The news: The insurtechs Next and Thimble recently announced layoffs of part of their workforces, stating that the need to focus on profitability drove their decisions, per the Insurance Journal. Next CEO and co-founder Gary Goldstein also cited worsening economic conditions as a contributing factor for his firm’s reduction in force.
The bigger picture: In Q1 2022, insurtech funding fell 58% quarter over quarter to $2.2 billion, the worst level since Q2 2020. This challenging environment is pushing insurtechs to scale back their headcount, reversing the rapid growth strategy that has driven venture capital investors within the sector.
What’s next? Although all insurers face rising claims costs amid supply chain shortages and rising inflation, insurtechs have it tougher than the longer-established providers that they once hoped to disrupt. Our report “The Era of Uncertainty: Insurance—How Insurers Can Turn Gathering Headwinds Into Opportunities” delves into why legacy insurers are better-positioned to weather the storm—particularly if they continue pushing an innovation agenda that can help them close the tech gap with their harder-hit insurtech competitors.
Short-term trends: Both cohorts will be mindful of their budgets and the mantra: "Do more with less."
Long-term changes: Insurers will look at lower-cost distribution models—and insurtechs will redirect some of their budget back to marketing in an effort to boost their mind share with consumers.
Go deeper: For more details about how these trends are playing out across the industry, and our recommendations on how to weather them, click here.