Why is Munich Re paying $300m for IoT startup Relayr?
Relayr started out as an IoT middleware platform developer back in 2013. Fast forward five years: Relayr expanded its portfolio into IoT analytics and a range of supporting services around its products. Now it is being acquired by the €50bn insurance giant Munich Re for an eye-catching price tag of $300m.
At first glance, this looks like a surprising move, but Munich Re had been laying the groundwork for a while. The company invested in and partnered with Relayr in 2016 via its Hartford Steam Boiler (HSB) business. You might have expected that some of Relayr’s other backers, which include Deutsche Telekom or Cisco, to have been the first to make a move. But the reason why Munich Re was quick to snap it up was because the relationship with Relayr went beyond investment, and the companies working closely on exploring the early possibilities of IoT in the insurance sector.
IoT offers carriers the potential to gain real time insight into the performance of any asset that is being insured, which they can use to support underwriting decisions and ultimately move towards new usage-based pricing models and offer value-added services. There are many early applications of IoT in the insurance sector, with the biggest area of activity the use of telematics in the car insurance market. Usage based car insurance has been around for well over a decade, but it has not yet come to dominate the market in the way that many expected.
Apart from providing (re)insurance, Munich Re also offers risk services through its HSB business to other insurers, and that’s where Relayr’s capabilities will make a difference. A couple of years ago, HSB boosted its risk offering with IoT when it launched Sensor Systems, an IoT based service to help insurers manage risk by installing sensors at commercial locations. According to Munich Re, Sensor Systems has so far collected more than 250 million readings from its clients locations. HSB offers this direct to large customers and to small and mid-size players clients via partners, and again the Relayr acquisition will definitely beef up its capabilities around this proposition.
According to the official announcements, the acquisition will boost Relayr’s stability and financial strength but also allow access to the Munich Re’s accounts. The deal will also provide a way for HSB to boost its insurance offering in the industrial sector by fusing its financial engineering expertise with Relayr’s IoT expertise.
We’ve seen similar M&A moves to Munich Re’s purchase of Relayr from industry giants across other sectors such as manufacturing and utilities. The likes of Siemens, GE Digital, Itron and others have acquired digital specialists both to boost their core products and services, but also to improve their latest digital software portfolio as well. They see the latter as a success factor for making it in the digital world. The acquisition of Relayr is a good sign that even digital laggards such as insurers are making big moves in this direction as well.