of 2022 activity which spurred conversation on the buy versus build concept. Smaller companies being acquired by life and health insurance (even reinsurance) companies provide entry into new markets, supplement capabilities and may help to expand the acquirer’s share of wallet with their customers, for example. While the build option may certainly present more obstacles – budgets, resources, lack of speed among others, one participant suggested the buy option is certainly attractive when a company has considerable venture capital on hand.

Some companies may choose to partner rather than buy or build to gain access to new markets, new customers and new capabilities. It was suggested that M&A might be a strategic experiment for some companies to see what works. A health company acquiring a hospice company may find the experiment does not provide expected return on investment and later divest itself of the acquisition, for example.

Consumer demand: What have we learned during the pandemic?

Reviewing trends from the past two years in online shopping (Jornaya), applications (MIB) and sales (LIMRA) of life insurance revealed correlated peaks and valleys in the trend lines. For example, online shopping peaked in January 2021 but has been in steady decline so that February 2022 numbers are equivalent to those of February 2019. March 2021 data from MIB showed astonishing growth at 18% higher than a year previously, but the trend line falls somewhat steadily to December 2021. LIMRA data from 2021 shows 5% YoY as measured by annualized premium and decline of 1% YoY when measured by number of policies sold.

So what does it mean? Participants seemed to reach consensus that we are back to a “normal” frame of mind. Our return to work and routine could be impacting activity in online shopping for all things including insurance. Those who are re-employed after a pandemic layoff may have a residual desire to buy life insurance, but the reality of lower discretionary income as inflation rises may slow purchasing. The acceleration in sales during the past two years may also be slowing because everyone who wanted life insurance may have already purchased it.

SIR members may watch the recording of the roundtable here.