The news: The tough economic environment in 2022 didn’t spare the insurance industry, which saw dried-up funding, tighter budgets, and competitive pressures. This year’s economic outlook isn’t much brighter, but insurance firms are set to disrupt the scene with new partnerships and technological advances. Here are the top four trends we are watching in this space in 2023.
Trend 1: Partnerships form between startups and incumbents.
- Competition between legacy insurers and new entrants is fierce, and each faces unique challenges from a tough economic environment and intense consumer demand.
- Incumbents struggling with a digital transformation will look to startups that base their operations on new technologies to bring them up to speed. Meanwhile, the startups that are trying to get their feet on solid ground and reach profitability will turn to incumbents for an increased budget allowance and built-in customers.
- Incumbents also bring their brand names with them, especially in very competitive markets like the UK. Startups that link up with these established incumbents have a head start at gaining consumer loyalty. One example is Lemonade’s partnership with UK-based incumbent Aviva. While Aviva is well-known in the UK, Lemonade’s popularity in the US hasn’t yet translated to the UK market.
Trend 2: M&A deals consolidate the market.
- Some startups spent 2022 adjusting their business models to attempt to combat challenges like a lack of funding and high inflation, but their efforts still fell flat. Now, these firms are prime targets for M&A deals.
- We expect firms that just can’t make it through another tough year to get scooped up by startups that are further along in the growth cycle, or incumbents that see value in the technology the startup has developed. 2023 will be the year the weak are weeded out from the industry and the strong prevail.