Despite a challenging macroeconomic environment, Southeast Asia’s insurtech sector has shown significant progress in 2023, with a surge in deal value to S$2.35 billion (US$1.8 billion) from 27 deals, a significant 504% jump from S$538 million (US$412 million) across 39 deals in 2022, according to the Insurtech Landscape in Asean report by EY and Singlife.

Singapore continues to dominate the sector, the report notes, accounting for 85% of deal value. However, markets in Indonesia, Thailand and Malaysia are catching up, driven by favourable demographics and structural advancements.

Future investments, the report stresses, will likely favour insurtech firms that are category leaders with sustainable growth trajectories, especially those with multi-jurisdictional presence – a critical factor in scaling within Southeast Asia’s fragmented and underpenetrated insurance market.

Transactions, such as Singlife’s acquisition by Sumitomo Life, highlight investor preference for profitable, established companies with regional presence and innovative technologies.

Addressing evolving consumer demands, particularly among Gen Zers and small and medium-sized enterprises, will be key to staying competitive. To that end, innovation remains a critical growth driver, the report argues, with insurtech firms encouraged to enhance customer-centricity through digital platforms, dynamic pricing and tailored products.

The maturing of the Southeast Asia insurtech sector is also evident in the growing exit options, including initial public offerings, mergers and buyouts. These trends reflect a shift in focus from rapid customer acquisition to a balance between scalability and financial prudence, as investors focus on firms with strong local market understanding and a sound regulatory position.

“Fundraising in the insurtech sector in the short to medium term is likely to be geared toward companies that are category leaders and have a proven track record of sustainable and profitable growth,” says Rahul Vardhan, E&Y Solutions’ partner for strategy and transactions. “Presence across multiple jurisdictions will also be a key differentiator to allow scale in Southeast Asia’s underpenetrated insurance market.”

However, regional expansion, Vardhan points out, is a capital-intensive undertaking that requires a strong understanding of local regulations to navigate the regulatory hurdles smoothly, which is particularly important for insurtech firms that underwrite.

“Insurtech firms that execute this well will achieve a meaningful competitive advantage,” he adds “and the scarcity of such companies in the region is likely to drive high demand and valuations.”