Lemonade, for example, recently reduced Metromile's workforce by 20% after completing the acquisition of the insurtech in August 2022, despite previously stating that it would not reduce headcount.
Other high-profile insurtechs that have made similar moves in 2022 include Nova Benefits, which cut 30% of its workforce in June, and Zego, which cut 17% of its workforce in July.
According to GlobalData, the COVID-19 pandemic and cost-of-living crisis are having a massive impact on the global insurtech industry, with several leading insurtech start-ups going bankrupt or cutting staff.
By the end of July 2022, the industry had received $1.0 billion in investment, representing only 49.5% of the total annual figure for 2021. According to the report, growth is unlikely in 2022.
"These trends are likely due to a combination of factors," said Ben Carey-Evans, Senior Insurance Analyst at GlobalData. As previously stated, investment in the sector has slowed somewhat."
"Reduced investment is a significant barrier because funding rounds are essential to keep insurtechs running in the early stages before they become profitable."
According to GlobalData, economic woes have also led consumers to turn to familiar and established brands, as they trust them more to survive and pay out claims.
According to the report, many insurtechs focus on gadget or possessions insurance, which are not considered necessary purchases by consumers. As a result, it is a line that is always likely to be crossed as disposable incomes fall and consumers seek to cut back on their spending.
"Insurtechs will need to focus on offering value to consumers, as that is what they will be looking for in the immediate future," Carey-Evans adds.
"This can be accomplished by heavily relying on artificial intelligence to reduce processing costs, or by introducing novel products such as pay-as-you-drive and on-demand policies." The latter would allow customers to control how much they pay or receive coverage only when absolutely necessary."