Insurance companies' investment in big data and analytics is driving up the value of those services, spurring M&A activity in the insurance technology sector.

Insurance investment analyst firm Conning says in its Global Insurance Distribution & Services Sector Mergers & Acquisitions: Building for the Future report that there were 34 insurance technology deals in 2015, up from the year before, and that should continue this year.

"The adoption of technological innovation in areas such as “big data” and predictive analytics, a focus on customer experience, and increased health care infrastructure resulting from the roll-out of the Affordable Care Act have driven insurance service deal-making," Conning writes in the report. "The amount of activity in the insurance technology sector was dramatic in 2015, and Conning sees those drivers of M&A supporting further M&A activity in 2016."

Insurance technology companies were also the biggest buyers of companies in 2015, Conning notes. Insurance companies themselves tended to stay on the sidelines, but invested in different ways, the company says.

"Technology providers often are attracted to broadening their product suite and see acquisitions as an effective way to gain scale and new product capabilities fairly quickly," the report says.

"The number of insurers acquiring technology service firms was sparse in 2015, but that does not necessarily mean insurers are not focused on capitalizing on the ongoing technology transformation," it adds. "Several insurers were active investors in technology startups, including insurance startups."

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