Report shows promising signs in burgeoning US insurtech market.

March 27, 2024
1 min read

TLDR:

  • The US insurtech market is showing signs of recovery in 2024, with industry consolidation and expense reduction plans being key factors.
  • Public market investors are warming up to insurtech stocks again, with many rebounding in 2023 after a decline in 2022.

In 2024, the US insurance technology space is experiencing a glimmer of hope for growth. Industry consolidation is in progress, and companies that are resilient enough to thrive independently are making strides in cutting expenses. Additionally, public market investors are showing renewed interest in growth stocks, with many insurtech stocks bouncing back in the previous year.

The insurtech sector is expected to continue its recovery in the coming year as the industry consolidates further, and companies with strong potential for profitability survive the challenges. While a return to the high valuations of 2021 may not be on the horizon, a gradual decline in interest rates could benefit the sector by attracting public market investors back to growth stocks and making venture funding more affordable for startups.

Artificial intelligence is anticipated to play a crucial role in the industry’s growth. Embracing AI technologies can transform operations and generate enthusiasm among investors in tech stocks. Insurtech companies are encouraged to fully integrate AI into their operations and highlight their efforts in this area to attract investor interest.

Following a lackluster 2022, public market investors have shown renewed interest in the stocks of insurtech companies listed on major US exchanges over the past four years. A market-cap weighted index of these companies rose by 22.2% in 2023 after a significant decline in 2022. Despite still being valued below their 2021 levels, companies have made progress in reducing net losses, signaling a faster recovery than expected.

Notable stock gains have been attributed to special situations, with companies such as Oscar Health Inc. and Root Inc. experiencing increases in stock prices due to specific events or takeover bids. Evidences of short covering and event-driven catalysts indicate better prospects and appropriately valued companies. This positive momentum could lead to increased IPO activity in 2024, especially for profitable or potentially profitable companies.

Slide Insurance Holdings Inc. and Kin Insurance Inc. are among the companies that may consider IPOs in 2024. Slide’s focus on homeowners insurance in Florida, strong growth trajectory, and data-driven advantages position it as a potential market entrant. Kin, a tech-oriented insurer targeting catastrophe-prone regions, could also explore going public after a previously aborted SPAC merger in 2021.

In conclusion, the US insurtech market is witnessing a resurgence in investor confidence and growth opportunities, with AI technologies and industry consolidation playing key roles in driving the sector forward in 2024.

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