Published October 2021


The Evolve team recently returned from InsureTech Connect (ITC), the world’s largest insurance technology conference in Las Vegas.  After a two-year hiatus because of COVID, we noted the increased attention to digitization of traditional players, and it was a common theme across many conversations.  The research note was penned before we departed to ITC, but our conversations with conference attendees further supports our thesis. Enjoy our note on M&A and partnerships driving digitization.



In recent years, digital transformation has been a persistent theme in the insurance industry reshaping distribution, carriers and it service providers. The global pandemic has been a strong catalyst as companies move to digitize their operations. The continued urgency to adopt new operational and business models have led some companies to consider M&A or partnership deals, facilitated by investor interest and capital. However, notwithstanding a challenging shift in mindset (e.g. willingness to handle difficulties during the transition process), management teams need to source for necessary talent and resources to help them integrate new technology into existing operations. Companies that can marry both technical and distribution capabilities will be able to thrive in these uncharted waters.

At its core, the importance of digital transformation reflects the changing habits of consumers and small businesses. As consumers increasingly get accustomed to working from home, they increasingly demand real-time access to information and services.  Today, a lot of insurance offerings remain complicated and time-consuming, frustrating consumers. Small business owners also face obstacles, leaving more of them with coverage gaps or worse, no coverage at all. To adapt to these changes, traditional wholesale brokerage firms such as Appalachian Underwriters (Appalachian) teamed up with InsurTech firm Slice Labs to offer a small business insurance platform, as announced in late 2020. This platform is built on Slice’s Insurance Cloud Services platform, operated by AERO Insurance Services – Appalachian’s digital brand. Under the new system, the firm’s independent agents can manage and service small business accounts online within minutes. Partnerships like this help companies like Appalachian supercharge its digital transformation, much faster than if they try to overcome the technological and knowledge gap themselves. This is beneficial for Appalachian, allowing them to stay ahead of InsurTech competitors such as Next Insurance.

For some companies, there is a need to pivot their business models. Insurance brokers, for example, have been disintermediated by insurance aggregators and marketplaces. Many of those that have successfully survived have focused on upmarket services, by offering specialized insurance options. With the need to handle digital transformation and business model transition, insurance brokers like UK-based Atlanta Group (part of the Ardonagh Group) have pursued an aggressive M&A program in recent years to expand to new businesses and markets, such as the April 2021 acquisition of telematics broker Marmalade Insurance, with 100 employees (financial details were undisclosed).

As the group becomes bigger, there is a greater need to upgrade their technological capabilities to enhance efficiency in the newly acquired business units and to integrate operations to facilitate the flow of information as part of a comprehensive customer database. To achieve its digitalization goals, NashTech Global was brought in to offer offshore recruitment services to search for talent in Vietnam – which has a wealth of technology talent that would otherwise have been hard to access. Atlanta Group’s initial challenges to maintain digital skillsets and capacity was alleviated by the partnership with NashTech Global, which took on the burden of recruiting specialized tech talent. Given the steep learning curve in technology, companies facing digitalization and business pressures may do well to focus on strategic partnerships and deals that can offer complementary value.

One major deal to highlight is American Family’s February 2021 acquisition of InsurTech firm Bold Penguin (financial details were undisclosed). Bold Penguin provides a digital exchange to source for insurance options easily. With the acquisition, American Family’s agencies can integrate Bold Penguin’s marketplace directly into their operations, to achieve greater efficiency and convenience for their agents and their customers.

Companies in the traditional insurance space need to adopt a paradigm shift in mindset, focusing on a data-first management framework, which may not be an easy feat to do. Traditional companies without proper data management processes may be spending a lot of time manually collating and cleaning data, which thus get deprioritized because they did not contribute directly to generating revenue. A data-first management framework will require expertise in data automation processes, so that employees can spend more time analyzing the data to generate actionable insights for the company. Investors such as Thompson Street and SandBox Ventures have identified huge opportunities to modernize the P&C sector through data modernization, as seen from their late 2019 co-acquisition of DataDimension, a Wisconsin-based provider of outsourced document handling and workflow solutions for the P&C insurance, financial services and government industries.

Once you have a reliable and accurate source of data automatically generated consistently, it will act as a major foundation for the company to expand into new businesses. Companies need to hire key executives that not only have the vision to execute on ambitious digital transformation plans, but also have the right mindset to build a data-first culture. DataDimension’s August acquisition of BPO firm WorkCompEDI is a deal that will center on data capabilities as a core growth strategy, one of many such cases in the future, as investors continue to funnel capital towards this type of deals.