APAC insurtech spurs interest among impact-minded institutions
Insurtech – the use of innovative technologies, such as artificial intelligence, big data analytics, blockchain, and machine learning – to improve and automate the traditional insurance industry, is generating growing interest from institutional investors as an impact investment theme.
The Asia-Pacific, in particular, presents high growth opportunities for investors.
“In certain segments and products, insurtech could take a much bigger chunk of the [insurance industry] marketshare,” Fernanda Lima, partner and co-head of the Asian financial services team at Leapfrog Investments, told AsianInvestor.
“We are in this space [insuretech] because of the profit with purpose mission. Given the insurance protection gap [the difference between total losses and insured losses], and the growing demand for insurance, we believe in the potential of this space.”
LeapFrog Investments
Current insurance companies cannot serve this demand in a way that is needed to increase insurance penetration, she added.
LeapFrog Investments is a private equity-focused impact investment firm firm that invests in high-growth, purpose-driven businesses in Africa and Asia.
Several large institutions, including Singapore’s Temasek, insurer AIA, Ford Foundation and asset manager Prudential Financial, have invested in LeapFrog’s funds.
It recently closed its fourth fund with commitments and designated co-investments totalling $1.02 billion. Investments will focus on high-impact healthcare and financial services.
Over 50% of capital was raised from Asia, including first investors from Japan, Singapore, and China.
INVESTING IN PARTNERSHIPS
Lima said that one of the ways LeapFrog Investments accesses the insurtech space is via partnerships that also inject capital.
“We see partnerships are a good way of accessing this market -- we decided to go with local champions and then large platforms that have the scale to be profitable,” she said.
Two examples of insurtech investments are Indonesia’s PasarPolis and Singapore’s Bolttech.
“When we invested in PasarPolis, it was clear they had a distinct advantage in becoming the leader in Indonesia with their digital-first approach,” she said.
LeapFrog invested in PasarPolis, which has now evolved into a full stack insurance provider, in September 2020 as part of the company’s series B round -- an unusual move for the impact investor.
However, Pasarpolis’ innovative digital-first approach offered an interesting opportunity for scale and impact for Leapfrog.
Bolttech, meanwhile, drew in LeapFrog as a new strategic investor in September 2023.
LeapFrog’s $50 million investment made bolttech’s fund raise of $246 million the largest ever Series B round for an insurtech.
In countries like the Philippines, Vietnam, and Indonesia, boltech plays a key role by making devices, such as mobile phones and solar panels, insurable assets.
It facilitate financial accessibility for the unbanked and underbanked population in these markets.
“It[bolttech] operates as a SaaS [software as a service] player or a marketplace, connecting insurance companies with key partners such as telecom giants like SingTel, as well as original equipment makers, retailers and financial institutions that have extensive customer bases,” she said.
Through their operations, these entities are dislodging traditional incumbents and gaining market share, especially on the general insurance side, added Lima.
ACTIVE PLAYERS
The Asia Pacific has a large, tech-savvy population, and its low insurance penetration markets offers significant growth opportunities, according to other experts.
CSC
“Larger private equity giants have been quite active making venture capital investments or [engaging in] private equity activities in the insuretech market,” Agnes Chen, regional managing director for APAC at CSC, told AsianInvestor.
CSC is a business administration and compliance solutions provider.
“Late-stage investments have proven to have done well, such as considering exits via potential considerations through the possibility of IPOs pos or expansion plans, with notable deals such as Bolttech and OneDegree.”
Some jurisdictions including Singapore, Hong Kong are also fostering innovation through regulatory sandboxes and frameworks designed to encourage innovation and advancements as well.
China, India, Singapore and Hong Kong already have some established Insurtech players.
“These markets appear more mature in terms of market expansion and frequently draw venture capital investments, typically at mid cap and series B onwards fundings,” said Chen, adding that the focus is often on scaling proven technologies with efficiency.
Markets with potential growth opportunities include Japan, Indonesia, Vietnam, she added.
Southeast Asia’s insuretech sector deal value in 2023 climbed to $2.4 billion from 27 deals, compared with $538 million from 39 deals in 2022, according to consultancy EY.