Investor interest in insurtech is expected “to remain hot across all regions of the world” during 2017, following strong growth in 2016, according to a report by KPMG.

In the coming year, most insurtech investments likely will focus on companies specializing in individual components of the value chain, such as distribution, underwriting, claims and customer service, said the report titled “The Pulse of Fintech Q4 2016 – Global analysis of investment in fintech.”

However, some investors may follow the lead of Lemonade and Trov, which KPMG described as two early-mover, full-service digital insurance providers.

The range of “disruptive insurtech solutions” introduced last year include some aimed at unbundling insurance offerings, while others aim to provide niche insurance offerings “outside the purview of traditional insurers,” the report said.

There seems to be significant pent-up demand for solutions to the problems challenging the insurance industry.

“Investment from corporates is also expected to grow as traditional insurers look for technologies that can help them respond to the evolving demands of their customers,” said the KPMG report.

The report noted that traditional insurers also made significant fintech investments in 2016, “both by setting up fintech innovation labs and by investing in fintech companies more directly.”

Further, interest in cross-industry technologies – such as healthtech, automotive telematics and commercial drones – are also expected to remain high, said the report.

The industry has been ripe for disruption, and hence, investor interest in insurtech, because many traditional insurers have been hampered by legacy IT systems and regulatory transformation programs, which has created limited funds to invest in innovation, the report explained.

“There seems to be significant pent-up demand for solutions to the problems challenging the insurance industry – from the need to improve operational efficiencies and cost effectiveness to creating more customer-centric product offerings,” said Murray Raisbeck, Partner Insurance, KPMG in the UK, who was quoted in the report.

“When these challenges are combined with the growing availability of tech from other sectors with the applicability to the insurance sector, there’s little doubt investment in insurtech is going to keep booming,” he added.

Ironically, overall investment in fintech companies dropped by 47.2 percent to $24.7 billion during 2016 from the record-setting $46.7 billion reported for the previous year.

Acknowledging that 2016 was a challenging year for fintech investment, the report explained that investors became more cautious after the Brexit vote in the UK, the US presidential election, a perceived slowdown in China and exchange rate fluctuations across the globe.

However, enthusiasm for specific fintech areas helped keep overall interest in fintech high, the report said, pointing to insurtech, along with regulatory tech (regtech), artificial intelligence (AI) and data and analytics.